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Insurers’ raising of premiums facing strong opposition
Clients say they will not take out motor vehicle physical damage insurance policies if insurers join forces to raise the insurance premiums for vehicles.
The arguments of sellers
Domestic insurance companies have signed an agreement on raising the standard motor vehicle physical damage insurance premium, under which, the insurance premium increases from 1.3% to 1.56%, not including 10% VAT. Meanwhile, commercial vehicles which provide cargo transport services see a premium increase to 1.83%, and vehicles which provide inter-provincial passenger transport services, 2.97%. Insurance premiums for taxis see the sharpest increase to 3.95%.
According to the Vietnam Insurance Association, insurance companies have been trying to slash insurance premiums in order to lure clients, but this activity has put them at risk.
The association also said that it would be unreasonable to keep the same insurance premiums applied since 1995 while commodity prices all have increased sharply.
Insurers say that the expenses for doing bodywork have increased by 25%, while the prices of many kinds of car parts have increased by 40%. Phung Dac Loc, Secretary General of the Vietnam Insurance Association, said that raising insurance premiums is a must to ensure the compensatory capability of insurance companies in the context of higher inflation.
According to Dinh Quang Tan, Head of the Vehicle Insurance Division under Bao Viet Group, the standard insurance premiums on vehicles have increased by 15% (from 1.3% to 1.56%), while the inflation rate in 2008 is estimated at over 20%.
According to the Vietnam Insurance Association, in the first nine months of the year, insurance companies paid VND3,018bil in compensation.
The difficulty of buyers
Of course, insurance companies’ clients do not like the insurance premium increases.
Insurers have estimated that with the premium increases, the clients who are the owners of personal vehicles see the lowest premium increases, while businesses, especially taxi firms, are the big sufferers.
According to Dinh Van Sau, Chairman of Huong Lua Taxi, previously, the insurance premium for the company was 1.1% per annum, which meant that he had to pay VND2.2mil only for the cars which had the insurance value of VND200mil. As the premiums have increased to 3.95%, he has to pay VND8mil a year, not including VAT.
Tran Quoc Khai, Chairman of Noi Bai Taxi Cooperative, said that previously, he had to pay a 1.5% physical insurance premium only, or VND3-4mil a year. If counting other kinds of insurance, each of his cars bears VND12mil a year.
“With such insurance premium increases, our business will be heavily affected,” Khai complained.
Conflicts
Transport companies have threatened not to take out insurance policies anymore as the insurance premiums have increased.
“We have stopped taking out insurance policies for Noi Bai taxis,” Khai said.
Huong Lua Taxi, according to Sau, is considering setting up a risk fund which members would contribute money to and insure themselves. “With the fund, insurance expenses would be just a half of the insurance premiums,” Sau said.
Hoang Mai Company Ltd has also confirmed it will not take out damage insurance policies on its coaches when current insurance contracts expired.
Meanwhile, representative of the Hanoi Taxi Association Do Quoc Binh said that the behaviour of insurance companies to join forces to raise insurance premiums has been affecting clients, and that the behaviour has violated the Competition Law.
Analysts have also warned that the increased insurance premiums will make a lot of clients abandon insurance policies. Currently, vehicle insurance is not compulsory.
According to Bao Viet, only 30% of circulating vehicles are insured.
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In the latest news, the Vietnam Insurance Association has asked 16 insurance companies to halt raising insurance premiums until the Competition Administration Department gives a final decision. |
Viet Nam Net, VNE
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