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Builders shy away from insurance
Construction companies and investors have so far been unwilling to take out insurance, despite an increase in projects being affected by natural disasters, said insurance industry insiders.
Current Government regulations do not stipulate the compulsory purchase of insurance.
General secretary of the Viet Nam Insurance Association (VIA), Phung Dac Loc, said that although insurance policies were becoming more flexible, and premiums were coming down, builders remain uninterested.
Meanwhile, natural disasters were becoming more frequent and their aftermath more serious, said Loc.
An insurance expert, who declined to be named, said that while there are no official statistics, it was estimated that builders and investors forked out roughly VND700-800 billion in compensation for damages related to construction work, half of which was due to natural disasters.
According to VIA statistics, the number of construction projects had risen significantly in the first half of the year, turnover from construction insurance during the period accounted only for nearly 10 per cent of the insurance industry's total turnover of more than VND5.56 trillion.
Foreign construction companies and investors have been the biggest buyers of insurance so far, said the VIA, adding that domestic builders continue to ignore insurance products, citing cost saving as the main reason.
General director of the Coteccons Group of construction companies, Nguyen Ba Duong, said many builders did not attach any importance to construction insurance, explaining that to win bids for construction projects, domestic builders had to cut costs, and insurance was often the first cut.
Doan Thanh Tung, from the Chuong Duong Investment and Construction Company said insurance premiums were a significant cost for domestic builders, especially small and medium sized companies.
Premiums are set at around 0.3 per cent of total construction costs.
According to VIA, insurers have paid out on claims to many high-profile building projects such as Sai Gon Residences, whose builder received VND7 billion, while paying only VND100 million in premiums.
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