Improving business efficiency of import-export cargo insurance business transported by sea at Petrolimex Insurance Joint Stock Company

service. Because reducing one dong of cost also means increasing one dong of profit. Moreover, companies and enterprises will decide the level of production and consumption of a series of goods or services, depending on the cost and selling price of those goods or services. Moreover, the issue of cost and profit is not only a concern of businesses but also a concern of consumers and of society in general. That also means paying attention to the efficiency of production and business activities. These issues are also the top concerns of insurance companies. Because, cost, profit and production and business efficiency are related to the entire operation process of companies, deciding whether the company exists, develops or goes bankrupt. Therefore, improving the efficiency of business activities is always an objective necessity of each insurance company.

Since its establishment and operation (June 1995), PJICO has achieved tremendous results, meeting the aspirations of shareholders contributing capital, meeting the increasingly diverse insurance needs of customers as well as increasing strength in the construction and development of the economy in general and the Vietnamese insurance market in particular. Among the achievements that PJICO has achieved, there is a significant contribution from the results that the import-export cargo insurance business process achieved by sea in the past time. These results are reviewed and analyzed in the above sections of the topic and in this section, we will delve into the research, analysis and evaluation of the business efficiency of the business to partly see the insurance business efficiency of the entire company.

In terms of statistics, to express and measure the business efficiency of the company in general and the task of insurance of imported and exported goods transported by sea in particular, it is impossible to use one indicator. Because the content of the business efficiency category is very broad and complex. The complexity is reflected in the nature of the relationship between results and costs. Costs as input factors of business activities are very diverse and include many types. From a microeconomic perspective, if understood in a broad sense, costs include all human resources and material resources mobilized into production and business. The quantity of results is expressed in many different indicators. Calculating and determining each indicator, choosing which indicator to reflect efficiency are issues.

complex issue. Therefore, to evaluate the business performance of the business based on revenue and profit compared to total costs and expenses during the period (year).

Suppose:

* Total revenue includes original insurance premium revenue and other revenue. Other revenue includes the following items:

- Reinsurance fee

- Investment revenue

- Collect reinsurance compensation

- Collect third party

- Other revenues.

* Total cost includes original insurance compensation and other costs. Other costs include the following:

- Reinsurance cession

- Reserve fund

- Commission and brokerage fees

- Management costs

- Tax payment

- Other expenses

and consider profit to be calculated simply by the formula:

LN =  DT -  CF

We have:

by revenue

Efficiency index

Total revenue

Total cost

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by profit

Efficiency index

Total profit

Total cost

To evaluate the business performance of export insurance business of sea transport at PJICO in recent years, it is necessary to consider the following data table:

Through the above calculated figures, it can be seen that the business results and efficiency of import-export cargo insurance business transported by sea at PJICO are generally relatively high but are gradually decreasing.

Considering 1995 alone, it was the year with the highest efficiency index in terms of revenue and profit in the past 6 years. The index shows the efficiency of PJICO's capital use in the insurance business of import and export goods transported by sea: one dong of expenditure earned 1.36 dong in revenue and created 0.36 dong in profit. In just the last 6 months of operation, the company earned 628,111 thousand dong in profit from this business. This proves that this is one of the company's key businesses that needs to be cared for and focused on in accordance with its strategic importance. If we consider the past 6 years, the business results that PJICO achieved in the last 6 months of 1995 played a very important role in the company's construction and development strategy, contributing to increasing business results and efficiency, partly creating motivation and encouragement for all employees of the company as well as creating trust with shareholders, partners and prestige with customers participating in insurance. Achieving such achievements cannot be without mentioning its reasons. First of all, it can be seen that in 1995, the domestic economic situation had many positive changes with the highest GDP growth rate of 9.5% in the period 1986-1995, foreign trade activities increasingly developed in breadth and constantly improved in depth, import and export turnover increased rapidly, the maritime transport industry was also focused on investment and development. As an insurance business that is greatly affected by socio-economic conditions and foreign trade activities such as insurance of import and export goods transported by sea, it is clear that in 1995 PJICO effectively took advantage of the above advantages and positive premises. Besides, as a newly established company, operating in a relatively new and promising field in Vietnam, PJICO received enthusiastic support from the Ministries, Branches, close cooperation from relevant organizations and especially from insurance customers in shareholders along with the efforts and determination to overcome difficulties to build the company stronger and stronger in all aspects of all officers and employees. On the other hand, achieving such high efficiency targets is partly due to the company's very reasonable revenue and expense structure, 1995 was the year with the lowest compensation rate in the whole period.

(38.53%) only accounted for 41% of total costs but total revenue was quite high. Therefore, the efficiency in 1995 exceeded the company's expectations.

In 1996, the efficiency index according to the revenue of the business decreased very quickly, one dong of cost spent only earned 1.16 dong of revenue and created 0.16 dong of profit, much lower than in 1995. This shows that the efficiency of using one dong of cost is lower than its real potential, although in 1996 the socio-economic conditions were still very stable, the import and export turnover of goods continued to increase, which was favorable for contract exploitation, attracting customers and increasing fee revenue. This was the year with the second highest compensation rate after 1999 with the original insurance compensation amounting to 4,951,883 thousand VND, accounting for 79.3% of total expenses, an increase of 258.1% compared to 1995, while the growth rate of total revenue was 205.2%, leading to a profit increase of only 58.2% or an increase of 365,828 thousand VND. There was such a big fluctuation because during the year there were a number of large losses, the compensation rate was up to 87.67%. Perhaps the risk assessment work right from the exploitation stage or the work of appraisal, prevention and limitation of losses have not been completed and implemented promptly and closely. Therefore, the business performance of the year was only average, not reaching the company's plan.

In 1997, the business situation of import-export goods insurance by sea at PJICO was more positive, the efficiency index according to revenue increased by 1.18, higher than in 1996. The growth rate of total revenue was 45.3% or 605,346 thousand VND, higher than the growth rate of total expenses (42.8), leading to a profit increase of 60.9%. In the structure of total expenses, because the original insurance compensation expense increased slowly, accounting for only 64.1% of total expenses, the compensation rate was 65%, while other expenses increased very quickly, more than twice as much as in 1996. Such an increase was due to the adjustment to increase expenses for a number of expense categories such as: agent and brokerage commission expenses, loss prevention and limitation expenses, reinsurance expenses... to overcome the difficulties that still existed since 1996. This increased revenue and profit, leading to increased business efficiency. This is a great achievement that PJICO achieved even though 1997 was a year when the marine import-export insurance market in Vietnam encountered many difficulties because the import-export turnover of insured goods decreased by 7.2% and the total market revenue from business fees also decreased by 15.3% compared to 1996. This proves that the company's business strategy is very flexible, suitable for the fluctuations of the economy, and the stages in business operations are implemented relatively effectively.

The Asian financial and monetary crisis that occurred in July 1997 had a negative impact on all sectors of the domestic, regional and world economies. In particular, foreign trade activities tended to slow down and encountered many difficulties in the import and export of goods. Cutting costs for import and export businesses was the top priority, including freight and insurance fees for goods... that's why in 1998 and 1999, exploitation activities encountered many limitations. In both years, the growth rate of total revenue was lower than the growth rate of total costs. Although in 1998, profit increased by 24.9%, in 1999, profit not only did not increase but also decreased by 3.5% compared to 1998. This is the lowest result since the establishment of the company, which has caused the efficiency index calculated by revenue in 1998 to be 1.12 and in 1999 to be only 1.09, meaning that for every VND of cost, only VND 1.09 of revenue was obtained and VND 0.09 of profit was generated, a figure reflecting very low efficiency in capital use. Such results were due to the impact of the Asian crisis, especially insurance business, a financial sector that was relatively negatively affected. On the other hand, as in the general situation of the whole market, in 1999 there were a number of major losses for customers participating in insurance at PJICO, causing compensation costs in the year to skyrocket, the compensation rate reached 89.41% while total revenue (including total costs) increased slowly, thereby causing profits to decrease compared to 1998.

In two consecutive years 1998, 1999, the business results achieved were not very positive, which posed a very difficult problem for PJICO: how to overcome the ineffective business situation as in the recent past. As a business of great importance to the business efficiency of the whole company, it is very sensitive to fluctuations in the economy, the market and other conditions. Therefore, after studying and reviewing the practical situation, PJICO proposed specific solutions to overcome the shortcomings and improve business efficiency in 2000 and the results achieved as shown in the table are very positive: total revenue and profit increased faster than the growth rate of total costs and was also the year with the highest profit in the entire period of 1995-2000, reaching 3,765,571 thousand VND, exceeding the plan set by the board of directors by 20%, nearly twice as much as in 1999 while costs increased by only 4.4%. This increased the efficiency index calculated by revenue, showing that one dong of cost spent earned 1.17 dong of revenue and created 0.17 dong of profit. Such results were achieved because in 2000 the socio-economic situation had many positive changes, increasingly tended to develop stably, foreign trade activities took place more vibrantly, thereby contributing greatly to the process of improving economic efficiency.

business. On the other hand, the coordination between insurance companies is increasingly closer, the situation of unhealthy competition has decreased and has created trust and prestige for customers participating in insurance. Especially due to the correct and timely direction of PJICO leaders in implementing extremely flexible, reasonable and effective solutions in the business process, it is shown in the adjustment of the structure of expense categories in the total cost. The table shows that other expenses in 2000 increased sharply compared to 1999 because the company proactively adjusted to increase expenses such as: agent and brokerage commissions, loss prevention and limitation expenses, appraisal expenses, reinsurance expenses, expenses for expanding the business network, advertising and propaganda expenses... causing the ratio of other expenses in total expenses to reach 51.3% and perhaps these expenses themselves had an impact on reducing the loss ratio, leading to a decrease in compensation expenses. The compensation ratio in 2000 was only 51.43%, much lower than in 1999. This shows that the business strategy and solutions that PJICO proposed were very suitable to the actual situation, increasing the business efficiency of import and export cargo insurance business transported by sea in 2000, thereby contributing to improving the business efficiency of the whole company in general.

- In the past 6 years, the overall picture of the world and regional economy has changed a lot. These changes have more or less affected the economic growth and development indicators of Vietnam. Still very young and on the rise, the Vietnamese insurance market is also greatly affected by these changes. As a business whose business performance is very sensitive and closely linked to the fluctuations of the socio-economic situation, especially foreign trade activities in the economy, insurance of imported and exported goods transported by sea cannot help but have ups and downs, instability. Particularly at PJICO, although the business performance of this business tends to decrease, it is still considered a key insurance business with many prospects in the future due to the following basic advantages:

- In the process of industrialization and modernization of the country, along with the strong trend of regional integration and globalization, the exchange of goods between Vietnam and other countries in the world is increasing, foreign trade activities are developing more and more. Besides, due to the advantage of geographical location, Vietnam's maritime transport industry is also constantly focused on investment, improvement of technical facilities and service quality. On the other hand, up to now, the import and export turnover of goods insured only accounts for about 20% of the total import and export turnover.

goods of the whole country. Therefore, the development potential of insurance business for import and export goods transported by sea is very large, the demand for this type of insurance is increasingly diverse and rich.

- Partly due to the general regulation that imported and exported goods transported by sea must be insured and partly due to the fact that import and export businesses have long been aware of the necessity and role of insurance for their imported and exported goods, purchasing insurance for goods has become an international practice and is closely associated with the process of trading and exchanging foreign trade goods.

- As a joint stock company with capital contributions from shareholders, which are business units with high import and export turnover, PJICO has gained enthusiastic support from customers in shareholders (Petrolimex, VSC).

- PJICO was born in a context where the country's economy had completely changed its mechanism - a free competition mechanism with the management and direction of the State, so there was no interference between the two mechanisms in terms of awareness and ideology. That is why PJICO has created a business style that is consistent with the market economy - dynamic, creative, flexible, and sensitive, suitable for the continuous fluctuations of the socio-economic situation. It can be said that PJICO's goal of becoming a strong insurance company in the Vietnamese insurance market is only a matter of time.

- PJICO's business organization network can be considered as relatively complete. Company branches, representative offices, general agents and agents are distributed in most of the key economic centers in the country, creating extremely favorable conditions for insurance business in general and insurance of imported and exported goods transported by sea in particular.

- In recent years, PJICO has established and continuously strengthened its reputation in the insurance market, the import and export turnover of goods participating in insurance at PJICO is increasing, the number of customers other than shareholders participating in insurance is increasing (currently, insurance premiums collected from these customers account for about 70% of total premium revenue). That shows the company's increasing trend of integration and development.

- The Law on Insurance Business has been promulgated and taken effect, creating a solid corridor for insurance business activities in general and import-export goods insurance in particular.

Improving business efficiency of import-export cargo insurance business transported by sea at Petrolimex Insurance Joint Stock Company - 11

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