Hanoi (VNA) - The totalpremium collected by insurance companies in Vietnam in the first half of 2017has grown 21 percent year-on-year to 47.17 trillion VND (1.8 billion USD).

Of the total sum, the revenue from life insurance premiums is 27.83trillion VND and non-life insurance premiums is estimated at 19.34 trillionVND, said Pham Thu Huong, Deputy Director of the Ministry of Finance’sInsurance Supervisory Authority (ISA).

Besides maintaining a high and sustained growth rate, thefinancial status of insurance firms improved in the first half of the year, Huongsaid. Their total assets grew by 19.11 percent year on year to 264.64 trillionVND, of which life insurers accounted for 73.4 percent.

During this period, insurance companies invested 217.59 trillionVND into the economy, which is a rise of 17.88 percent, compared to thecorresponding period last year.

The insurers also purchased 15-year and 30-year term Governmentbonds worth 15 trillion VND in H1.

The fast-growing insurance market, poised to thrive thanks torising living standards, has prompted a number of foreign companies, includingthe UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up theirpresence in Vietnam through mergers and acquisition or joint ventures in thepast months.

In April, Aviva Plc acquired 50 percent stake in Hanoi-basedVietinBank’s life insurance joint venture, VietinBank Aviva Life Insurance Ltd(Aviva Vietnam).

In late 2016, Sun Life took full control of the joint venture PVISun Life Insurance Company Ltd, by acquiring the remaining 25 percent stakefrom PVI Holdings.

The insurance industry is expected to benefit from the country’sprojected gross domestic product (GDP) growth of more than 6 percent annuallyover the next three years.

It also has great potential as the country has one of the world’slowest life insurance penetration levels, at less than 1 percent of the GDP.

Steve Clark, chief executive officer of Prudential VietnamAssurance, told Vietnam Economic Times that the penetration rate of lifeinsurance, usually measured as the number of individuals who own lifeinsurance, is still low in Vietnam relative to other Southeast Asian countries.

The average insurance premiums in Vietnam stand at 30 USD, much lowerthan the global average of 595 USD and Southeast Asia’s 74 USD.

Only 7 percent of Vietnam’s 93 million people have life insurance,and the sector contributes a modest 2 percent to the GDP, compared to 2.6 percentin Indonesia and 11 to 14 percent in the Republic of Korea and Singapore.

However, there remain many challenges in the way of further growthof this sector.

ISA director Phung Ngoc Khanh said that awareness among Vietnamesepeople about life insurance may have increased, but most still don’t believethat it’s worth the expense. In fact, almost all Vietnamese people are wary ofit and think it unnecessary to buy insurance because they don’t have a thoroughunderstanding of its importance, he explained.

Life insurance products usually involve a long-term contract, somany customers are also concerned about their financial capacity to fulfil itin the future, Khanh said. Doubts about the commitment of foreign life insurersto permanently operate in Vietnam also contribute to its low penetration rate.

Many potential customers continue to see insurance as aninvestment, rather than as a device to share financial losses caused by ill-fortune.They prefer bank savings or investing in gold or real estate, which have ahigher rate of return.

The low penetration rate also comes from the fact that lifeinsurers have only focused their operations in big cities, overlooking 70 percentof the country’s population that lives in rural areas, Khanh said.

To increase sales and promote products, besides traditional salesmethods, life insurers have also started partnering with commercial banks.Though the bancassurance market in Vietnam has remained sluggish, contributingonly 2 percent to the total turnover of the insurance market, analysts believethat this channel holds great potential, and now some 35 commercial banks andfinancial institutions are collaborating with insurers.-VNA