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"For our business, there is no short cut in building and growing a business in an emerging market.” - Lam Sui Kong
Generali Vietnam Life
Insurance LLC general director"
On the eve of the opening, Generali Vietnam Life Insurance LLC general director Lam Sui Kong talks to VIR about his firm’s business strategy in Vietnam.
After two years researching Vietnam’s life insurance market, what challenges and opportunities have you experienced?
On the opportunities side, the macro picture always draws easy attention. In terms of demographics, Vietnam is a populous country of 90 million and is still growing with most of them young people. In terms of economic fundamentals, Vietnam is a growing economy even though this is not without worries and concerns especially in relation to inflation and growth. Furthermore, the low insurance density, about $8.6 premium per capita and insurance penetration at 0.7 per cent premium per GDP mean that there is a lot of room for the market to grow.
However, a favourable macro environment might lead to different growth scenarios. The devil is in the detail, especially in our business sector where consistency in strategic direction and persistency in the excellent execution of the strategy are two critical success factors.
On a micro level, in terms of demand, the market has the potential to develop in terms of products and services requirements. Currently, only about 20 per cent of the population can afford life insurance with an average household income of VND10 million ($478) per month, according to survey on household living standards 2008 by the General Statistics Office. The pool of clients, who can afford life insurance is growing. We are only seeing the first phase of market development compared to other developed markets.
The life insurance market opened only 13 years ago. There is a lot of room to improve. I see a lot of mileage for a company to do things in a better way, from how it recruits agents, how it trains agents, how it develops products and how it serves customers, just to name a few areas.
On our challenges, 97 per cent of the life insurance market in Vietnam is agency driven and a mass recruitment approach prevails. Although the annual agent recruitment statistics appear high, most of the agents are recycled from one insurer to another within a fairly short period of time. Hence, the retention rate is very low, as is productivity. It is not surprising why the industry is also struggling to attract new blood. At the same time, group business is still in a nascent stage of development in terms of client understanding and infrastructure.
The biggest challenge is the time required to develop skilled staff, to build an effective and productive distribution channel and to deliver a return to our shareholders within a reasonable time frame.
For our business, there is no short cut in building and growing a business in an emerging market. The macro opportunities do not guarantee quick success. I always liken the setting up of a start up operation in an emerging market to a marathon race. The macro opportunities are for the spectators to understand. The runners will tell you what it takes to prepare before you even start, not to mention to finish the game and win the race.
Generali Vietnam Life Insurance this week opened its doors for business with an ambitious market growth strategy. The firm’s chief in Vietnam said a quality workforce was a key reason why the firm would succeed in Vietnam.
Generali Group is present in over 60 countries worldwide, in Asia, in China and in India through joint ventures. So, why has it chosen to directly enter Vietnam?
In Asia, we operate in China, India, Hong Kong, Japan, Thailand, the Philippines, Indonesia and Vietnam. Asia represents a strategic region for Generali due to its high economic growth and high household saving propensity. The launch of Generali Vietnam Life is part of the group’s expansion strategy in the region.
In China and India the entry strategy has been driven by the local regulations that impose a cap on the maximum Foreign investment in insurance companies (50 per cent in China and 26 per cent in India). Having said that, we always maintain the option of working with strategic partners of choice provided they are aligned with Generali strategic goals and able to add value to the insurance business. This partnership might occur in different forms and at different stages of our development.
What is your business strategy to tap Vietnam's life insurance market as it is said that the Vietnamese market’s low penetration is due to the low awareness of life insurance products?
The low insurance penetration is a result of many factors. While people might have a low awareness of life insurance products, they should not have a low awareness of the importance of protection and saving needs for them and their families.
The future development of Vietnam’s life insurance market lies in growing the needs of customers. People will only be interested in understanding our products if they know how the products can fulfill their needs. This highlights the importance of the professionalism of our agency force. We need them to understand the needs of the clients as a precedent to selling our products, rather than just go for a product push.
We adopt a multidistribution channel strategy with business model covering individual and group employee benefits business through tied agents, brokers, banks and financial institutions channels. By doing this, we will be able to capitalise on the unique franchise of the Generali Group in the group employee benefits solution segment at the same time when we are building up our tied agency force. On a selective basis, we will also develop alternative distribution channels such as banks and financial institutions.
We have made a strategic choice in developing a qualityfocused model to support agency productivity. This encompasses an all rounded approach to focus on quality recruitment, training and development, mentoring and activity management of our agency force.
In addition to that, we have diversified products. For the individual life business, we have launched savings, protection and hospital income products. They will enable us to fulfill the full life cycle needs of our target client segments.
For group business, we have launched a full suite of products covering the employee benefits spectrum. This includes term life, personal accidents, medical reimbursement, hospital income and income compensation.
Generali Vietnam will operate a business in Vietnam under a full licence from May. What is the significance of this milestone to the company?
We first opened our representative office in July 2009. Last month, we celebrated our first anniversary as a licenced life insurance company. We started group business last year in October and with the launch of our Individual Life business now, we are implementing our multidistribution business model. We are proud to have reached this important milestone.
How do you expect the development of Vietnam’s life insurance market to proceed in the next five years?
It is difficult for anyone to read into the future. However, I believe that the following trends will continue. First of all, increasing consumer sophistication will lead to increase demand for professionalism in insurance agents. Customer service will assume much more importance in differentiating life insurers.
A clear shift from product push approach to ad visebased and needsbased sales approach. As a result, there will be increasing pressure on the sustainability of the mass recruitment model.