Most people have a fair idea about the history and geography of those countries which play leading roles in the world’s economy and international politics. In the insurance world the same could be said about the extent of our understanding of what is happening in some of the smaller countries on the planet where, for various reasons, the development of insurance and its impact on global business have not been spectacular.
Vietnam probably falls into this category but, as usual, when one takes a closer look, it is reassuring to see that the market is growing, there is an increasing level of sophistication and the larger foreign players are lining up to take a piece of the action.
A couple of thousand years ago, the people who inhabited the region between Canton (as the English called Guangdong province) and the Red River basin (main city, Hanoi) objected to plans to merge into a “Greater China” and started moving southwards. Amongst other things this led to intermingling with other groups and the basis of a mixed ethnic Vietnamese identity started. From a linguistic point of view, one can also trace developments: Mon-Khmer, Tai and Chinese are key elements in the development of the language. Although romanised/western style script introduced by the French has been widely introduced for over 100 years and now forms the basis of the official written Vietnamese language, the use of Chinese characters and script remains to this day, albeit only for ritual and celebratory purposes.
Taking a large step to the 1700’s the fusion, conflicts and separation of peoples has led to the moulding of the Vietnamese people as we know them today. There is Chinese, Champa and Khmer blood in their make up, as well.
Up until this time, China had continued to play a dominant role in the country and this was evidenced by Chinese style rule with a central authority supported by local mandarins and an emphasis on agriculture (rice) and fishing, rather than the production of goods from plentiful resources such as wood from the vast and lush forests. By 1800 Vietnam had created its own, and the most advanced legal system in south east Asia, promoted art, literature and education and modernised its agriculture. Throughout the country’s history there has been division, reunification, division and so on but gradually besides Hanoi, Saigon became the other main city, along with Da Nang and Haiphong.
As the western world became interested in the Orient, Portuguese and French missionaries and traders came to Vietnam and many thought it was a possible entry point into China. In 1857 France invaded Vietnam to secure its need for overseas markets and expand its share of Asian territories. Vietnam was merged into France’s Cochinchina. This was not a happy time and after several attempts the French were beaten at the battle of Dien Bien Phu in 1954. It was the communist forces from the north which led to the demise of France as an invading master. This led to the creation of the two Vietnams: North and South. America had supported France in it attempts to resist the spread of communism and in 1965 they opened up direct warfare by bombing Hanoi. A tragedy for all, the war lasted until 1973 when a peace treaty was signed. Two years later the South fell to the North’s forces and not long after Saigon fell, its name was changed to Ho Chi Minh City. The capital remains Hanoi.
The Insurance Market
There are currently 30 insurance companies operating in Vietnam: half of them have foreign investors – some of them are 100% foreign owned. The 14 domestic companies handle more than 80% of local business (including all of the compulsory lines such as Fire/Explosion and Motor liability). The foreign companies have an advantage with IT and systems and procedures to maintain underwriting discipline and next year when certain WTO restrictions are lifted the domestic companies will find competition stiffening even more. By 2012 it is anticipated that foreign insurers will be allowed to develop a branch structure to distribute their products.
It is forbidden to cover risks located in Vietnam on a non-admitted basis. Amongst other things, this is to protect local insureds and to ensure payment of local taxes (10% VAT on all classes except life, accident and health). Products are distributed through insurance company agents and independent brokers. Insurance, reinsurance companies and brokers are regulated by an insurance department, a division of the Ministry of Finance.
Vietnam – Some Basic Facts
Population - 85 million
Non-life premiums for 2007 (anticipated) - US$500 million
Life premiums for 2007 (anticipated) - US$575 million
Percentage of world premiums - 0.03%
In preparing this Spotlight article we have received invaluable assistance from Aegis Insurance Services Co Ltd in Ho Chi Minh City (www.aegisrs.com) for which we are grateful.
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In our next e-newsletter we will feature a Spotlight on New Zealand. Although relatively small, like Vietnam, over the years New Zealand has introduced some innovations which the rest of the world has marvelled at. Every country is different and in our next edition of WoRdS we will look at a bit of history and what is going on there today.
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