Hanoi (VNA) - The total premium collected by insurance companies in Vietnam in the first half of 2017 has grown 21 percent year-on-year to 47.17 trillion VND (1.8 billion USD).

Of the total sum, the revenue from life insurance premiums is 27.83 trillion VND and non-life insurance premiums is estimated at 19.34 trillion VND, said Pham Thu Huong, Deputy Director of the Ministry of Finance’s Insurance Supervisory Authority (ISA).

Besides maintaining a high and sustained growth rate, the financial status of insurance firms improved in the first half of the year, Huong said. Their total assets grew by 19.11 percent year on year to 264.64 trillion VND, of which life insurers accounted for 73.4 percent.

During this period, insurance companies invested 217.59 trillion VND into the economy, which is a rise of 17.88 percent, compared to the corresponding period last year.

The insurers also purchased 15-year and 30-year term Government bonds worth 15 trillion VND in H1.

The fast-growing insurance market, poised to thrive thanks to rising living standards, has prompted a number of foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in Vietnam through mergers and acquisition or joint ventures in the past months.

In April, Aviva Plc acquired 50 percent stake in Hanoi-based VietinBank’s life insurance joint venture, VietinBank Aviva Life Insurance Ltd (Aviva Vietnam).

In late 2016, Sun Life took full control of the joint venture PVI Sun Life Insurance Company Ltd, by acquiring the remaining 25 percent stake from PVI Holdings.

The insurance industry is expected to benefit from the country’s projected gross domestic product (GDP) growth of more than 6 percent annually over the next three years.

It also has great potential as the country has one of the world’s lowest life insurance penetration levels, at less than 1 percent of the GDP.

Steve Clark, chief executive officer of Prudential Vietnam Assurance, told Vietnam Economic Times that the penetration rate of life insurance, usually measured as the number of individuals who own life insurance, is still low in Vietnam relative to other Southeast Asian countries.

The average insurance premiums in Vietnam stand at 30 USD, much lower than the global average of 595 USD and Southeast Asia’s 74 USD.

Only 7 percent of Vietnam’s 93 million people have life insurance, and the sector contributes a modest 2 percent to the GDP, compared to 2.6 percent in Indonesia and 11 to 14 percent in the Republic of Korea and Singapore.

However, there remain many challenges in the way of further growth of this sector.

ISA director Phung Ngoc Khanh said that awareness among Vietnamese people about life insurance may have increased, but most still don’t believe that it’s worth the expense. In fact, almost all Vietnamese people are wary of it and think it unnecessary to buy insurance because they don’t have a thorough understanding of its importance, he explained.

Life insurance products usually involve a long-term contract, so many customers are also concerned about their financial capacity to fulfil it in the future, Khanh said. Doubts about the commitment of foreign life insurers to permanently operate in Vietnam also contribute to its low penetration rate.

Many potential customers continue to see insurance as an investment, rather than as a device to share financial losses caused by ill-fortune. They prefer bank savings or investing in gold or real estate, which have a higher rate of return.

The low penetration rate also comes from the fact that life insurers have only focused their operations in big cities, overlooking 70 percent of the country’s population that lives in rural areas, Khanh said.

To increase sales and promote products, besides traditional sales methods, life insurers have also started partnering with commercial banks. Though the bancassurance market in Vietnam has remained sluggish, contributing only 2 percent to the total turnover of the insurance market, analysts believe that this channel holds great potential, and now some 35 commercial banks and financial institutions are collaborating with insurers.-VNA