Insurtech - Opportunities and challenges for Vietnamese Startups

Leading the industrial revolution 4.0, digital technology has drastically changed our lives, especially during the period of social distancing and isolation caused by the Covid-19 pandemic. According to the Digital Economic Report of Southeast Asia (SEA) 2020 announced by Google, Temasek and Bain & Company on November 10, 2020, Vietnam is the country with the highest rate of new Internet users in Southeast Asia, reaching the percentage of 41% of current Internet users, approximately 70% of the population. The deployment of new and innovative technology that changes how insurance companies do business globally will bring many opportunities and challenges for Vietnamese startups in the digital insurance sector, InsurTech.

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Derived from the term FinTech, InsurTech = Insurance + Technology, also known as Digital Insurance Technology, is a term that refers to the use of technological innovations designed to increase efficiency and cost-effectiveness from the traditional insurance model. Activities in the insurance chain are carried out online via the Internet, from initial stages such as customer research, product design, marketing, sales, contract signing, and operations and the after-sales such as customer care, due diligence and compensation settlement. Technology application is also used in online sales, insurance operations such as risk assessment, assessment, valuation, reinsurance, ... InsurTech companies can be insurance companies, companies acting as intermediaries, acting as brokers or insurance agents, or just providing technology solutions, insurance support services.

In Vietnam, InsurTech, although only recently formed in recent years, has proliferated. Most of the original insurance companies have built online applications or websites for their business activities. Along with the penetration of foreign InsurTech companies is establishing InsurTech startups in Vietnam such as INSO, SaveMoney, MIIN, Papaya, etc... These companies are mostly small in scale and most of them act as intermediaries (acting as brokers or insurance agents) and provide technology services to primary insurance companies.

Opportunities for Vietnamese Startup

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Although Vietnam's insurance market lags behind countries such as Thailand, Indonesia, Singapore,... for many years, it is in the stage of developing and booming. Total insurance premium revenue has increased continuously, from 2010 at 30,842 billion VND to 2020 at an estimated 182,654 billion VND. It is forecasted that the insurance market will continue to grow significantly and InsurTech will explode in the coming years. Millenials and Z will overtake older consumers as the biggest spending force in the future. The cashless trend is developing and will drive consumers to increase digital transactions. With home-field advantages, Vietnamese startups take the lead in designing products suitable for domestic customers, improving customer experience, expanding potential customer network and loyal customers, ... With compact structure, flexible operation, low cost, Vietnamese startups have advantages in associating with domestic original insurance companies in implementing InsurTech, when foreign InsurTech companies are limited due to high costs, differences in language and culture. Vietnam has many favorable conditions to become the region's information technology center thanks to its competitive labor costs and stable political environment. This is an opportunity to help InsurTech Vietnam towards expanding the market to neighboring countries such as Laos, Cambodia, Myanmar,... and other countries in the region.

And great challenges...

Besides the advantages and opportunities, InsurTech Vietnamese startups have to face great challenges when they have to compete with potential foreign InsurTech companies, and constantly have a headache with the problem of human resources and capital. The high cost of investment in technology and developing high-quality human resources in the long term, the tough competition and elimination of the market, the risk of Vietnamese Startups facing bankruptcy and getting acquired of is considerable during the process of business operating and developing.

Digitalization has been ingrained in our daily lives, InsurTech will be an inevitable trend in the future if we do not want to be left behind and eliminated. For the insurance market in general and InsurTech in particular in Vietnam to develop stably, it is necessary to join hands of the state, businesses and the people.

References

Insurance Supervision Department: Global insurance market bulletin (February 8, 2021).
Statista Research Department (2021). Share of Insurtech funding transactions in selected countries worldwide from 2012 to Q4 2020.
Nguyen Dinh Hoan, Le Thi Mai Anh, Bui Thi Bich Thuy (2019). Insurtech: Opportunities and challenges for Vietnamese insurance companies. Finance and Accounting Study 2019, No. 12 pp.51-53.

Contact author: MSc. Le Thi Hong Hoa - School of Economic Mathematics - Statistics, University of Economics Ho Chi Minh City.

News, photos: School of Economic Mathematics - Statistics, Department of Marketing and Communication, Scientific Management - International Cooperation Department.