Takashi Fujii

- Takashi Fujii: The global economic slowdown has placed certain impact on the finance and banking sector in Vietnam. However, the finance sector here had showed signs of decline even before the international financial crisis broke out. The VN-Index began falling from the end of 2007 and early 2008. This followed the rule of nature, particularly for the local stock market after a period of overheating. However, the life insurance market continued growing more than 20% last year, and still has good fundamentals to gain further growth as only five million prime life insurance contracts have been sold in a market of 86 million people like in Vietnam. I believe proper life insurance products will turn more attractive in 2009 as the interest rates of bank deposits have tumbled. Although more people have become jobless coupled with the possible damages to crops because of natural disasters, I’m still optimistic that the market will maintain its growth rate of 20% or higher this year.

Some experts say less people can buy life insurance products this year because unemployment increases. What’s your view?

- Buying life insurance products is the need of customers for protections and then savings rather than considering this as a channel to invest. I want to say that the economic slowdown does not result in the fall in road accidents, risks and diseases. All the daily-life risks are there and may increase. Life insurance is a tool that helps ensure financial safety and protects buyers from risk, and remains attractive at a time when the annual interest rate of bank deposits is just around 7-8% and the volatile prices of stocks. However, increasing unemployment and less disposable income (because of higher living cost) are among the major challenges that trigger fiercer competition in the life insurance market. Despite this, I’m still looking to strong growth of the local life insurance market.

So, the strong need will help the market weather the economic downturn?

- That’s right because this was proved in 2008. But, companies will have to design the products that meet the real demand in the current time. In Vietnam, 70% of the population are farmers and live in rural areas, and this means their income is not stable. So, there should be flexible products for customers to be active in making the most suitable financial plan for themselves and for their families, as they can have bumper crops in a year and incur lean crops in the other year. Such products enable them to choose premium payment, change the sum insured, pay excess premium or make withdrawals from the policy account value. These are the features that help enhance the protections and savings of policies for customers. We have just launched Universal Life, a product of this type which we target mass market.

Do you think few people in rural areas can afford to buy life insurance products?

- We used to think so. However, Dai-ichi Life Vietnam have sold more policies in the Central Highlands, Yen Bai, Lao Cai, central coastal region and those areas that we used to think that locals did not money to buy life insurance products. It’s not true to say that farmers do not have money, but it’s true that their income is not stable. They do not buy policies with high premiums, but with the payment appropriate for their earnings. In such major cities as Hanoi, Haiphong, Danang, Can Tho and HCMC, many life insurance firms still expect to sell the products of much higher premiums, and the number of policyholders they find is small. One of the keys to success of a life insurance firm today depends much on its ability to explore new markets. Of course, every company has its own strategy for either niche market or high-end market. At Dai-ichi Life Vietnam, we target unstable-income earners because of the market demand and our wide network with 52 branches and offices nationwide.

Dai-ichi Life in Japan acquired Bao Minh-CMG two years ago. Do you think acquisition is the best way for a foreign firm to enter Vietnam’s life insurance market and expand network?

- Acquisition helps foreign companies shorten the process of entering Vietnam’s life insurance market and building a strong stance in this market. Dai-ichi Life opened a representative office in this market in 2005 and waited for 2008 when the market would be opened up to foreign players. Instead of waiting for a license and building a network, I think it is better to buy an existing firm and make it operate better. It is not easy for a new company, and often takes it from three to five years to establish the network like what we have today. Therefore, Dai-ichi Life made the right decision to buy Bao Minh-CMG in 2007 as the selling and buyout of a life insurance firm was very rare in that year when only seven companies operated in the life insurance market. The current number is 10, and Bao Viet is the only local insurer engaging in this field.

There is concern that foreign players will dominate the local market. What’s your comment?

- The concern has ground, and the foreign life insurance companies operating in Vietnam are the leaders in the world and the region. They choose and apply appropriate patterns of business to their operations in Vietnam while local firms are still learning. However, life insurance requires vast experience and knowledge of the market. Foreign owners have invested capital in their operational companies whose majority of employees are Vietnamese. Over the past 10 years, Vietnamese employees have not gained all the experience and skills to take top management positions. But I believe things will change in a 10 year’s time, and remember that 10 years are nothing to the life insurance industry. I won’t be surprised if these Vietnamese employees will become founders of local life insurance companies in the future, when they are experts in this sector as well as know the market and customers better than foreigners. Human resources are the decisive factor. Some day in the future, some of the local life insurance firms will become strong and acquire foreign counterparts. Again, I say that nothing is unchanged if we take into account the case of major players in the global finance and banking sector being in trouble or having gone bankrupt over the past time.

Dai-ichi Life Vietnam in brief

- The Ministry of Finance allowed Dai-ichi Life Vietnam to increase its chartered capital to US$72 million from US$25 million in January 2008, a year after its establishment. The firm is becoming one of the largest foreign investment life insurers in Vietnam.

- In 2008, new policies were up 49% over 2006 and new premiums grew 51% over 2006 to VND190.9 billion.

- New business has increased by nearly 30% over the past two years.

- An Thinh Chu Toan (Universal Life) was launched in February 9, 2009, with an annual credited interest guarantee of 5% during the first 10 policy years and 3% thereafter.

By Mong Binh