The Trans Pacific Partnership (TPP) and ASEAN Economic Community (AEC) are expected to offer more market opportunities for insurance companies in Viet Nam, but will also present tough challenges in a more competitive international environment.

Consumers enjoy shopping at the Co-op Mart supermarket in HCM City. Most consumers rarely think of buying insurance for themselves.

"The current Vietnamese insurance market is facing many disadvantages and hasn't met its potential for development," Pham Thanh Hai, legal director of Bảo Minh Insurance Corporation, told a seminar held yesterday in HCM City on the development of the insurance industry in the country.

The insurance industry has been active for 20 years in Viet Nam. As of March 2015, the country had 69 insurance companies, and more than 400,000 employees with total turnover of VNĐ54 trillion (US$2 billion) in 2014.

The legal framework for the insurance industry, however, is outdated and incomplete, and most residents do not buy insurance, Hai said.

Also, the industry lacks good governance, and fails to provide quality services and insurance products that meet customers' needs.

Shortages of high-tech use and trained and professional staff are other problems plaguing the industry, Hải said.

Unhealthy competition among insurance companies, through price and commissions, is another issue.

"Limited quality human resources, poor foreign languages, lack of experts in areas like the law, risk management, analysis and insurance fees have also restricted development of the industry," he said.

Hải noted that demand for insurance would sharply increase as Viet Nam joins AEC and TPP.

"The insurance market will open and help improve the situation," he said. "The threat is real that Việt Nam could become a place that imports insurance services from other AEC and TPP member nations to meet insurance demand for foreign capital."

Domestic companies are expected to face strong competition from other insurance businesses in the region, including Japan and the US.

Speaking at the seminar, Truong Minh Cat Nguyen, of the TILA Insurance Service Consultancy Ltd company, said, "The financial and governance strength of foreign insurance corporations will dominate the Vietnamese market."

To cope with the situation, Nguyen suggested that State authorities offer training to insurance corporations in AEC and TPP insurance-related content and complete a new legal framework for the industry.

Creating transparency and sustainable regulations and laws for the market, as well as better supervision to ensure safety, are also necessary.

He urged insurance companies to review the entire system to increase economic efficiency and to restructure management models with proper long-term business strategies.

The companies should also avoid unhealthy competitive activities, invest in human resources and technology, improve management skills, and promote co-operation among domestic insurance companies, he added.

VNS