Annie Nhat Anh Tran (pictured), enterprise risk manager at MSIG Asia, has drawn from Vietnam’s rapidly growing insurance sector to highlight the opportunities and obstacles in emerging markets.
Her recent analysis identified leadership as the critical factor in resolving challenges and fostering sustainable growth in such markets.
With an insurance industry valued at $11 billion in 2022 and projected to exceed $25 billion within five years, Vietnam exemplifies the potential for expansion. However, Tran’s examination revealed significant hurdles – low penetration rates, a fragmented market, governance issues, and talent shortages – all of which underscore the need for capable leadership to unlock growth.
Tran noted that Vietnam’s economy has undergone rapid transformation, with GDP per capita increasing nearly twentyfold since the 1990s. However, despite a growing middle class and robust economic activity, insurance penetration remains at only 2.3% of GDP – significantly lower than its regional counterparts, including Malaysia (5.0%) and Singapore (9.2%).
The low penetration rate highlights a significant gap in coverage. Over 60% of Vietnam’s population resides in rural areas, which are disproportionately vulnerable to climate-related disasters like flooding.
Meanwhile, agriculture, a critical sector contributing 12% of GDP and employing 28% of the workforce, remains underinsured. Digital insurance, despite high smartphone usage in the country, accounts for less than 1% of total premiums due to low awareness and limited trust in technology-based solutions.
Tran noted that the governance framework has also faced scrutiny. Aggressive sales tactics in bancassurance – responsible for over half of life insurance premiums – have led to high policy cancellations and allegations of mismanagement. Additionally, fragmented ownership structures, including foreign investments and bank-affiliated insurers, create challenges in aligning risk management practices and operational priorities.
Tran emphasised that leadership is the “X factor” in addressing these structural challenges.
Leaders who exhibit vision, technical expertise, integrity, and empathy can drive sustainable growth by steering the industry toward innovation, enhanced risk practices, and greater public trust.
Leadership with a clear, long-term vision can unlock new opportunities by addressing protection gaps and introducing innovative solutions.
Recent collaborations between insurers and insurtech firms in Vietnam have demonstrated this potential, including weather-indexed insurance products tailored for farmers. These innovations leverage digital platforms to simplify claims processes and expand accessibility, addressing the needs of underserved populations.
In emerging markets, where rapid growth often overshadows prudent practices, leaders with technical knowledge and risk management skills are crucial. Effective leadership can mitigate issues such as unsustainable price competition, under-pricing, and governance lapses, ensuring the industry’s long-term stability.
Building trust requires leaders who prioritize ethical conduct and transparency. In Vietnam’s fragmented market, leadership capable of aligning competing interests while maintaining integrity can help foster a healthier corporate culture and mitigate risks associated with conflicts of interest.
Public scepticism and negative perceptions of the insurance industry have contributed to a talent shortage, with 58% of insurers in Vietnam reporting unfilled positions in 2022.
Tran said empathetic leadership can rebuild trust and attract young professionals by demonstrating a commitment to customer well-being and social responsibility.
Tran also highlighted the complementary roles of regulators and investors in cultivating effective leadership.
Regulators can establish clearer guidelines to promote transparency, encourage consolidation to reduce market fragmentation, and incentivise innovation in underserved sectors.
Investors, on the other hand, can drive long-term growth by prioritising executive appointments that emphasise technical proficiency, risk awareness, and strategic vision. Aligning performance metrics with sustainable objectives can help reduce conflicts of interest and promote ethical practices.
