desire, affecting the sustainable development of the enterprise. Similarly, the staff who do well in offering reinsurance, collecting reinsurance claims, if done promptly and effectively, will greatly contribute to increasing revenue and profits for insurance companies.
In short, high-quality human resources will have a decisive impact on the development of non-life insurance companies in both breadth and depth. Therefore, most insurance companies focus on developing human resources, both in quantity and quality.
Information technology
Insurance is a type of service that provides financial security to customers in case of unfortunate risks. Therefore, it is very important to handle customers' requests quickly, accurately, and completely when an insurance event occurs. Information technology is the tool for insurance companies to achieve this goal.
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For non-life insurance, many people think that because the insurance term is short, usually only one year is the end of the contract, there is no need for management software programs. However, the reality shows that without software programs, insurance companies will not be able to manage their customer portfolio well, quickly process customer requests. Without software programs, companies will also find it difficult to identify target customers and implement promotional programs and after-sales services.
Information technology also opens a new channel of propaganda and sales for insurance companies. Many customers are willing to access, learn information and buy products, as well as make claims through the online website system. This is also a low-cost sales channel. Therefore, the application of advanced technology will make the business activities of insurance companies develop more and more.
Service quality (expressed in the factors of reliability, responsiveness, service capacity, empathy and tangibles) has a very positive impact on the development of non-life insurance activities. High service quality will promote the development of non-life insurance activities and vice versa.
Insurance premiums are the main source of income for insurance companies. Ensuring the correct and sufficient collection of insurance premiums not only contributes to increasing sales and improving business efficiency, but also plays an important role in improving service quality and customer service. Collecting insurance premiums that are too low can lead to business losses, and over a long period of time can lead to bankruptcy of insurance companies.
Corporate image is also a factor that greatly affects the development of non-life insurance activities. Enterprises with great influence and attracting public attention will have a very favorable position in promoting their business activities. On the contrary, enterprises without prestige will have a very difficult time expanding and maintaining the number of customers participating in insurance.
2.4.2 Objective factors
Economic development
Economic development is the leading factor affecting the development of non-life insurance business. Only when the economy develops, can service industries, including the insurance industry, develop. On the contrary, when the economy is in crisis, the insurance industry will be one of the first industries to be affected and impacted.
The larger the economy, the higher the accumulation and savings rate, the higher the cost of insurance, which is also the basis for insurance companies to attract more customers to participate in insurance. The more the economy develops, the more business expansion, trade, import and export, the greater the need to participate in insurance.
Industry environmental factors
Current competitors: These are competitors that are directly competing in the market. Every business that wants to survive and develop must exploit its own advantages to bring its own advantages. However, after the process of explosion in the number of businesses, it will lead to fierce competition, causing some businesses that do not have advantages or have wrong strategies to withdraw from the market or be acquired by large businesses in the industry.
Potential competitors : Potential competitors are competitors who are ready to enter the industry. The level of readiness to enter the industry depends on the current level of competition, the attractiveness of the market, and barriers to entry or exit from the market. For the Vietnamese insurance industry, the pressure from potential competitors on existing businesses is quite large. Although there are 29 businesses currently operating, the market potential is still very large. Therefore, it is completely possible to attract more foreign businesses to participate in the market with experience and large financial potential, similar to the current life insurance sector. This poses great challenges for existing businesses to improve services, expand their networks, and have strategies to cope with competition from new businesses that may enter the market. Especially when the economy overcomes difficult times, has high growth rates and low unemployment rates.
Customers : Customers are also a pressure for businesses. For the non-life insurance sector, the short cycle is usually 1 year, they can quickly switch to using the services of competitors, unlike in life insurance services. With the high level of competition, customers have many choices of insurance products as today, the pressure from customers on insurance businesses is very large. In addition to the end customer, the sales channel system also puts a lot of pressure on businesses due to the race for fees and commissions between insurance businesses.
Suppliers : Suppliers can also put pressure on businesses. However, in the non-life insurance sector in Vietnam. This pressure is not
large due to the nature of the insurance industry as a "collect first - pay later" service. There are quite a lot of suppliers for regular business activities in the market, so their pressure on businesses is not much.
Substitute products : Substitute products are also a risk for businesses. However, for non-life insurance services in Vietnam, this pressure is not large. Due to the nature of insurance services, the ability to imitate is very easy, but businesses must also create new services to meet increasingly diverse needs from customers.
Population size and consumer tastes
A large population is one of the necessary conditions for the development of the insurance industry. When the population is large, the demand for insurance is large, this is the initial basis for the market to develop. Reality also proves that any country with a large population will attract many domestic and foreign investors to invest in the insurance market.
A large population does not necessarily mean that many people participate in insurance, but it also depends on tastes and consumer habits. In many developed countries, the need to participate in insurance is always a top priority for people, so the implementation is very favorable. In other countries, when people have not yet formed the habit of participating in insurance to ensure safety needs, the rate of spending on insurance needs per capita is very low.
Legal system
The legal system is a necessary legal corridor to ensure stable market development. The legal corridor also creates transparency and fairness for the subjects participating in the insurance market. The legal system will also greatly affect the entry of foreign insurance companies. Many countries have documents restricting the participation of foreign companies and domestic private investors in the insurance market. Moreover, the lack of
Sanctions and tools to protect the rights of insurance participants also more or less affect the overall development of the market. The legal system that does not supervise insurance and reinsurance activities well will also be a risk for the insurance market to encounter difficulties when insurance companies do not have enough financial capacity or do not fully fulfill their commitments. The lack of a legal system also makes foreign investors feel uneasy when investing in the host country. Therefore, the legal system is a solid foundation for the development of insurance activities.
Openness and integration
Compared to other economic sectors, insurance is a field with a very early integration process, especially for reinsurance activities. For technical insurance products, especially products with large insurance amounts, most insurance companies must conduct reinsurance. The opening and integration of economies not only increases people's income but also creates opportunities for many new insurance companies to enter the market. In most bilateral and multilateral agreements, the commitment to expand the insurance market is one of the commitments that foreign countries are very interested in. With the trend of increasingly deep integration, many foreign insurance companies will penetrate, bringing advanced products, technology and management skills, contributing to the development of the insurance market.
Development of financial markets
The insurance market is always closely linked to the financial market, having an organic relationship, supporting each other to develop together. If the financial market develops, through it, companies can issue more shares to raise capital, improve their financial capacity. Insurance companies will also have many opportunities to invest in reserve funds, equity capital... to earn more profits. The developed insurance market will also invest back into the economy, thereby contributing to promoting the development of the financial market. The developed stock market, many listed companies will make operations more and more transparent, towards international standards.
Training work
Providing the market with a team of qualified staff will contribute to improving the quality of operations of insurance companies. This human resource is mainly implemented by universities and training institutes and provided to insurance companies. Therefore, insurance companies themselves must regularly coordinate with schools and centers to conduct initial training, retraining, and advanced training for their staff and agents. Without training and retraining, the quality of operations of insurance companies will certainly not be guaranteed.
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This chapter has clarified the important role of non-life insurance activities, thereby explaining why non-life insurance activities always attract the attention of managers, policy makers, businesses and people.
The content of the chapter also considers the indicators for assessing the level of development of non-life insurance activities, generalizes subjective and objective factors affecting the development of non-life insurance activities, and serves as a basis for analysis, comparison, synthesis and specific research in Vietnam.
CHAPTER 3
CURRENT STATUS OF DEVELOPMENT OF NON-LIFE INSURANCE ACTIVITIES IN VIETNAM
3.1 Overview of non-life insurance activities in Vietnam
3.1.1 History of formation, development and basic legal basis of non-life insurance activities
Compared to many other countries in the world, the Vietnamese insurance industry was born very late. On January 15, 1965, Vietnam Insurance Company, the first insurance company, officially operated under the establishment decision No. 179/CP dated December 17, 1964 of the Prime Minister of the Democratic Republic of Vietnam.
Up to now, non-life insurance in Vietnam has been officially implemented for 50 years. The development process of the non-life insurance industry can be divided into the following stages:
During the resistance war against America (1964 - 1975):
Right at the time when the war was in its fiercest stage, people's lives were extremely difficult, the Government decided to establish an insurance company to organize insurance activities. At first, the key insurance business was import-export goods insurance and marine insurance to meet the needs of transporting goods and necessities for the resistance war. Therefore, these were the first products of the Vietnamese insurance industry.
Subsidy period (1975 - 1986):
After the complete liberation of the South, Vietnam Insurance Company took over the Southern insurance branches and officially had a network of operations in the South. However, after 10 years, the insurance industry's activities were very limited, the products were almost the same as before and focused on products related to import, export and shipping activities. Products serving the people's lives, domestic enterprises did not have.
Period from 1975 to 1985
This was an extremely difficult period for the country. Even after peace and unification, due to the severe consequences of war, along with the difficulties caused by the centralized, bureaucratic, subsidized mechanism, people's income was very low, so the demand for insurance was very limited. Therefore, insurance hardly developed.
The period when the country's economy was in renovation but the insurance market had not yet formed (1986 - 1994):
After the 6th National Congress of the Party, our country's economy entered a new phase. The Vietnamese economy, from a very difficult situation, began to develop with a rapid growth rate and many changes in social life. This was the basis for many insurance services to be born in a short time and provided to customers.
However, compared to other countries, insurance in Vietnam is slow to develop. After 30 years, the Vietnamese insurance market still has only one insurance company.
The period when Vietnam's insurance market exploded (1994 - 2009):
By the end of 1994, Bao Minh, a member unit of Bao Viet, was separated to establish a new insurance company. In 1995, two new insurance companies were established, namely Petroleum Insurance Company and Nha Rong Insurance Company. Thus, the Vietnamese insurance market began to take shape from 1994. In the 1990s, the insurance market was completely dominated by state-owned enterprises. Since the 2000s, the first foreign insurance companies have appeared, and large state-owned insurance companies have been equitized. Since 2007, when Vietnam joined the WTO, the insurance market has begun to be more open to foreign enterprises.
The activities of the Vietnamese insurance industry in general and the activities of insurance enterprises in particular are regulated in the following main legal documents:
Law on Insurance Business No. 24/2000/QH10 dated December 9, 2000 (amended by Law No. 61/2010/QH12 dated November 24, 2010;