Developing life insurance market in hanoi

Table of Contents Overview of thesis 2 CHAPTER 1 SUMMARY OF SOME THEORIES OF LIFE INSURANCE 5 1 1 Basic definitions and concepts of insurance 5 1 1 1 Insurance definition 5 1 1 2 Terms related to insu[.]

Table of Contents OVERVIEW OF THESIS CHAPTER 1: SUMMARY OF SOME THEORIES OF LIFE INSURANCE .5 1.1 BASIC DEFINITIONS AND CONCEPTS OF INSURANCE 1.1.1 Insurance definition: 1.1.2 Terms related to insurance 1.1.3 Basic principles of insurance 1.2 SOME THEORIES ABOUT LIFE INSURANCE 1.2.1 Life insurance definition and related concepts: 1.2.2 Characteristics of life insurance 1.2.3 Life insurance products 1.2.4 The role of life insurance 10 1.3 OVERVIEW OF LIFE INSURANCE SITUATION IN VIETNAM AND OVER THE WORLD 11 1.3.1.Development history of life insurance 11 1.3.2 Establishment and development of life insurance in Vietnam 12 1.4 RELATED STUDIES 13 1.5 FACTORS AFFECTING THE LIFE INSURANCE MARKET 14 1.5.1 Economic conditions 14 1.5.2 Socio-cultural conditions 15 1.5.3 Information technology 16 1.5.4 Globalization and international economic integration 16 1.5.5 State legal and policy environment 16 1.5.6 Internal management of businesses and related departments 17 CHAPTER 2: RESEARCH METHOD AND THE RESULTS ANALYSIS OF THE CURRENT REALITY OF LIFE INSURANCE IN HANOI 24 2.1 METHODS OF STUDYING 24 2.2 THE IMPACT OF ENVIRONMENTAL FACTORS ON THE LIFE INSURANCE MARKET IN HANOI .24 2.2.1 Economic conditions are the basis for the development of life insurance .24 2.2.2 Socio-cultural conditions 25 2.2.3 Information technology is now available for Life Insurance Application .26 2.2.4 Globalization and economic integration facilitate leapfrog for life insurance 27 2.2.5 Legal environment and State policy on insurance business for a healthy development market 27 2.3 RESULTS OF SECONDARY DATA ANALYSIS 28 2.3.1 Life insurance market supply situation in Hanoi .28 B MARKET SHARE BY THE NUMBER OF AGENTS: 41 2.3.2 Vietnam life insurance market demand situation 44 CHAPTER 3: CONCLUSIONS, DISCUSSIONS AND RECOMMENDATIONS FOR THE LIFE INSURANCE MARKET IN VIETNAM 46 3.1 CONCLUSIONS AND FINDINGS THROUGH RESEARCH 46 3.1.1 Achievements and development steps 46 3.1.2 The drawbacks 46 3.3 SUGGESTIONS AND RECOMMENDATIONS WITH RESEARCH PROBLEMS 52 3.3.1 Solutions from the Hanoi Authority 52 3.3.2 Solution on the life insurance businesses side 54 Overview of thesis 1.1 The urgency of the research thesis Life insurance has appeared in the world since the middle of the eighteenth century Life insurance is not only a savings fund that brings benefits to the insured but also an effective risk recovery In addition, life insurance also contributes to the development of the socioeconomy Today, along with its benefits, life insurance has become a widely used product in the world The number of people with life insurance in Japan is 30% of the population, the Philippines 15%, Hong Kong 25%, and in some developed countries, the rate is up to 90% In Vietnam and especially Hanoi, the insurance industry in general as well as the life insurance industry in particular is still a nascent industry 1996 marked the birth of the life insurance industry in Vietnam by the Ministry of Finance allowing Bao Viet to pilot life insurance Currently, in Vietnam, only about 8% - 10% of the population use life insurance This is a small number compared to other countries in the world and especially for the current rapid development of our country Although the life insurance market has made significant progress, it has not really expanded across the country In terms of market supply, there are currently many companies selling life insurance products such as Bao Viet Life, Prudential, Manulife, AIA, Daiichi Life In which, Bao Viet Life Company is the only company with 100% Vietnamese capital to provide life insurance products The life insurance market is a market with great potential but has not been exploited much by businesses Besides, the demand for life insurance is also not high Most people are not aware of the importance of life insurance to their lives, even many people have not had access to insurance products in general and life insurance products in particular Therefore, in order to contribute to assisting the people of Hanoi to have proper awareness of life insurance as well as promoting the development of activities in the life insurance market, we have carried out the thesis "Developing life insurance market in Hanoi" 1.2 Confirmation and problem statement in thesis Thesis title "Developing life insurance market in Hanoi” With the subject, we determine the object of research is the life insurance market in Hanoi for years (2015 - 2020), thereby assessing the current situation of the life insurance market in Hanoi and proposing suggestions and solutions to market development of life insurance in Hanoi 1.3 Targets Research topics and research subjects have been established, we conducted research to respond to three main objectives: - First, Grasp one how systematically the theoretical problems of life insurance operations - Second, be aware of the current situation of the life insurance market in Hanoi - Third, offer solutions to develop the life insurance market in Hanoi 1.4 Questions in the research While researching this topic, there are a number of questions that need to be addressed, including - How the life insurance market operating in Hanoi today? - How to develop the life insurance market in Hanoi and bring life insurance products closer to the people of Hanoi? 1.5 Research scope In terms of space: we conduct research on the development of the life insurance market in Hanoi In terms of time: Research the life insurance market in the period 2015 - 2020 and offer solutions and recommendations in the near future The research content includes Theories about life insurance in general, the current situation of life insurance market development, and solutions to develop more positively 1.6 Methodology The thesis uses a combination of qualitative research methods, dialectical materialism methods, logical reasoning methods, statistical analysis methods, interpretation methods, inductive methods In addition, the topic also mentions issues from a general and specific point of view in order to closely analyze the current situation of the life insurance market in Hanoi in the years from 2015 to 2020, review the results achieved as well as the surface remains and their causes, so that may be the solution proposed to develop the life insurance market in Hanoi in the future 1.7 Related studies Development of the insurance market has been mentioned a lot in books, magazines and scientific forums However, within the scope of the student's scientific research topics, the graduate thesis of students, this topic has not been exploited much, moreover, the research content is still limited, such as: - Graduation thesis "Improving the organization of life insurance marketing services at Life Insurance Company" by Le Quang Vinh - Graduation thesis "The necessary financial solutions to the strategy of Vietnam Insurance Corporation in the current market economic conditions", by Le Ba Truong - Graduation thesis "Perfecting management of distribution and sales channels at Hanoi Life Insurance Company", by Pham Thi Thanh Huyen - Graduation thesis "Marketing solutions to develop life insurance products market of Bao Viet Life Company in Hai Duong", by Bui Thi Minh Thu The above studies have been very successful when focusing on analyzing marketing activities, sales distribution channels of a life insurance company operating in the Vietnamese insurance market, and giving get solutions to improve the organization and develop insurance businesses in the current life insurance market However, there is no systematic and comprehensive research on the life insurance market development, esspecially in Hanoi and other provinces Therefore, our team's research to develop the life insurance market in Hanoi the capital of Vietnam is very important and useful to today's general commerce in general 1.8 Significance of the thesis - The study will be a document for future specialized learning - The reference for scientific research of the following students - A reference document for life insurance companies and businesses in Vietnam, from which they can develop life insurance services to supply in Hanoi market In summary: This topic is a reference for strategic makers to develop and manage the life insurance market in Hanoi, insurance businesses in general, and life insurance in particular, In addition, it also serves the teaching and learning of universities and colleges in economics and finance with a specialization in insurance 1.7 Structure of the thesis The structure of the thesis is divided into parts as follows Chapter 1: Summary of some theoretical issues on the research topic Chapter 2: Research method and analytical results of the current situation of the life insurance market in Hanoi Chapter 3: Conclusions, discussions, and recommendations on the life insurance market in Hanoi CHAPTER 1: SUMMARY OF SOME THEORIES OF LIFE INSURANCE 1.1 Basic definitions and concepts of insurance 1.1.1 Insurance definition: According to Dennis Kessler (1994) “Insurance is the contribution of the majority to the misfortune of the minor.” According to Monique Gaullier (1994) (Insurance is a business through which one party as the insured person will guarantee to pay an amount called the desired performance premium for themselves or for a third person in the event of a risk will receive a compensation for losses paid by another party - the insurer The insurer assumes liability for all risks and compensates for damages according to the methods of statistics.” According to Etibu: Insurance is a mechanism that, under this mechanism, an individual, a business or an organization assigns risk to an insurance company, that company will indemnify the insured’s losses, which are covered by the insurance and divide the value of the damage among all the insured The Law on Insurance Business of Vietnam (2000): Insurance business is an insurance business activity for the purpose of profit, under which the insurer accepts the insured's risks, on the basis of the purchaser of insurance pays the fees for the insurance enterprise to pay the insurance for the beneficiary or to indemnify the insured when an insured event occurs We can generally see insurance as follows: Insurance is a financial category associated with economic relations arising in the process of forming, distributing and using insurance funds to ensure for the process of social reproduction and human life in society to be stable and develop normally in the condition of unfavorable events The nature of insurance: A division of the loss of one or more persons for all the insured to bear Insurance is based on the law of large numbers 1.1.2 Terms related to insurance - The insurer is an organization responsible for building an insurance fund through the form of insurance premium collection and indemnity when there is a risk - The insured is an organization or individual currently residing in Vietnam, aged 18 or over, having full civil act capacity, who declares and signs on the insurance claim dossier and is a premium payer - The insured is an individual who is currently residing in Vietnam and is accepted by the insurer under the insurance contract - Beneficiary is an organization or individual designated by the policyholder to receive the insurance benefits in accordance with the insurance contract - Insurable interest is the relationship between the policyholder and the insured, in which the insured's risk will result in a financial or moral loss to the purchaser of insurance - Insurance premium is the amount of money that the buyer pays periodically to the insurance enterprise to be insured according to the term and the method agreed by the parties in the insurance contract - Insurance money is the par value of an insurance contract agreed upon by the purchaser of insurance and the insurance enterprise in the insurance contract - Contract term is the period of time when an insurance enterprise accepts insurance provided that the purchaser of insurance fully pays the premium according to the provisions of the insurance contract - Premium payment period is the period of time between two times when a periodic premium is due Payment period can be: Monthly, every months (quarterly, every months (half a year), annual - Perimum payment grace period: In the event that the customer is unable to pay the premium on the agreed deadline for any reason, the payable premium will be extended for an additional 60 days from the stated premium due date - Insurance profit is the income (not guaranteed dividend) reported to the policyholder each calendar year for the policies has been in force for at least 03 months Insurance profit will be announced annually, if any, is the percentage of the sum insured and the accrued insurance profit announced previously, if any, of the insurance product involving interest division, is the amount of money that the customer will only receive the full amount when the company pays the insurance benefit in accordance with the rules, terms of the insurance product Insurance profit is announced and accumulated annually Actual dividends are announced based on the company's business results and the economic situation If the economic situation and business results are not as expected, to reflect the real interest rate on investment, the company may reduce the dividend This is to ensure that the company always fulfills its contractual obligations and guaranteed interests - Withdrawal of accumulated dividends: After the second maturity date of the policy, the policyholder may request to withdraw part or all of the insurance in advance, which is included in the policy The amount of the bonus that is withdrawn first will be less than the face value of the bonus that is calculated based on the present value of the bonus, as well as depending on when the dividend is withdrawn The later the customer withdraws, the higher the dividend value will be - Insurance benefits when the contract expires is the amount of money that the beneficiary of the insurance benefit, in accordance with the policy of insurance, receives when the insurance contract expires - Benefit of receiving advance from the cashback value: If the insurance policy has refundable value, the policyholder may be advanced an amount not exceeding 80% of the refundable value 1.1.3 Basic principles of insurance - The principle of only insure for the fortuity not certainty: Insurance is only one incident that happens suddenly, incidentally, unintentionally by a human, not one that will inevitably happen - The principle of utmost good faith: All business transactions should be done on the basis of mutual trust, absolute honesty Both the insured and the insurer must be honest in all matters - The principle of insurable interest: An insurable interest is related to, affixed to, or depends on the safety or insecurity of the subject-matter insured This principle states that the insured who wants to buy insurance must have an insurance interest An insurable interest can be an existing or an interest in the subject of insurance - Indemnity principle: According to the principle of indemnity, when a loss occurs, the insurer must compensate in some way to ensure that the insured has the same financial position as before the loss occurred, nothing more and less The parties are not allowed to take advantage of insurance for their own profits - Principle of subrobgation: According to the principle of subrogation, the insurer, after indemnifying the assured, has the right to act on behalf of the assured to claim the liability of a third party to indemnify himself 1.2 Some theories about life insurance 1.2.1 Life insurance definition and related concepts: Life insurance: A contract between an individual and a life insurance company to cover themselves or a relative, or between an organization and a life insurance company to cover its employees for the purpose of is to ensure financial security for the insured When an insurance event occurs, the life insurance company will base on the respective contractual terms of the product that the client participates in to pay the insurance benefits Insurable interest that client will receive is clearly stated in the life insurance certificate Insurance claim records is an insurance subscription form issued by an insurance enterprise An insurance buyer is obliged to fill out a complete and honest insurance request dossier Claim documents are considered an integral part of a life insurance policy Life insurance certificate is an insurance confirmation document issued by an insurer, listing the main insurance benefits of an insurance policy The life insurance certificate is an integral part of a life insurance policy package Consideration time period of 21 days from the date of issuance of the life insurance certificate The purpose of this time is for customers to carefully and independently review their decision to buy insurance, especially after having had enough time to carefully read the book “Policy Terms and Conditions of Life Insurance” included in the contract that the client received This consideration period is also within the policy term Within 21 days of consideration, the client has the right to refuse to participate in the insurance or to request to change the insurance product, the sum insured or the period of insurance to better suit their needs If the client does not want to continue to participate in insurance, the company will refund the premium paid by the client, after deducting medical examination expenses, if any 1.2.2 Characteristics of life insurance 1.2.2.1 Insurance products are "unexpected" products This is reflected in the fact that, for pure insurance products, even though they have purchased insurance products, customers not want their risks to indemnity or pay for the insurance This feature makes it more difficult to exploit insurance products Saying so does not mean that insurance enterprises cannot conduct insurance business Simply because although individuals and organizations "did not expect", but risks can still happen at any time Therefore, if you know the right time to propagate insurance, the exploitation of the product will still be successful Stemming from this feature, insurance products are often classified in the group of products "sold, not purchased" In other words, an insurance product is a product of "passive demand" - consumers are not actively looking to buy, but only buying when there are seller's marketing efforts Nowadays, along with the development of information technology, the sale of insurance online has been adopted by a number of companies and this has made insurance products like ordinary products Clients have actively bought these products, not products of passive demand anymore 1.2.2.2 The insurance product is the product of the "reverse accounting cycle" If in other business lines, the product price is determined on the basis of the actual costs incurred, then in the insurance sector, the premium - the price of the insurance product is determined based on the estimated data of costs that may arise in the future such as indemnity payments (insurance payments), commissions, reinsurance expenses, Expenses accounting for the largest proportion is spending on compensation These expenditures are determined primarily on historical statistics and future estimates of the frequency and extent of losses The use of statistics in the past to determine prices for insurance products for the future requires very closely to help businesses offset the costs that may arise to obtain a reasonable profit physical 1.2.2.3 Insurance products have "movement effect" Businesses often collect premium in advance and pay compensation when insurance events occur, so if the probability of risk is large, their profits are reduced, and vice versa The efficiency of insurance business is difficult to determine at the present time, at the time when insurance products are sold Regarding the customer, the purchase of these products is also “able to move” - indefinite This comes from the fact that not all insured customers also "receive" the insurance company's payout, or in other words, only when there are events that happen to see "the effect of insurance” And because of such a "moving efficiency", a life insurance product also has a profit sharing to increase its attractiveness 1.2.3 Life insurance products 1.2.3.1 Term life insurance: Term life insurance is signed only to cover the possibility of death occurring during the period specified in the contract If death does not occur within that period, payment cannot be made and the insured person will not receive any payment from the premium paid For this reason, premiums may be kept to a minimum as they are for life insurance only and will not pay any amount if the life insured is alive until the end of the contract Level term assurance is the most basic and cheapest form of term insurance because the premium stays the same for the life of insurance Life insurance company commits to pay the premium if the insured dies before the expiration date of the policy When the expiration date is reached, the policy is automatically no longer valid The main features of this type are as follows: - Low insurance premiums - Coverage for a specific period of time - Premium and insurance money are fixed - No cash value or refund value - This policy will become invalid after the deadline without paying the premium The main benefit of this contract is used to repay outstanding debts in the event of a death Renewable term assurance Another type of insurance in that the policy can be renewed at the discretion of the insured on the termination date of the policy without providing any additional evidence of the health condition The age limit to choose from can be up to 65 At the time of renewal, the premium is increased taking into account the insured's age and there is the option to renew at the end of the policy The main features of this type are as follows: - The term of the contract can be extended without providing additional proof of health status - The policy can be either renewed or renewed when it ends - The premium will increase with the age of the insured at the time of renewal Because of these features, instead of signing a 20-year contract, he signs a 5-year term life insurance, after every years this man will have a choice whether or not to re-continue again Convertible term insurance: A form of fixed term insurance that gives the insured the choice of converting part or all of the policy into a single life insurance policy or mixed life insurance at any time during the duration of insurance The premium will be calculated based on the new combined life insurance policy, according to the insured's age This type of policy can be used as a security for the loan and the option to convert makes it possible to use this policy to implement future savings Decreasing term insurance: This type of policy has an annual reduction in the sum insured as specified in the policy This type of insurance has the following characteristics: - Insurance premiums are kept at a fixed rate - The compulsory premium payment period can be shorter than the entire period of the policy to avoid canceling the policy when the sum insured is too much - The premium may be lower than the fixed rate or be paid for a decreasing period This type of policy is often used to insure a gradual debt, such as the principal owed on the mortgage when the insurance amount can decrease in proportion to the amount owed Increasing term insurance: This type of insurance is designed to deal with the effects of inflation, reducing the real insured amount of the policy when the value of the currency falls in value over a period of time The policy can be made by either increasing the annual premium by a percentage, or offering short-term policies that can be renewed with an increased premium This type of insurance has the following characteristics: - Insurance money may increase during the term of the policy without proof of health - Insurance premium will increase with insurance money - The premium will be based on age at the time of renewal - Initial premium is higher than fixed term death insurance premium - Insurance usually continues until the age of 60-65 Currently, this type of insurance is facing difficulties because of the impact and increase of AIDS 1.2.3.2 Lifetime life insurance Whole life policies are primarily signed to protect the money insurance that is paid upon the death of the insured person Since this policy is long-term, there is an investment element, and at sometime the policy is definitely paid out (unlike term life insurance) This type of life policy has a cash value (value of interest) usually two or three years after premium has been paid There are different types of lifetime life insurance depending on how premium is paid, such as: - Whole life insurance continuous premium payment - Whole life insurance limits the payment period - Whole life insurance one-off fee - Whole life insurance has variable fees - Whole life insurance has an incremental fee The purpose of using whole life insurance: 10