The theory for the development of motor insurance business
The definition of motor insurance business
The decree no.103/2008ND-CP date 16/9/2018 of government, the motor is the vehicle have the two wheel and they use the internal combustion engine.
The motor insurance policy
The motor insurance business have about 5 types of insurance and divide about 2 group: compulsory insurance and voluntary insurance
Compulsory insurance is mandated by the government under Decree No 103/2008/ND-CP, issued on September 16, 2008 This regulation is further clarified by Circulars No 126/2008/TT-BTC dated December 22, 2008, No 151/2012/TT-BTC dated September 12, 2012, and No 103/2009/TT-BTC dated May 25, 2009, from the Ministry of Finance.
Voluntary insurance encompasses four main types: motor insurance, which covers vehicle damage; driver's accident and passenger seat insurance, providing protection for both drivers and passengers; civil liability for cargo on the vehicle insurance, safeguarding against potential cargo-related claims; and civil liability for motor vehicle owners, ensuring coverage for damages caused to third parties.
- The motor insurance: this is the insurance for the motor when the vehicle owner have the unexpected accidents and uncontrollable the vehicle
- the driver's accidents and passenger seats insurance: the insurance for the human on this vehicle when they have the accident in traffic
- the civil liability for cargo on the vehicle insurance: The insurance company will have the compensation for the cargo on the vehicle when they have the accident
- the civil liability of motor vehicle owners: the insurance corporation will compensation payment for the people in traffic (not the motor owner).
The classify of the motor insurance
1.3.1 The compulsory insurance a) The subject insured:
Civil liability insurance protects individuals and vehicles in the event of an accident involving a third party This coverage is activated when an accident occurs, although determining responsibility may not be straightforward at the time of the incident.
The insured person is the owner, motor owner, it can be the person or company
The amount of compensation civil liability have the formula:
Amount of compensation = error level x actual damage of third people
If the motor owner and the third people in traffic don’t agree with the amount of the compensation, we can find the law court to decide b) Range of insurance
In the civil liability insurance, the range of it has about:
- Damages of the life and health for the third people
- Damages of the goods, asset of the third people
- Damages of asset if influence the business or decrease the profit
- The cost of the necessary for limited accident
- Decrease the damages for health and life , the cost of emergency
The insurance companies will insurance payment when the motor owners have about the problems:
- The accident has the deliberate of vehicle owners
- The motor isn’t enough the safety condition when it participate in traffic
- The motor owner has the traffic violation:
+ The bike don’t have the circulation paper, the safety certificate
+ The motor move to the forbidden road
- Damages by steal, robbed when accident
Besides that, The company isn’t responsible about the asset like gold, diamond… c) Amount of insurance liability
In the event of an accident, the maximum compensation a corporation can provide is limited; if damages exceed this amount, the vehicle owner is responsible for covering the difference It is essential to establish liability, as civil liability may not be evident at the time of insurance participation Additionally, increasing the amount of insurance liability can enhance traffic participation awareness and reduce the financial burden of potential damages.
According to Decree No 103/2008/ND-CP dated September 16, 2008, and subsequent circulars from the Ministry of Finance, including Circular No 126/2008/TT-BTC dated December 22, 2008, Circular No 151/2012/TT-BTC dated September 12, 2012, and Circular No 103/2009/TT-BTC dated May 25, 2009, the specified amount of insurance liability for motor vehicles is outlined in these regulations.
- For person: 70.000.000 VND/ person/ accident
- For asset: 40.000.000 VND/ person/accident d) The fees
Motor vehicle insurance fees are the payments required by insurance companies to protect vehicles These fees, determined by the Ministry of Finance, represent the cost of the insurance product While the Ministry sets a baseline price, insurance companies may charge higher rates The coverage typically lasts for one year.
1.3.2 The voluntary insurance a) The subject insured:
Motor insurance is a voluntary product designed to protect the insured asset, specifically the motor vehicle, which must be registered This insurance not only covers the vehicle itself but also ensures compliance with engineering standards and traffic safety regulations.
The compensation will pay for motor owner when have the accident in traffic, example:
- storm, flooding, lighting, earthquake, tsunami
And the difference cost for this range:
- protect and take the motor to the repair shop
- define the reason and damages of the accident, with the agree of insurance company c) The risk isn’t include the range of insurance
- Deliberate action for the accident of the motor owner or manager people this motor
- The vehicle doesn’t have registration certificate of motor, or this certificate isn’t suitable
- In the time have accident, the motor owner don’t have the driving license or the certificate isn’t suitable for this vehicle
- The motor owner use beer, alcohol and drunk
- Illegal transportation, not accordance with law
- Move to the forbidden road, go counterclockwise, blow the red light, turn left or right in the forbidden turn left (right)…
Overloading vehicles with excessive passengers or cargo that exceeds the manufacturer's specifications significantly contributes to traffic accidents This disregard for vehicle certification guidelines during transportation poses serious safety risks on the road.
- The indirect damage when participate traffic
- Damage the asset include: gold, silver, gemstone, diamond, money, cash, picture, art statue…
- The accidents start at the difference country
- The owner motor doesn’t honest when have the accident, or insurance profiteers
- Disrepair about the electronic, machine doesn’t have the accident
- Damages the wheels, tire, decal
- Steal the part of vehicle
- After fix the motor, but the certificate is expired
- Have the disrepair when the vehicle drown on the road d) Amount of insurance liability
The insurance corporation is responsible for covering the repair costs for the vehicle owner in the event of an accident, with the payment amount being limited to the insurance liability coverage.
When they use the under-value insurance, the enterprise will pay follow the formula:
Amount of compensation = Actual loss x (Amount of insurance liability/market price of vehicle)
When the amount of the insurance liability is equal the insurance value of motor, the amount of compensation is the actual loss
In cases where the insurance liability exceeds the motor's insured value, compensation for a total loss will be limited to the insured value of the vehicle Conversely, for partial losses, the compensation will be based on the vehicle's market value.
Now, the insurance corporation doesn’t favor the customer use the over- value insurance, because this product is raising the insurance profiteers
In the event that a vehicle sustains damage exceeding 80% of its value, it is considered a total loss Consequently, the insurance company will provide the maximum payout to the motor owner Understanding the value of motor insurance is crucial for vehicle owners.
The value of motor insurance is the actual price of this vehicle on the market And the insurance concern uses the motor registration to calculate the depreciation Example:
Value of motor insurance = original price – depreciation
We have many formulas to calculate the depreciation, example:
- Compare the depreciation with the original price
- Use the method depreciation f) The fees
Vehicle insurance fees are the payments that vehicle owners must make to the insurance company upon signing a contract, which only becomes effective once the full payment is received These fees are crucial as lower costs can attract more customers and enhance competitiveness in the market When determining these fees, companies take into account various factors such as the type of vehicle, accident history, intended use, and year of manufacture Consequently, different insurance providers may offer varying fee structures.
Besides, the insurance concern will degree the fees when the customer buy more difference motor insurance or don’t have the accident in the time insurance…
If the vehicles use the short time, we will have the formula:
The fees = The fees of years x (the number of months working/12)
Or we can calculate the difference method, example:
The vehicle use 3 months will have the price about 30% the fees of years
Vehicles that are used for 3 to 6 months typically retain about 60% of their annual value, while those used for 6 to 9 months maintain approximately 90% of their yearly worth For vehicles that have been in use for over 9 months, the resale price aligns closely with their full annual fees, reaching around 100% of their original value.
If the customer want to termination of contract, the concern will pay back 80% the fees of years, with conditions is this customer never receive the money of compensation.
The necessary of develop the motor insurance business
Recent years, the number of motor is growing up in Viet Nam The analyzing numbers, we have about 50 million motors running in traffic In that, there are
Vietnam produces 35 million motors domestically and imports an additional 15 million from other countries The motor insurance sector is a significant contributor to revenue, accounting for approximately 30% of the total According to the Insurance Association of Vietnam, these trends were evident in the years 2015-2016.
Motor insurance 7,203.33 32.78 7,256.24 31.09 0.73 Health insurance 6,574.11 29.92 6,856.14 29.38 4.29 Property insurance 4,322.43 19.67 4,648.27 19.92 7.53
Table 1: The insurance revenue of Insurance Association of Viet Nam in 2015-2016
In recent years, motor and health insurance products have generated significant revenue, with motor insurance reaching approximately 7,203.33 billion in 2015 and 7,256.24 billion in 2016, while health insurance followed closely with 6,574.11 billion in 2015 and 6,856.14 billion in 2016 Property insurance also showed growth, increasing from 4,322.43 billion in 2015 to 4,648.27 billion in 2016 To foster corporate development, it is essential to focus on enhancing motor insurance offerings, alongside improving the quantity and quality of insurance agents.
Motor insurance is a retail product that requires salespeople to engage directly with customers, whether individuals or businesses, necessitating a larger number of insurance agents With fees around 60,000 VND, the profit margins are low, making it challenging to establish an extensive agent network Upgrading the system poses difficulties, and managing risk is even more complex Agents can be ranked, and without careful oversight, there's a risk of losing insurance documentation, which can benefit unscrupulous actors and lead to increased costs for the company Additionally, agents often work for multiple insurance companies, intensifying competition To address these issues, insurance companies should develop an agent ownership system to enhance agent quality and attract a diverse range of agents, ultimately strengthening their market position Furthermore, the prevalence of accidents on roadways poses a significant threat to public safety, despite advancements in technology aimed at reducing such incidents; human negligence often undermines traffic laws, exacerbating the problem.
2016, we have over 18,000 accident traffic, 10,000 dead and 7,000 injured persons And in one day, we have 30 accident traffic, 25 dead and 18 injured persons
In recent years, advancements in technology have significantly improved transportation, making it faster, cheaper, and more convenient However, this progress has also led to a sharp increase in traffic accidents While the number of vehicles in Vietnam rose from approximately 40.3 million in 2015 to 42.6 million in 2016, the road infrastructure has not kept pace, expanding from 302,000 km to only 330,000 km during the same period This disparity between vehicle growth and infrastructure development contributes to a higher likelihood of traffic accidents in the country.
The disadvantage of the accident don’t small, it can lost the money and life
Accidents can result in significant financial losses, amounting to billions of VND, and may lead to tragic fatalities, particularly affecting family members or business owners Such incidents have profound implications on the lives, health, and mental well-being of their families or companies.
Motor insurance was created to provide essential coverage for individuals, families, and businesses in traffic-related situations It raises awareness about the importance of financial protection, contributes to social security budgets, and supports infrastructure improvements, making it a vital necessity for businesses.
The increasing number of motorcycles has led to a significant rise in accidents, prompting the government to mandate motorcycle insurance This requirement has resulted in high revenue for the motor insurance sector, creating job opportunities and boosting profits for companies in the industry.
The criteria to evaluate the development of motor insurance business
The company aims to expand and enhance its market presence by adapting to regional demands We are committed to developing both existing and new markets through various strategies By evolving our sales network, including branches and agents, we can create a cohesive system that improves our service offerings and drives growth.
To enhance customer acquisition in the insurance industry, businesses should prioritize both the quality and quantity of clients, utilizing the "majority better singular" method This approach allows for a larger pool of insured individuals, facilitating easier payment processes and distributing risk among more people Consequently, companies must focus on increasing their customer base as a primary objective Controlling insurance profiteers is crucial for all firms, though it presents challenges By managing the quality of customers—distinguishing between "good" customers with low compensation rates and "bad" customers with high rates—companies can improve their profitability The Ministry of Finance is actively regulating customer and vehicle owner data through compulsory insurance, which will significantly impact the quality and quantity of clients in the insurance market By developing a robust system to track customer history, insurers can protect reliable clients while identifying and disregarding those deemed untrustworthy or exploitative.
1.5.3 Develop the product and service of motor insurance a) The product
In recent years, vehicle owners have been required to purchase compulsory insurance for their vehicles, as mandated by Decree No 103/2008/ND-CP dated September 16, 2008, and Circulars No 126/2008/TT-BTC dated December 22, 2008, No 151/2012/TT-BTC dated September 12, 2012, and No 103/2009/TT-BTC dated May 25, 2009, from the Ministry of Finance This legislation highlights the importance of insurance and its impact on individuals and society In response, insurance companies have developed various products and services to meet customer needs, including a range of motor insurance options.
- The insurance for the cargo: this product only service the transport company
- The insurance for passenger on the vehicle: the product have the number of customer is big, it bring the high revenue for the company
Motor material insurance is a key focus for insurance companies due to its high premiums, which significantly boost revenue and profits However, these costs are often above the average income, limiting the customer base Insurers recognize the profitability and market potential of this product, leading to a concentrated effort on attracting users Additionally, companies are enhancing their offerings by including provisions such as coverage for stolen vehicle parts, protection against water damage, and options for garage storage.
The insurance corporation have about two important point are the sales and after-sale service
Sales are crucial for any business, significantly impacting revenue and profit In the insurance sector, customers cannot assess product quality before purchase; therefore, selling involves instilling "trust." Effective advertising is essential for building this trust, necessitating that insurance companies promote their brand widely Additionally, training staff to effectively consult with customers is vital for fostering understanding of the products and maintaining customer loyalty Well-trained personnel must excel in communication, identifying customer needs and delivering professional service with a friendly demeanor Consequently, insurance companies should invest carefully in staff training, focusing on product knowledge, communication skills, and customer engagement.
The quality of a product significantly influences a corporation's success or failure, making it essential to enhance services during this critical period Upgrading customer service, including compensation services, is vital for maintaining product quality and ensuring competitive insurance rankings in the market We will establish four key criteria to guide this improvement process.
Timely response is crucial when staff encounter an accident, as they must receive immediate assistance To ensure this, the company should establish multiple branches across the country and provide a 24/7 hotline for efficient communication and support.
Compensation staff, often engineers, possess specialized knowledge about motors and must excel in communication skills When customers reject claims from insurance companies, these professionals are responsible for clearly explaining the reasons behind the decisions Customers often assume that purchasing a product guarantees full coverage for accidents, so it's essential for the staff to be knowledgeable and experienced to effectively address their concerns.
Ensuring high-quality service at our motor garage is our top priority We conduct daily inspections to maintain a comfortable environment for both our company and customers In the event of any complaints regarding repair quality, we promptly investigate to identify and address the root cause of the issue.
To enhance customer service, it is essential to offer gifts during special occasions and monthly events We should also seek feedback from customers regarding their experiences, focusing on their feelings after receiving compensation for service quality and staff interactions.
So the quality of after-sale is very important If the quality is good, we can have the number of customer is stable and the brand is famous
1.5.4 Increase the revenue and profit
To enhance profitability, businesses must focus on increasing revenue while simultaneously improving control systems and reducing costs Implementing effective risk assessment and compensation strategies before product sales is essential Many companies are adopting innovative approaches to boost revenue, such as lowering fees and extending insurance coverage.
To enhance revenue and customer satisfaction, the insurance corporation in Vietnam should expand its branch network significantly A robust network facilitates easier customer access and improves the quality of claims processing and complaint resolution Customers prioritize both the company's business network and its complaint handling quality Additionally, strengthening the insurance agent network can further boost revenue The corporation should also consider leveraging online insurance services and Bancassurance as effective strategies to increase profitability.
The reasons impact the development in the business motor insurance
In the market, we will have many reasons effect the business But, we will analysis about two reasons, there are the outside the company and inside
Motor insurance is the primary product driving revenue and growth in the industry, largely due to the significant rise in the number of vehicles over the past five years Upgrading motor insurance offerings is essential to meet the evolving needs of consumers and address the increasing demand in the market.
Between 2010 and 2015, the number of motorcycles tripled, and experts predict that this growth will accelerate in the coming years As a result, the motorcycle insurance market has significant opportunities for development.
Higher income leads to increased consumption, resulting in a greater demand for daily life items and services As people's incomes rise, their needs for better quality services, including insurance, also improve This allows individuals to more easily afford insurance premiums, demonstrating that higher income significantly influences the growth and development of the insurance industry.
As people's understanding of insurance improves, they recognize its potential to enhance their lives by increasing government capital and mitigating future risks This growing awareness is driving the development of the insurance market in Vietnam.
Insurance companies must adhere to insurance laws to promote fair competition, protect customer interests, and foster market development These laws also influence motor insurance through various regulations, including traffic laws, investment and development laws, and import-export regulations for vehicles Understanding and evolving these legal frameworks is crucial for the growth of both the motor insurance and non-life insurance markets.
The success of insurance companies is driven by continuous improvements in product quality, competitive pricing, customer service, and effective advertising strategies.
To effectively meet customer needs, insurance companies must enhance and diversify their product offerings As individuals' incomes increase, the demand for upgraded insurance solutions also rises Therefore, it is essential for insurance providers to innovate and develop new products to stay competitive in the market.
Price significantly impacts customer decisions, as they weigh both quality and cost when selecting products Companies must align their pricing strategies with customer demands to remain competitive In the insurance market, various products are offered at different price points, each corresponding to specific coverage levels For instance, civil liability insurance priced at 66,000 VND provides indemnity of up to 80 million VND per person per accident, while a higher-priced option at 86,000 VND offers additional protection Quality plays a crucial role in influencing market share, especially in the insurance sector, where products are intangible Customers prioritize quality, particularly during claims, so insurance providers must focus on delivering exceptional service to build trust and alleviate concerns about the claims process.
Insurance is a complex and high-demand product that requires effective advertising for companies to thrive Between 2012 and 2016, Vietnam's economy saw growth, with the insurance market contributing approximately 1.5% to the country's GDP However, public knowledge about insurance remained limited, and many companies struggled with brand recognition To succeed, companies must enhance their brand promotion and improve their advertising strategies to educate consumers and establish a strong presence in the market.
Part 2: The development business motor insurance of BIDV Corporation
The development business motor insurance of BIC
BIDV Corporation Insurance (BIC) is a member of BIDV, originally established as the Vietnam – Australia Insurance Company in 1999 In 2005, BIDV acquired full ownership of the company, recognizing the potential of the Vietnamese insurance market Following years of improved banking and insurance operations, the company rebranded as BIDV Corporation Insurance (BIC) in 2010, with its capital increasing to 660 billion VND.
Between 2005 and 2011, BIC employed around 600 staff members and comprised 21 member companies, managing approximately 91 business departments Ranking sixth among the top ten non-life insurance companies in Vietnam, BIC was also the first insurer to establish member companies in Laos and Cambodia The Laos-Viet Insurance Company (LVI) was founded in 2008, followed by the Cambodia-Viet Insurance Company (CVI) in 2009.
About 13 years experiences, BIC show the ability and position on the non-life insurance market in Viet Nam They bring about 70 products to the customer, it include about the construction - installation insurance, fire insurance, assets insurance, health insurance, motor insurance… The BIC insure many important assets of country, or have the contract with some big companies about the: industry, traffic, irrigation, ship…All of that products, BIC has the main product are construction – installation insurance, motor insurance, it has the high revenue of BIC
BIC is committed to sustainable development and product diversification, investing in innovative business methods to enhance customer convenience As a pioneer in adopting new approaches such as Bancassurance, online insurance, SMS, and ATMs, BIC aims to make their services more accessible To increase revenue and profit, BIC continuously develops new products tailored to customer needs, including apartment and student insurance Their slogan, "Customer is the asset of BIC," reflects their dedication to valuing and serving their clients effectively.
BIC is enhancing its product offerings and service quality by partnering with leading reinsurance companies such as CCR, Chartis, and B.E.S.T RE, which recognize BIC as a top non-life insurance provider capable of handling their contractual business To ensure customer protection, BIC collaborates with top damage assessment firms like Mc Lawren and Crawford, prioritizing indemnity as a critical concern By effectively managing risks, BIC safeguards its reputation in the Vietnamese non-life insurance market.
BIC has the product about the non-life insurance and non-life reinsurance, examples:
+ And another products of non-life insurance
The reinsurance: BIC collaborate with another non-life insurance on the world Growth up the finance: Rise the stock, share, and another finance market
- The organization structure of BIC:
Table 2.1 The organization structure of BIC
2.1.2 The business of BIDV Insurance Corporation a) The revenue
Table 2.2 The revenue of BIDV Insurance Corporation in period 2012-2016
Between 2012 and 2016, BIC experienced significant revenue growth, increasing from 670.37 billion in 2012 to 1,671.46 billion in 2016, marking an impressive growth rate of 149.33% In 2013, revenue rose to 792.26 billion, reflecting an 18.18% increase The most substantial growth occurred in 2014, when revenue surged to 1,116.47 billion, achieving a remarkable growth rate of 40.92%, the highest during this period However, in 2015, revenue increased by 362.29 billion, with a growth rate of 32.44%, and in 2016, it reached 1,671.48 billion, a slight rise of 192.72 billion compared to 2015 Despite the high revenue figures, BIC faced challenges due to a struggling economy in Vietnam, leading to a rise in bankruptcies and prompting the company to adopt new cost and risk management strategies.
Table 2.3 The revenue of each product in period 2012-2016
Between 2013 and 2015, BIC experienced a significant surge in revenue, nearly doubling due to substantial growth in both motor and asset insurance Motor insurance revenue soared from 308.37 billion to 476.69 billion, an increase of 168.32 billion, while asset insurance rose by 126.33 billion, from 137.74 billion to 264.07 billion During this period, BIC focused on promoting retail products, particularly motor and health insurance, which are expected to drive future revenue growth.
This is the big cost in the business of BIC It affect the business operation and the success of BIC
The motor insurance 102.9 115.45 120.56 125.66 150.68 The health insurance 14.52 22.49 30.2 28.35 35.72 The asset insurance 45.41 34.49 30.87 38.7 40.64 The transport goods insurance
Table 2.4 The cost of compensation of BIC in period 2012-2016
The table illustrates the primary cost compensations in business, highlighting that motor insurance represents the largest expense for BIC Following this, asset insurance ranks second, while transport goods insurance comes in third Between 2012 and 2016, the demand for motor insurance surged as more individuals utilized this product, leading to a significant increase in BIC's revenue The frequency of motor vehicle usage, often limited to once or twice a week, contributed to a rise in traffic accidents, further escalating motor insurance costs In contrast, asset insurance experienced minor fluctuations, decreasing by approximately 3.62 billion, from 34.9 billion to 30.87 billion during 2013-2014 However, from 2014 to 2016, this sector saw a notable increase of 9.77 billion During this period, BIC faced high costs due to their strategy of prioritizing revenue growth across all products, which involved competitive pricing and a relaxation of risk control measures.
Table 2.5 The profit before tax of BIC in period 2012-2016
General, the profit before tax of BIC rises all of them In 2013, the profit grew up 2.45 billion and the growth rate was 2.21%, they had that profit because the cost
The result, limit and occasion of motor insurance business in BIDV
BIC has the potential to expand its market, with a stable customer base and increasing revenue and profits However, the company faces challenges such as high insurance costs and insufficient staffing To capitalize on their growth opportunities, it is essential for BIC to address these limitations and implement improvements.
3 The solution motor insurance in BIC
To effectively promote their products, BIC should utilize online advertising and banners to reach BIDV's customer base, which can significantly expand their clientele Although their fees are higher, the superior quality of their services will enhance customer satisfaction Additionally, by upgrading the scale of their products, staff, and services, BIC can boost profitability and ensure long-term success.
In recent years, Vietnam's traffic conditions have improved significantly, leading to an increase in vehicle ownership and, consequently, a rise in accidents As a result, individuals are now more concerned about motor insurance to mitigate financial losses from accidents This emerging trend in Vietnam sees insurance companies offering compensation for damages incurred by policyholders, helping victims cover repair costs and medical bills With the sharp increase in motorcycle ownership, the demand for motor insurance has skyrocketed.
BIDV Insurance Corporation (BIC), a subsidiary of Bank Invest and Development Vietnam (BIDV), has been operating in the non-life insurance sector for approximately 15 years and currently ranks sixth in the market Motor insurance represents a significant portion of BIC's revenue, contributing to a substantial market share As this product is easy to service and generates considerable income for the company, the evolution of motor insurance amidst increasing competition in Vietnam has led to improvements in the offerings Consequently, BIC must continue to enhance its motor insurance products to meet growing consumer expectations.
Besides that, I refer to the articles, example: “The vehicle insurance of Bao Minh insurance company period 1994-2005”, (Phung Thi Huong Giang Thd,
In 2006, Pham Phu Nghi emphasized the need to enhance the competitive capabilities of vehicle insurance at Bao Viet Insurance Company Recognizing the challenges faced by BIC in the motor insurance sector, I aim to identify effective solutions for the company Therefore, I have titled my Master's Thesis: "Solutions for the Development of Motor Insurance at BIC."
1 The research objective and research question
In this thesis, my research objective is find the solution for the development motor insurance of BIC And the research question follow are:
- How to increase the market share?
- How to increase the customer?
- How to upgrade the product, service?
- How to upgrade the revenue, profit?
This thesis utilizes statistical methods and expert approaches, combined with analytical reasoning, to examine the data from BIC during the period of 2012-2016 The research aims to identify limitations and propose solutions to enhance revenue and profit for BIC's motor insurance sector.
The thesis will have about 3 part:
Chapter 1: The problem of the insurance business in Viet Nam
Chapter 2: The development motor insurance of BIC
Chapter 3: The solution of motor insurance in BIC
Part 1 The theory for the development of motor insurance business
1.1 The definition of motor insurance business
The decree no.103/2008ND-CP date 16/9/2018 of government, the motor is the vehicle have the two wheel and they use the internal combustion engine
The motor insurance business have about 5 types of insurance and divide about 2 group: compulsory insurance and voluntary insurance
Compulsory insurance is mandated by the government under Decree No 103/2008/ND-CP, dated September 16, 2008, and is further outlined in the Ministry of Finance's Circulars No 126/2008/TT-BTC, dated December 22, 2008, No 151/2012/TT-BTC, dated September 12, 2012, and No 103/2009/TT-BTC, dated May 25, 2009.
Voluntary insurance encompasses four key types: motor insurance, which covers vehicle damage; driver's accidents and passenger seats insurance, providing protection for both drivers and passengers; civil liability for cargo on the vehicle insurance, safeguarding against potential cargo-related claims; and civil liability of motor vehicle owners, ensuring legal coverage for vehicle-related incidents.
- The motor insurance: this is the insurance for the motor when the vehicle owner have the unexpected accidents and uncontrollable the vehicle
- the driver's accidents and passenger seats insurance: the insurance for the human on this vehicle when they have the accident in traffic
- the civil liability for cargo on the vehicle insurance: The insurance company will have the compensation for the cargo on the vehicle when they have the accident
- the civil liability of motor vehicle owners: the insurance corporation will compensation payment for the people in traffic (not the motor owner)
1.3 The classify of the motor insurance
1.3.1 The compulsory insurance a) The subject insured:
Civil liability insurance protects individuals and vehicles by covering damages incurred in traffic accidents involving third parties The determination of responsibility in such accidents often cannot be established immediately.
The insured person is the owner, motor owner, it can be the person or company
The amount of compensation civil liability have the formula:
Amount of compensation = error level x actual damage of third people
If the motor owner and the third people in traffic don’t agree with the amount of the compensation, we can find the law court to decide b) Range of insurance
In the civil liability insurance, the range of it has about:
- Damages of the life and health for the third people
- Damages of the goods, asset of the third people
- Damages of asset if influence the business or decrease the profit
- The cost of the necessary for limited accident
- Decrease the damages for health and life , the cost of emergency
The insurance companies will insurance payment when the motor owners have about the problems:
- The accident has the deliberate of vehicle owners
- The motor isn’t enough the safety condition when it participate in traffic
- The motor owner has the traffic violation:
+ The bike don’t have the circulation paper, the safety certificate
+ The motor move to the forbidden road
- Damages by steal, robbed when accident
Besides that, The company isn’t responsible about the asset like gold, diamond… c) Amount of insurance liability
The maximum compensation a corporation can provide in the event of an accident is limited; if damages exceed this amount, the vehicle owner is responsible for covering the difference It is essential to establish liability, as damages related to civil liability may not be evident at the time of obtaining insurance Additionally, increasing the insurance liability amount enhances awareness of traffic participation and reduces the financial burden in case of an accident.
According to Decree No 103/2008/ND-CP dated September 16, 2008, and the subsequent circulars from the Ministry of Finance, including Circular No 126/2008/TT-BTC dated December 22, 2008, Circular No 151/2012/TT-BTC dated September 12, 2012, and Circular No 103/2009/TT-BTC dated May 25, 2009, the specified amount of insurance liability for motor vehicles is outlined.
- For person: 70.000.000 VND/ person/ accident
- For asset: 40.000.000 VND/ person/accident d) The fees
Motor vehicle insurance fees are the payments required by insurance corporations to protect vehicles These fees, determined by the Ministry of Finance, represent the cost of insurance coverage However, insurance companies may offer this product at higher prices, and the coverage typically lasts for one year.
1.3.2 The voluntary insurance a) The subject insured:
Motor insurance is a voluntary product designed to protect the insured asset, specifically the vehicle, which must be registered This insurance ensures engineering and traffic safety for the motorist, providing essential coverage for potential risks on the road.
The compensation will pay for motor owner when have the accident in traffic, example:
- storm, flooding, lighting, earthquake, tsunami
And the difference cost for this range:
- protect and take the motor to the repair shop
- define the reason and damages of the accident, with the agree of insurance company c) The risk isn’t include the range of insurance
- Deliberate action for the accident of the motor owner or manager people this motor
- The vehicle doesn’t have registration certificate of motor, or this certificate isn’t suitable
- In the time have accident, the motor owner don’t have the driving license or the certificate isn’t suitable for this vehicle
- The motor owner use beer, alcohol and drunk
- Illegal transportation, not accordance with law
- Move to the forbidden road, go counterclockwise, blow the red light, turn left or right in the forbidden turn left (right)…
Overloading vehicles with excessive passengers or cargo, contrary to the vehicle's certification guidelines, significantly contributes to the rise in traffic accidents.
- The indirect damage when participate traffic
- Damage the asset include: gold, silver, gemstone, diamond, money, cash, picture, art statue…
- The accidents start at the difference country
- The owner motor doesn’t honest when have the accident, or insurance profiteers
- Disrepair about the electronic, machine doesn’t have the accident
- Damages the wheels, tire, decal
- Steal the part of vehicle
- After fix the motor, but the certificate is expired
- Have the disrepair when the vehicle drown on the road d) Amount of insurance liability
The insurance corporation is obligated to cover the vehicle owner's expenses in the event of an accident, with the payment amount for repairs or the maximum cash payout being equal to the insurance liability limit.
When they use the under-value insurance, the enterprise will pay follow the formula:
Amount of compensation = Actual loss x (Amount of insurance liability/market price of vehicle)
When the amount of the insurance liability is equal the insurance value of motor, the amount of compensation is the actual loss
The solution for the development motor insurance in BIDV Insurance
The development of BIDV Insurance Corporation in future
In the future, BIC aims to increase revenue and profit by prioritizing two key strategies: enhancing product quality and service, along with effective brand advertising Additionally, the company aspires to rank among the top five non-life insurance companies in Vietnam in terms of profitability To achieve these goals, the CEO of BIC has outlined several missions for the organization moving forward.
- Rise the quality of business insurance by control the risk, the indemnify rate or fees
- Upgrade the quality of retail channels: Bancassurance, agent or insurance online
- Evolve the quality of staff, the salary of member
- Grow up the quality of serve customer
- The information technology of BIC must changes, it will help quality of manage and operating system rise.
The demand of customer about the motor insurance in Viet Nam
In future, the quantity of motor will rise sharply in Viet Nam, so the market of insurance will expand and the insurance companies can have more revenue and profit
Motor insurance presents a significant revenue opportunity for insurance companies and enhances brand development However, many individuals remain indifferent to this product, largely due to the lack of visible consequences associated with traffic congestion This poses a challenging issue for insurance firms operating in Vietnam.
According to the Insurance Association of Vietnam, insurance revenue saw a slight increase of 13% in 2016 compared to 2015, while motor insurance revenue only grew by 3% This stagnation is attributed to a decline in new motorcycle purchases, which has narrowed the insurance market Additionally, rising compensation rates due to deteriorating transport infrastructure and poor traffic awareness have negatively impacted the profitability of insurance companies As a result, there is a diminished focus on motor insurance products To address these challenges and enhance revenue and profit for companies like BIC in the future, effective solutions must be implemented.
The solutions for development
Advertising is a crucial strategy in business as it enhances brand awareness, builds customer trust, increases potential clients, and expands the insurance market Effective advertising methods are essential for promoting insurance products, making it vital for companies like BIC to utilize diverse channels such as print media, television, leaflets, and billboards Additionally, community engagement through scholarships and charity programs can strengthen brand recognition in Vietnam To further enhance its market presence, BIC should collaborate with influential individuals and organizations to amplify its message Expanding insurance services beyond Vietnam to neighboring countries like Laos and Cambodia presents an opportunity to grow the client base BIC must establish strong connections with companies in these regions, ensuring effective communication and collaboration As BIC develops its motor insurance product advertising strategy, it should focus on tailored campaigns that resonate with audiences in Vietnam, Laos, and Cambodia.
BIC need has the policy of customer, they must classify the customer and bring the perfect policy Example:
BIC, as a member of Bank Investment and Development Vietnam (BIDV), enjoys a competitive advantage in client access compared to other companies This affiliation allows BIC to engage with BIDV's extensive customer base more effectively To capitalize on this opportunity, BIC should implement tailored customer policies and strategies to attract BIDV's clients Strengthening the relationship with BIDV requires special customer policies, competitive fees, and exclusive offers, including gifts for BIDV on significant occasions.
To enhance customer satisfaction and retention, BIC must implement tailored policies for clients using their insurance products, such as offering lower fees and personalized communication for VIP customers and those utilizing multiple services BIC aims to distinguish itself from competitors by creating a strong brand presence, ensuring that clients view it as their top choice for insurance This involves delivering exceptional customer service, providing expert consultations, and efficiently addressing complaints Additionally, BIC needs to innovate its compensation process, as current practices can take up to a month to resolve claims, hindering service quality Addressing internal staff management is also crucial, as there have been issues with employees seeking higher compensation to expedite complaint resolutions, which reflects a need for better oversight and training.
3.3.3 Upgrade the product, services a) Evolve the compulsory motor insurance
This government-backed product serves as a valuable asset for vehicle owners during traffic situations, while also generating revenue for companies due to its constant demand To enhance market reach and increase customer usage, BIC should consider revising its business strategy We have identified several potential solutions to achieve this goal.
BIC should consider increasing its discount rate, currently at 10%, to match or exceed competitors who offer rates between 15-20% This disparity makes it challenging for BIC staff to engage with customers, potentially driving agents to seek companies with higher discount rates for better financial incentives While the immediate impact on revenue and profit may not be evident within the first couple of years, a five-year outlook could reveal significant growth in customer numbers, revenue, and profits, potentially doubling or tripling current figures.
BIC is facing challenges in business progress due to its complexity, which affects agents' ability to manage customer transactions efficiently For instance, agents are unable to retain earnings from product sales for more than a couple of days, as BIC requires immediate revenue collection upon customer purchase To streamline this process, it is proposed that fees be aggregated monthly, allowing BIC to receive revenue on the 25th of each month Additionally, reducing fees while enhancing customer responsibility in voluntary motor insurance products could further improve the overall business model.
BIC should consider conducting research to reassess and adjust the pricing of their product, as their fees currently exceed those of competitors, which may deter potential clients A strategic approach would involve lowering the fees while increasing the customer's financial responsibility per incident, for instance, raising it from 20,000 VND to 25,000 VND or 30,000 VND In conjunction with this adjustment, offering a discount of 10%-15% on fees when customers utilize the product could help reduce BIC's overall expenses while enhancing customer engagement Additionally, upgrading customer service will further improve client satisfaction and retention.
To enhance sales, BIC must improve professional knowledge and change work attitudes to elevate service quality Actively listening to customer feedback and gathering information will facilitate necessary changes, allowing for better risk management Additionally, BIC should focus on expanding its customer base while nurturing loyal clients who have supported the company since its inception Renewing existing contracts is more cost-effective than acquiring new ones, enabling BIC to save money and ultimately increase business profits.
BIC must enhance the quality of their after-sale service, as the indemnification aspect is crucial in business insurance Failing to manage this effectively can lead to deceptive practices, where staff may collude with customers, significantly increasing costs for BIC Furthermore, indemnification is vital for the credibility of insurance companies; therefore, to improve the quality of their indemnity, BIC needs to implement necessary changes.
To enhance workforce effectiveness, BIC should expand training programs that focus on skill development and expertise for staff, particularly for newcomers lacking experience Encouraging these employees to seek knowledge from seasoned colleagues, managers, and leaders can significantly reduce workplace errors Additionally, BIC must prioritize recruiting individuals with specialized skills and knowledge in indemnity, despite the limited availability in the job market Implementing attractive employee treatment policies, such as competitive salaries, rewards, and a positive work environment, is crucial Furthermore, fostering a strong ethical culture is essential to combat insurance fraud, which has implicated company staff Therefore, BIC should establish clear disciplinary regulations to address fraudulent behavior, thereby enhancing employee integrity.
To effectively manage traffic incident claims, BIC should collaborate closely with the police to identify the causes and levels of errors in traffic jams, ensuring timely compensation for affected parties Establishing strong relationships with hospitals or medical centers is crucial for accurately assessing medical costs and minimizing the risk of fraud Additionally, when police involvement is absent in traffic situations, BIC must connect with reliable garages that possess the expertise to diagnose vehicle issues and calculate indemnity costs By leveraging these partnerships, BIC can streamline the claims process and enhance decision-making for all parties involved.
In recent years, BIC has dedicated significant time to addressing customer claims due to incomplete indemnity systems To enhance efficiency, it is crucial for them to expedite this process, enabling staff to compensate claims more swiftly.
- About the equipment of staff, example: computer, camera, printed, or modern equipment, BIC need provide for staff enough equipment It help the business and indemnity faster, more exactly
In the insurance business, compensation plays a crucial role in attracting and retaining customers, as it fosters a sense of security regarding indemnity To enhance customer satisfaction, BIC must continuously improve its professionalism and streamline processes This includes reducing unnecessary steps, accelerating the indemnity process, and ensuring staff provide enthusiastic and helpful guidance to clients By facilitating quicker claim submissions and creating a positive customer experience, BIC can prevent potential clients from turning away and build lasting trust.
BIC consistently conducts thorough inspections of compensation practices, business operations, and accounting processes They meticulously review each step to identify any violations and implement protective measures within member companies.
To enhance profitability, insurance companies must focus on reducing indemnity costs, which represent a significant financial burden BIC can achieve this by implementing effective loss prevention strategies and raising public awareness about risks, particularly in traffic safety Collaborating with police, hospitals, and media outlets to create informative campaigns on traffic and health can be beneficial Additionally, partnering with government agencies and other insurance providers to install safety measures like notice boards and convex mirrors on roads can further mitigate risks BIC can also assist customers by providing equipment checks for their vehicles, advising them on necessary replacements, and offering guidance during sales meetings These initiatives can help reduce traffic incidents and enhance customer safety.