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Koreans chase ‘enormous’ insurance potential
Korea Life Insurance Vietnam, a member of Hanwha Group, one of the 10 biggest conglomerates of South Korea who ranked 239th out of the top global 500 companies last year, will officially open shop at the end of this month. The company’s chief agency officer talked about its plans and the domestic life insurance environment.
There have been foreign insurance companies setting up business in Vietnam in recent years. How do you assess the market?
Although Vietnam’s life insurance market has been through the start-up stage with galloping growth rates, the potential remains attractive with more than 85 million residents and market penetration of merely 5-6 per cent.
In addition, more than 54 per cent of the population is aged less than 30 years – an attractive element. The entry of Vietnam into the World Trade Organisation has resulted in more effective economic reform policies and helped maintain high growth rates of GDP and GDP per capita.
In Vietnam, there are some foreign insurance companies, each with considerable market share. However, this market has enormous potential and meets all our investment criteria.
When investing in Vietnam, we do not aim at short-term profit but long-term growth. This applies in South Korea as well as in emerging markets.
Why did you choose this time to start the company? Is it possible for Korea Life to make a mark during the economic downturn?
We have taken into consideration the possibility that the crisis will have an effect on the growth rate of the life insurance market in Vietnam.
As stated by Albert Einstein: "In the middle of every difficulty comes opportunity". We believe this will be a good opportunity for Korea Life to win the affection of Vietnamese customers by providing them with suitable products and quality services. In fact, we do not aim at ambitious short-term growth but focus more on creating satisfied customers who will make the solid foundation for our long-term development.
How will you differentiate your products and services to win the market?
We have done extensive market research to ensure our products will offer the best protection benefits at competitive premiums. We also foster the concept that all family members can be insured under a single insurance contract, which makes it possible for more people to be protected at minimum cost.
We will regularly check to ensure that our customers’ insurance meets their needs and ability to pay and that all of our processes will be transparent and our forms easy to use. Most importantly, we will focus on agency and staff training and development as our personnel are our most valuable assets.
How have you gained the support from the Vietnamese Government?
A life insurance company often manages financial assets of millions of people. Therefore, like other governments, the Vietnamese Government pays special attention to insurance investors’ financial strength, history, expertise, and long-term commitment to the development of Vietnam.
We have gained strong support from the Government because Korea Life Insurance has met all stringent requirements stipulated and because we are the leading member of the Hanwha Group, some of whose affiliates have invested in Vietnam.
What is your target market? What are your business goals for 2009?
Our marketing will focus on families with an annual income of at least VND36 million (US$2,060). This year, we will open two branch offices in HCM City and one in Ha Noi. By the end of this year we expect to have about 4,000 customers.
What do you think about the potential growth of the life insurance market?
The crisis will have some effect. The locals may feel more reluctant to use life insurance as a saving or investment vehicle. However, their need to be protected against financial losses following major medical treatment, disablement or death of the breadwinners will continue to be high.
Therefore, life insurance products with extensive protection benefits, high flexibility and competitive premiums like ours will better meet their needs given their reduced income.
It was reported that the number of lapsed accounts equals about 8 per cent of the policies in Vietnam. What are the reasons and how will Korea Life avoid this problem?
I think there are three main reasons. Firstly, many customers have not been sold to their needs but on relationships. Almost all life insurance policies purchased in Vietnam have both saving and protection benefits.
With regards to saving, life insurance is best at helping people to save regularly for long-term goals (five years or more). Such goals can be children’s education, a car, a house or a retirement fund, etc. In the absence of such worthy goals, the customers are likely to let their policies lapse.
We should note that protection, not saving, was the original cause for the invention of life insurance. In fact, the most attractive characteristic of life insurance against the other saving/investment vehicles is that it pays for death, disability, critical illnesses or medical expenses, etc. of the life insured. However, I am afraid that those who let their policies lapse did not understand such protection benefits.
This is why we will make it clear to our customers that they should not purchase life insurance if they just want to save or invest.
Secondly, you should spend 5-10 per cent of your regular income on long-term saving goals. This will ensure a worthwhile amount of money when the life insurance policy matures while maintaining your payment capability through income fluctuations.
However, many insurance policies were sold without investigating the customers’ financial capability.
Therefore, they may let their policies lapse because they no longer see their saving goal as worthwhile or the premium has become a financial burden.
Thirdly, some customers claim they cancelled their policies because they were unhappy with the after-sales service, especially premium collection. Such complaints often come from policyholders whose agents have left the company.
High lapse rates are common in new markets like Vietnam and it requires the whole industry’s effort to rectify this problem. As for Korea Life Vietnam, we will take the following actions: selecting the best agents, providing regular training, providing management support and supervision to ensure the policies meet the customers’ needs as well as designing remuneration terms to motivate agents, managers and staff to provide the best customer services.
How does the insurance agency systems in South Korea and Vietnam differ? What is special about your agency development strategy in Vietnam?
I think the most prominent difference is that all insurance agents in South Korea work full-time while most of the agents in Vietnam work part-time.
As a newcomer, we will build a full-time professional workforce. This will be done through careful selection, training and management support. Just imagine you were to undergo a surgical operation: who would you choose, a full-time surgeon or one who only performs an operation at times?
VietNamNet/VNS
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