of foreign parties in life insurance joint ventures (from 30% to a maximum of 50%). In Thailand, to protect the domestic life insurance market, they have imposed many restrictions on foreign life insurance companies operating in Thailand, such as: regulations on capital contribution, deposits, labor recruitment, investment activities, etc. Even Japan and some EU member countries have opened up their life insurance markets to limit their market share simply because they do not want to share the domestic life insurance market with foreign life insurance companies.
- Second, thoroughly opening the market. In the current globalization trend, facing the weak management capacity, capital resources, and at the same time being under pressure from developed countries, a series of countries have thoroughly opened the life insurance market since the 80s of the 20th century. Even after opening, some countries still had to give foreign life insurance companies preferential rights in opening branches in regions, localities, recruiting workers, investing idle funds, etc. For example, Chile and South Africa thoroughly opened their life insurance markets since 1984. Taiwan began to thoroughly open in 1986. In Hong Kong, the government has absolutely supported the free market economy, so the insurance industry in general and life insurance in particular have been truly internationalized since 1991, etc.
Through the reality of opening and liberalizing the life insurance market at any level, it is shown that this is an inevitable trend. Because liberalization makes competition in the market stronger than ever, in order to survive and develop, life insurance businesses must always innovate in all aspects: products, prices, service quality, etc. From there, it has actively contributed to stimulating demand in the life insurance market.
1.2.3. Classification of life insurance market
The insurance market is very diverse and rich, people can come up with different criteria to classify the market depending on the research purpose. However, the core of market classification is to serve the exploitation and penetration of
enter the market, attract customers to increase market share, achieve efficiency in
business. The life insurance market is often classified according to the following criteria.
1.2.3.1. Classification by geography
This classification is to divide the market into different geographical units such as domestic life insurance market, international life insurance market. Even the international life insurance market can be divided into regional insurance markets such as Asia, Southeast Asia, Europe, North America... Or the domestic insurance market can also be divided into regional and provincial markets...
1.2.3.2. Classification by demographics
This is an advanced and comprehensive method of market segmentation. This method is based on age, gender, family size, income, occupation, education level or religion, ethnicity... These factors are the most common basis for distinguishing one customer group from another, because the needs, desires and usage levels of a product of each group are different. For example, women are always conscious of saving and pay a lot of attention to their children's education, so life insurance products for educational security are very suitable for them. Or people with high incomes are very interested in whole life insurance products, because these are products that meet the needs of preserving assets and starting a business for their children.
1.2.3.3. Classification according to consumer psychology
This classification is based on the characteristics of social classes. Social class is one of the factors that greatly affects the needs and preferences in product consumption. Therefore, in business, enterprises often pay attention to designing products and services according to the needs of each class, creating products that suit the requirements of each class in society to attract customers. For example, the psychology of the elderly is that they do not want to live dependent on their children and social welfare, so life annuity products are very suitable for them. Or people with very high incomes, they always want to be protected and safe when facing
with serious illnesses such as: Cancer, neurological, cardiovascular, etc. Therefore, life insurers should cleverly diversify products with additional terms that will meet their needs.
1.2.3.4. Classification by consumer behavior
According to this classification, customers are divided into groups based on their knowledge, attitudes, usage level and reaction to a product. Based on consumer behavior, we will know which products are favored by customers, which products need to be improved and perfected to suit the needs of users.
In short, market classification is very meaningful for businesses in general and life insurance businesses in particular. Market classification will create business opportunities for businesses in each type of market. The decision to focus on which market must be based on the size, growth rate of the market, the attractiveness of the market and the goals and potential of the company. In business, businesses must choose a market that is suitable for their capabilities and potential, on the other hand, they must take advantage of comparative advantages, must build a reasonable business strategy to dominate the market, consume products to achieve business goals.
1.2.4. Experience in developing the life insurance market
Number of countries in the world and lessons for Vietnam
1.2.4.1. General overview of the world life insurance market
The history of life insurance shows that on June 18, 1536, a group of London marine insurers issued the first life insurance contract to an English citizen - Mr. William Gybbons. This was a term life insurance policy, with a term of 1 year and an insurance amount of 400 pounds. Unfortunately, in that same year, Mr. Gybbons passed away and the insurers had to pay 400 pounds to the deceased's relatives.
Although the first life insurance contract was signed in London in 1536, it was not until more than 100 years later – when Edmund Halley built
The first life insurance company was established in London in 1699 under the name of the “Society for the Assurance of Widows and Orphans”. This first life insurance company and several other life insurance companies later offered the same premium for all insureds and were not successful. In 1762, the “Equitable Society for the Assurance of Life and Survivorship” offered life insurance contracts with premiums that varied according to the age of the insured and this company was immediately successful [10, p.47]. Thus, the world life insurance industry has a history of nearly 250 years.
In the world, since 1980, life insurance has developed strongly and made much more progress than non-life insurance. The explosive growth of life insurance is not only due to the decline in interest rates, but also due to the importance of individual life insurance in national pension policies.
In 1999, the world life insurance market “took off”. Insurance companies around the world exploited a total premium of 2,324 billion USD (Table 1.1), of which life insurance premium revenue was 1,412 billion USD, accounting for 60.8%. Life insurance companies had an advantage because interest rates in 1999 were generally low. Developed industrial countries are still the dominant countries in the world life insurance market (nearly 91% of the world life insurance premium market share), while accounting for only 15% of the world population. The European Community accounts for 30% of the total world life insurance premium. Japan and the United States are the two countries with the most important roles in the world life insurance market (accounting for over 50% of premium revenue); followed by 4 Western European countries (UK, Germany, France, Italy). On average, a person in developed industrial countries spent about 1,408.6 USD on life insurance. In Japan alone, the average person spent 3,103 USD on life insurance - the highest in the world. The average person in emerging markets spent 23.4 USD on life insurance; and in the ASEAN bloc, the average person spent 17.0 USD on life insurance.
Table 1.1 : Life insurance premium revenue in 1999 by region and group
water [6]
Region, group of countries
Non-life insurance premium revenue (billion USD) | Life insurance premium revenue (billion USD) | World market share by life insurance premium revenue (%) | Life insurance premium revenue over GDP (%) | Average life insurance premium revenue per capita (USD) | |
1. America | 447,111 | 425,629 | 30.14 | 3.63 | 530.1 |
- North America | 422,713 | 414,357 | 29.34 | 4.17 | 1,369.0 |
- Latin America and the Caribbean | 24,398 | 11,272 | 0.80 | 0.63 | 22.5 |
2. Europe | 297,601 | 464,044 | 32.86 | 4.69 | 576.3 |
- Western Europe | 287,131 | 459,487 | 32.53 | 4.97 | 995.0 |
- Central and Eastern Europe | 10.47 | 4,558 | 0.33 | 0.72 | 13.5 |
3. Asia | 144,434 | 476,769 | 33.76 | 5.66 | 133.3 |
- Japan | 101,977 | 392,908 | 27.82 | 8.87 | 3,103.4 |
- East and South Asia | 34,531 | 80,274 | 5.68 | 2.46 | 25.2 |
- Central Asia | 7,926 | 3,587 | 0.26 | 0.49 | 13.6 |
4. Africa | 6,674 | 19,535 | 1.39 | 3.42 | 24.1 |
5. Oceania | 15,848 | 26,329 | 1.86 | 5.75 | 900.7 |
Worldwide | 911,722 | 1,412,207 | 100 | 4.57 | 235.4 |
Industrial countries development industry | 827,630 | 1,293,031 | 91.55 | 5.37 | 1,408.6 |
Emerging markets | 84,092 | 119,176 | 8.45 | 1.71 | 23.4 |
OECD bloc | - | - | 94.48 | 5.29 | 1,199.0 |
G7 bloc | - | - | 80.58 | 5.54 | 1,656.3 |
EU bloc | - | - | 30.73 | 5.03 | 1,136.0 |
NAFTA bloc | - | - | 29.62 | 4.01 | 1,049.8 |
ASEAN bloc | - | - | 0.55 | 0.99 | 17.0 |
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In 1999, in emerging markets such as Central and Eastern Europe, East and South Asia, and Latin America, premium revenue grew strongly. Specifically, in Central and Eastern Europe, premium revenue increased by an average of 32.5%. The huge demand for investment-linked insurance products contributed to the high growth rate of the Polish insurance market. The Hungarian insurance market was similar. The growth rate of Russian insurance reached 54%. However, many life insurance policies in Russia were sold solely for the purpose of tax evasion [6].
The life insurance markets in East and South Asia have only partially recovered from the 1997 financial crisis. As awareness of the need for insurance increased following the financial crisis, life insurance premiums in Southeast Asia have increased sharply - especially in Singapore and Indonesia. The life insurance markets in China, Hong Kong and Taiwan have all reached
double-digit growth. In the Korean life insurance market, premium revenue in 1999 decreased by 11% and there was a trend in this market to abandon savings products and focus on term life insurance products.
In 2002, world premiums were $2,627 billion (see Table 1.2), of which life insurance was $1,536 billion. This represents a 3% increase in global premiums compared to 2001. In developed industrial countries, premiums increased by 1.9%; in developing countries, the rate was 12.7%. This growth was largely driven by growth in premiums in China, India, and many countries in Latin America, especially Brazil and Mexico. Premiums in most of these markets grew faster than GDP.
The United States is the world's leading country in terms of total insurance premium revenue and the US life insurance industry has also risen to the top of the world. The US's life insurance premium revenue in 2002 was 480.452 billion USD, accounting for 31.28% of the world market share. On average, an American spent about 1,662 USD on life insurance and life insurance premium revenue contributed 4.59% to the US GDP.
Table 1.2: Top 10 countries in the world life insurance market in 2002 [7]
Nation
Life insurance premium revenue (billion USD) | World market share (%) | Population (million people) | Average life insurance premium revenue per capita (USD) | GDP (billion USD) | Life insurance premium revenue over GDP (%) | |
1. America | 480,452 | 31.28 | 289 | 1,662.46 | 10,446 | 4.59 |
2. Japan | 354,553 | 23.08 | 127.4 | 2,782.99 | 4.102 | 8.64 |
3. You | 159,656 | 10.39 | 59.6 | 2,678.79 | 1,567 | 10.18 |
4. France | 80,411 | 5.23 | 59.5 | 1,351.44 | 1,432 | 5.61 |
5. Germany | 60.86 | 3.96 | 82.5 | 737.69 | 1,987 | 8.25 |
6. Italy | 52,444 | 3.41 | 57.5 | 912.06 | 1,185 | 4.42 |
7. South Korea | 39,272 | 2.56 | 47.8 | 821.58 | 477 | 8.23 |
8. China | 25,054 | 1.63 | 1,284.5 | 19.50 | 1,237 | 2.02 |
9. Spain | 23,840 | 1.55 | 40.5 | 588.64 | 653 | 3.65 |
10. Sweden | 22,566 | 1.47 | 8.9 | 2,535.50 | 241 | 9.36 |
In the Asian region, although the regional financial crisis affected economic activity in the years following the crisis, it was
The crisis prompted regulators to liberalize regional insurance markets. This is considered a key factor in the growth of the Asian life insurance market in the following years [12]. In 2002, Asia accounted for over a quarter of the world's life insurance premiums, (Japan alone accounted for 80% of Asia's life insurance premiums). During the period from 1999 to 2002, Asia's life insurance premiums (excluding Japan) increased by an average of 5.5%.
Japan's life insurance business has been struggling due to the collapse of the stock market, persistently low interest rates, and falling demand. In April 1998, Nissan Mutual Life Insurance collapsed, followed by six other life insurance companies. Although the Japanese government has enacted regulations to reduce the dividend payments on existing life insurance contracts, this has not been enough to save the life insurance companies.
With the exception of Japan, most insurers are bullish on the future growth of the Asian life insurance market. What is attractive to insurers is the large population of Asia - almost half the world's population. The population in India and Southeast Asia is relatively young, while in Hong Kong, Japan, South Korea, and Singapore, the population is aging rapidly. In young and developing markets, life protection and savings are the two top needs of the people. Investment-linked insurance products are also increasingly accepted. In mature markets with aging populations, on the contrary, there will be a greater need for income during life and medical care in old age.
The fact that the state pension programs do not guarantee a living standard means that individuals have to take care of their own pensions, which is also a factor that creates favorable conditions for the development of life insurance. This is also a big problem in Japan, the government-funded pension fund is not enough to
cover the retirement costs of pensioners - especially
is when the standard of living is rising and health care costs are skyrocketing.
High savings levels among Asian households are also considered an important factor for the development of life insurance in this region. Distribution through banks is also a factor contributing to the development of the Asian life insurance market.
1.2.4.2. Experience in developing life insurance market in some countries in the world and lessons for Vietnam
- Life insurance market in countries with developed insurance industry:
US Life Insurance Market:
In the United States, the insurance industry was built on the British insurance model. The first life insurance company in the United States was established in 1759 - just seven years after Benjamin Franklin's Mutual Fire Insurance Company was founded. It was a joint-stock insurance company called “The Corporation for Relief of Poor and Distressed Presbyterian Ministers and the Poor and Distressed Widows and Children of Presbyterian Ministers”. It was sponsored by the Philadelphia Presbyterian Conference and operated for the benefit of ministers and laypeople. On May 22, 1761, this insurance company signed the first life insurance contract with the American public. This insurance company is still in operation today (only insuring clergy) and is the oldest life insurance company in the world.
From a few initial companies, the US insurance industry has become a large-scale industry, contributing significantly to the economy. The US has become the world's leading country in insurance business in general, and life insurance in particular. To see more clearly, we will go into specific aspects of the US life insurance market such as market size in terms of revenue from exploited life insurance premiums, and products on the market.
+ Life insurance premium revenue:
In 1993, there were 6,200 insurance companies doing business in the United States.