A study on micro–insurance at viet nam agricultural bank insurance joint stock company and suggest the development for micro insurance in viet nam

Sincerely thank the Vietnam Insurance Association, the Insurance Company of the Agricultural Bank of Vietnam - ABIC for helping me a lot in collecting data, capturing some information on

ĐẠI HỌC QUỐC GIA HÀ NỘI

LUẬN VĂN THẠC SĨ

Chuyên ngành: Quản trị tài chính

Đề tài:

NGHIÊN CỨU MÔ HÌNH TRIỂN KHAI BẢO HIỂM VI MÔ TẠI CÔNG TY

CỔ PHẦN BẢO HIỂM NGÂN HÀNG NÔNG NGHIỆP VIỆT NAM VÀ GỢI

Ý PHÁT TRIỂN BẢO HIỂM VI MÔ TẠI VIỆT NAM

HVTH: Hoang Dieu Quang Minh MSHV: 18075006

GVHD: TS Nguyen Thi Hai Duong

HANOI, 2022

VIETNAM NATIONAL UNIVERSITY, HANOI

Graduate Student: Hoang Dieu Quang Minh Student code: 18075006

Supervisor: Dr Nguyen Thi Hai Duong

ABSTRACT

Currently, insurance is a rather hot field in modern life when people have a high standard of living and high requirements in protecting themselves and their properties However, is this type of product only for the rich and the poor do not have the opportunity to access? Agriculture Bank Insurance Joint – Stock (ABIC) is considered as one of the leading insurance service providers in the Vietnamese insurance market in general and the low-income people market in Vietnam in particular And this topic refers to the deployment model of micro-insurance for low-income people of ABIC The author used secondary information to make clear about business risk management of the company Although the company has achieved lots of success in insurance business as well as risk management of insurance, it still exists limitations and challenges that require the company to recover Thus, this research also recommends methods and solutions for both ABIC and the State and Regulatory Agencies at aim to make risk management in insurance field better

ACKNOWLEDGEMENT

I sincerely express my gratitude to all the teachers in the International Department and the Graduate School of Hanoi National University for dedicatedly imparting valuable knowledge as well as creating all the most favorable conditions for during your studies and research until your dissertation project Sincerely thank the Vietnam Insurance Association, the Insurance Company of the Agricultural Bank of Vietnam - ABIC for helping me a lot in collecting data, capturing some information on social security fields of the company

In addition, I would like to express my great appreciation to my advisor, Dr Nguyen Thi Hai Duong, Head of Insurance Economic Department, Faculty of Insurance, National Economics University - who directly guided and advised me during the time of this research topic

Despite trying very hard in the process of researching the topic, but with limited personal capacity, the thesis cannot avoid its shortcomings Therefore, I would like

to receive comments from teachers, brothers and sisters who have the same interest

in my research topic to help me to be more complete as well as make dark solutions advantages in the process of promoting the macro insurance sector in Vietnam Thank you sincerely!

HaNoi, June 25th, 2022

TABLE OF CONTENTS

ABSTRACT

ACKNOWLEDGEMENT

TABLE OF CONTENTS

LIST OF TABLE

LIST OF FIGURE

INTRODUCTION 1

CHAPTER 1 THEORITITCAL FRAMEWORK OF MICROINSURANCE 5

1.1 Overview of micro insurance 5

1.1.1 Dedinition and characteristics of micro insurance 5

1.1.2 The role of micro insurance 9

1.2 Micro insurance products and deployment model 12

1.2.1 Products of micro insurance 12

1.2.2 Micro insurance distribution 16

1.2.3 Micro insurance implementation models 17

1.3 Factors affecting the micro insurance market 17

1.4 Experience in implementing micro insurance in the world 18

1.4.1 Microinssurance in Countries 19

1.4.2 Experience for Vietnam 29

CHAPTER 2: MICROINSURANCE DEVELOPMENT AT VIETNAM AGRICULTURAL BANK INSURANCE JOINT STOCK COMPANY 31

2.1 Introduction to Vietnam Agricultural Bank Insurance Joint Stock Company 31

2.1.1 History and Development 31

2.1.2 Organizational structure 33

2.1.3 Operations and Products 38

2.1.4 Business performance of ABIC (2016 - 2020) 40

2.2 Microinsurance in Vietnam 44

2.2.1 Overview of Microinsurance in Vietnam 44

2.2.2 Models of implementation of Microinsurance in Vietnam 46

2.3 The current situation of microinsurance development in ABIC 47

2.3.1 ABIC's microinsurance product 47

2.3.2 ABIC's micro insurance client 52

2.3.3 Deployment model of ABIC insurance 53

2.4 Assessing of micro insurance performance results at ABIC 55

2.4.1 Achievement 55

2.4.2 Existences and Reasons of Existences 59

CHAPTER 3: SOLUTIONS TO DEVELOP MICROINSURANCE AT VIETNAM AGRICULTURAL BANK INSURANCE JOINT STOCK COMPANY AND RECOMMENDATIONS FOR DEVELOPMENT OF MICROINSURANCE IN VIETNAM 61

3.1 Factors effect to Microinsurance Development 61

3.2 Solutions to Develop Microinsurance at ABIC 64

3.2.1 Improve service quality 64

3.2.2 Diversify micro-insurance products 65

3.2.3 Choosing the direction and scope of business 65

3.2.4.Choose a business strategy 66

3.3 Recommendations for development of microinsurance in vietnam 67

3.3.1 Constructing the legal framework for microinsurance operation 67

3.3.2 Educate farmers about the importance of microinsurance 68

3.3.3 Diversify Suppliers 68

CONCLUSION 73

REFERENCE 74

LIST OF TABLE

Table 2.1 ABIC’s Recurring ROE (2016-2020) 41

Table 2.2 ABIC’s Recurring income and Recurring ROE (2016-2020) 42

Table 2.3 ABIC’s One-time ROE (2016-2020) 43

Table 2.4 ABIC’s One-time ROE Growth (2016-2020) 43

Table 2.5 ABIC Annual BATD’s Premium Rate Schedule 51

Table 2.6: ABIC Credit Security Insurance’s Short-term Premiums 51

Table 2.7: ABIC's Long-Term Credit Security Insurance’s Premium Rate 51

Table 2.8 ABIC’s agent (20-2020) 56

Table 2.9 ABIC's credit security inssurance product business results 57

Table 2.10 Premium Revenue of ABIC's Credit Security Inssurance 58

LIST OF FIGURES

Figure 1.1: Model of micro insurance implementation in Japan 25

Figure 2.1 ABIC’s General Structure 33

Figure 2.2 ABIC’s Headquarters Structure 36

Figure 2.3 ABIC’s ROE (2016-2020) 41

Figure 3.1: Distribution channel model Partners – Agents 71

INTRODUCTION

1 Rationals

The country reform has brought about many important economic and social achievements, including the consolidation and improvement of the social security policy system Social security is to contribute to ensuring income and life for citizens in society when they unfortunately encounter "social risks" or "social events" that lead to stop or decrease in income The aim is to create a stable life for all members of society and therefore, it is deeply social and human This is also the ideology towards prosperity and happiness for everyone in society

Each person in society from different social status, different race, different religion are manifestations of a social value system As a citizen, they must be guaranteed in all aspects to fully develop their abilities, regardless of social status, race, religion Social security helps the unfortunate the less fortunate people have more conditions and supports necessary to overcome the "events" and "risks", helping them have opportunities to develop and integrate into the community

Since time began, Vietnam have been determined to develop a social security system to ensure the better realization of the people's basic rights Social security policy has many forms, including "Micro Insurance" Micro insurance plays an important role in ensuring social security, contributing to poverty reduction, including insurance products designed and offered to the poor, the low-income and the disadvantaged in social

Not only seen as an effective tool to "protect" the poor, micro insurance also contributes to improving understanding of the need for insurance in the low-income and middle-income communities in rural areas It can be said that micro insurance brings knowledge about finance insurance or simply helps poor people to have the habit of accumulating finance In other words, micro insurance is a type of product that offers safe protection and ensures the poor to avoid risks and damages The benefits of financial services for the poor are widely recognized and microfinance

projects are top concern in developing countries Meanwhile, micro insurance - the type of insurance for the poor - that has the potential to significantly support millions of the poor and weak in society, receive limited attention The poor can face big financial trouble when unexpected risks come to them A poor person's wealth may be limited to a few animals or plants and a modest place to live, but destroying any of these can be a blow to their family's economy Therefore, even a small insurance premium can guarantee protection, peace of mind, even dignity for the poor However, from the insurers' point of view, the small sum insured means small premiums and low profit margins, leading to many businesses not being too eager for this type of insurance In that regard, micro insurance must be well managed, cost-effective and distributed on a large scale in order to bring both benefits to the poor and insurance providers This is not a simple problem

So far, Agriculture Bank Insurance Joint Stock Corporation (ABIC) is the most successful company that provide micro-insurance in Vietnam with very respectable numbers For Vietnam to make great strides on poverty reduction, bringing insurance products closer to the poor, Vietnam urgently needs businesses and organizations like ABIC What model did ABIC operate on to receive such success? This essay is enthusiastic research that stems from the desire to contribute

a part of strength in the cause of poverty reduction, bringing the poor and difficult access to better values

From that importance and meaning, along with the knowledge learned at the school and my choice, I choose the topic: “A study on micro insurance at ABIC and suggest the development for micro insurance in Vietnam” Realizing that this is an important and highly applicable study, the topic has studied the systematization of the theoretical basis of microinsurance in general and the assessment of the current situation of micro insurance operations, give solutions to push up micro insurance

in ABIC in pacticular, micro insurance in Vietnam in general

2 Objectives of the research

Micro insurance is still not popular in Vietnam, so that the general objective of the thesis focuses on researching theoretical issues of micro insurance such as definition, characteristics, roles, types of micro insurance; assessing current situation, difficulties, and opportunities of micro insurance development at ABIC; and propose solutions to develop micro insurance in ABIC, in Vietnam in general

- Detail Objectives:

To make clear the general objective, the thesis will be concentrated on the follow detail objectives:

 Synthetize and systemize theoretical issues of micro insurance

 Analyzing the current situation of micro insurance at ABIC, to point out the advantage and disadvantage, micro insurance development process at ABIC

 Assessing potentials and challenges in implementing micro insurance at ABIC in the next future and propose solutions for development this one at ABIC

 Recommendation to develop micro insurance in Vietnam

3 Subject and Scope of the Research

- Subject of the research

The object of the thesis is the theory and practice of microinsurance, focusing

on product development, distribution channel network, and customer market development

- Scope of the research

The scope of the thesis is determined in terms of space and time The scope of research in the space focuses mainly on the development of microinsurance at ABIC The scope of research in term of time focuses on the period 2017-2020

4 Research Methods

To clarify the research objectives, the thesis uses methods of synthesis, statistical analysis, comparative analysis to analyze each content through information and aggregated data to give out the comments, reviews

The data used in the study are secondary data collected from annual reports of ABIC, data from the statistical yearbook of the Insurance Supervisory Authority (ISA), the Market news of Vietnam Insurance Association (VIA)

5 Thesis structure

Structure of the thesis includes three chapters:

Chapter 1 Theoretical Framework of Microinsurance

Chapter 2 Microinsurance Development Model at Vietnam Agricultural Bank Insurance Joint Stock Company

Chapter 3 Solutions to Develop Microinsurance at Vietnam Agricultural Bank Insurance Joint Stock Company and Recommendations for Development of Microinssurance in Vietnam

CHAPTER 1 THEORITITCAL FRAMEWORK OF

MICROINSURANCE

1.1.1 Dedinition and characteristics of micro insurance

1.1.1.1 Definition

Until now, insurance is a kind of product that can be said to be essential in people's thinking about business as well as life in general in developed countries because it is a protection for risks what are unexpected things may happen in the future The insurance business is developing relatively strongly with high growth Insurance is formed because of the existence of risks and the need for people to have preventive measures for the uncertainties that will happen, and also to overcome and limit the consequences that the risks It can be seen that the idea of insurance was born very early, when people were aware of the need to store food to prevent accidents such as loss, drought, and war Insurance industry initially came from insurance products for the marine industry, followed by the proliferation of fire insurance, life insurance In everyday life as well as in business activities, every individual, organ or business often encounters unexpected problems that no one can foresee Such risks can affect people, property and human responsibility Risks often lead to financial loss And insurance is born to manage those risks, which is a method to protect individuals or businesses against accidental financial losses, lives, occupational accidents, traffic Insurance helps transfer risks, spread losses, and minimize losses Insurance also stabilizes costs, helps insurance buyers feel secure and stimulates savings So, the role of insurance is extremely important

in life, as a lifeline when you are in trouble

Naturally, insurance is a "future" product, it seems only for the rich income people almost never think of insurance because they consider it is luxury thing Therefore, the poor, the low-income people become more and more stuck when they suddenly encounter accidents when they do not have protection from insurance This leads to serious economic disparities among the population classes

Low-as well Low-as hindering national economic growth or many other consequences that come with it Realizing this serious problem, since the 1990s, the International Labor Organization began experimenting with super-low-cost insurance policies that started out as a form of charity Micro insurance campaigns are born from here Micro-insurance is a massive development of microfinance projects developed

by the banker and Nobel Prize-winning Bangladeshi economist Muhammad Yunus, which has helped millions of low-income people in Europe Asia and Africa set up businesses and buy houses

American International Group Inc (AIG) was one of the earliest companies to offer micro insurance and started selling policy in Uganda in 1997 Micro-insurance soon was joined by other major insurance companies including Swiss Re, Munich

Re, Allianz and Zurich Financial Services Today, many innovative micro insurance products have been developed to protect poor workers from the financial impact of losses

Micro-insurance Network is a global non-profit organization comprising specialists in the microfinance sector, comprising 80 institutional members from more than 40 countries, committed to promote the development and offers a wide range of insurance services for low-income people

Micro Insurance is often distributed in cooperation with microfinance institutions, rural banks, economic organizations, and humanitarian organizations that provide non-financial services Insured crops and livestock can be used as collateral for loans to buy better equipment or improve farmers' productivity, ultimately improving living standards

With limited growth prospects in developed countries' insurance markets, insurance companies see emerging economies with the potential to grow and deliver more attractive returns So far, the growth of insurance premiums in developing countries has outstripped growth in industrialized countries Swiss Re identifies emerging markets as countries in South and East Asia, Latin America and the

Caribbean, Central and Eastern Europe, Africa, the Middle East (excluding Israel), Central Asia and Turkey

With limited growth prospects in developed countries' insurance markets, insurance companies see emerging economies with the potential to grow and deliver more attractive returns So far, the growth of insurance premiums in developing countries has outstripped growth in industrialized countries Swiss Re reinsurance group identifies emerging markets as countries in South and East Asia, Latin America and the Caribbean, Central and Eastern Europe, Africa, the Middle East (excluding Israel), Central Asia and Turkey

1.1.1.2 Characteristics of micro insurance

Micro insurance is not quite the same as ordinary commercial insurance because micro insurance are risk reduction and allocation products related to costs, terms, level of support and distribution channel are designed appropriately for low-income clients and often covers a wide range of areas, from life and healthcare to weather, property, crops, livestock, and natural disasters Target groups are farmers and rural areas, people who have low incomes

There are quite a few perspectives and views on micro insurance from the features, processes, prices, and targets such as:

+ According to the International Association of State Management Agencies

on Insurance Business (IAIS), Micro Insurance is a type of insurance for income people provided by many organizations but complying with the general principles of insurance

low-+ According to Craig Churchill (2006, 2013) “Micro insurance is a type of insurance that protects low-income people from changing risks in return they have

to pay a fee for each type of risk that they take part in”

+ Like Chuchill, insurance company ALLIANZ AG, GTZ and UNDP (2006) points out that “micro insurance is specifically designed to protect low-income people, with suitable insurance products to help them cope and protected from common risks”

According to the synthesis of the IAIS (International Association of Insurance Supervisories), micro insurance has the same financial and professional regulations with ordinary insurance However, micro-insurance is created to support individuals

or households with small amounts of savings and low income, so the products of this type of insurance are designed with low-value assets and protect the insured against risks such as illness, injury, or death so it will still have the following distinct properties:

The contract is simple, easy to understand (rules and terms of insurance must

be simple, easy to understand, with almost no exclusion of insurance, automatic acceptance (no appraisal)

 Simple, narrow coverage

 The premium payment period is regulated to meet customer needs

 The insurance period depends on the loan period or by year

 Small amount insured, low premium It does not depend on the insured person's age, gender or occupation

 Small target market, limited financial capacity, almost no access to insurance services

 In addition, as a micro insurance distribution partner for insurance businesses, microfinance institutions, credit unions, cooperatives, and community organizations, it is not necessary to be an insurance agent

Basically, to be considered as "micro insurance", an insurance product must meet 4 characteristics:

 Products must serve groups of people, industries, and vulnerable and vulnerable areas;

 Low cost;

 Convenient and simple insurance payment procedure;

 The interest rate on the product is relatively low, in line with the cost spent

1.1.2 The role of micro insurance

The value of the benefits of microfinance activities is beyond argument However, one of the modes of operation of the microfinance model is micro-insurance is still a new concept that many people do not know about because of the common ways of thinking like “they do not need demand for insurance”; "Unable to provide commercial insurance to the poor because they are too poor to pay for insurance"; "Do not want to spend a sum of money to buy something that has not necessarily happened" Because of these thoughts, micro insurance is still not the option of poverty alleviation that the poor seek

In general, micro-insurance has the same basic roles as other insurance products

First, we discuss the economic role that micro-insurance offers:

 Micro insurance contributes to financial stability of individual person and households participating in insurance

Insurance companies in the market offer insurance services to meet the need to ensure financial safety and stability when insurance events occur This service aims

to create financial resources for individual person and households bought insurance

to stabilize their business and life when they encounter risks

In fact, the compensation or insurance payment has helped socio-economic organizations to preserve their assets and capital sources; individual person and families have overcome financial difficulties, do not fall into material and spiritual exhaustion Thereby, insurance has contributed to ensuring the stable development

that the premium collected first, the compensation, the insurance payout arises later,

so the monetary fund formed from the insurance premiums is mostly temporarily idle Therefore, insurance companies can use that idle capital to invest and meet capital needs for the economy

 Micro insurance contributes to stabilize the State budget

By virtue of the insurance services provided by the insurance market, the State budget has significantly reduced budget amounts such as subsidies due to natural disasters and unexpected accidents

At the same time, the state budget is enhanced due to contributions from such amounts as value added tax, corporate income tax of insurance companies

Following are the prominent social role of micro-insurance as follows:

 Micro insurance contributes to avoid risks, limit losses, ensure safety for the socio-economy

The insurance profession requires insurance organizations to be responsible for researching risks, making statistics on accidents and losses, identifying causes, setting out and coordinating with relevant industries to implement control measures, prevent risks, minimize losses

Every year, insurance companies spend a certain amount of money to carry out prevention work to limit losses

 Micro insurance creates a life of savings and brings a state of mental safety

The micro insurance market with diversified types of insurance products, especially the life insurance sector in the micro insurance field will create a flexible form of savings, affecting the thinking of individuals, households They have to think, calculate and gradually develop a sense and habit of spending a portion of their income to pay premiums with the aim of having a safer future

In addition, beyond the meaning of money, insurance in general and micro insurance bring a state of mental safety, reducing anxiety about risks and uncertainties for the insured Future risks are something that we humans cannot foresee Natural risks such as storms, floods, droughts, tsunamis, epidemics are becoming very complicated Even the risks caused by the people themselves such as war, terrorism, can happen at any time Therefore, participating in micro insurance, the insured has transferred his risk to the insurance company, so he has released fears and worries about possible losses, contributing to positive psychology

in thought, peace of mind to work, and live That is the humanistic meaning of insurance in modern society and shows a good image of the insurers before the public

Not only that, but the special roles also that have the characteristics of micro insurance that other insurers cannot have are:

 Micro insurance provides the poor and low-income households the means

to protect themselves against the effects of risk

 As a tool to expand social security and contribute to poverty reduction The experience of the world shows that implementation of insurance is one of the core policies in the policies to improve and enhance the lives of low-income people

 Micro insurance plays a significant part in strengthening microfinance institutions The provision of micro-insurance products enhances the image of the organization; making members feel that this is a reliable organization, always protecting members against any possibility of loss, attracting more new members Micro-insurance also brings valuable opportunities for the private insurance

company aims to support a large portion of customers who are not well served but still generate profits

1.2 Micro insurance products and deployment model

1.2.1 Products of micro insurance

The nature of micro insurance is to provide insurance for individuals who do not have retirement savings or for adults in low-income households who are disadvantaged in society As a result, micro-insurance products are designed to compensate for illness, injury or death, and lower value assets Micro-insurance, like any other type of insurance, was created to cover a wide range of risks These include health risks (illness, injury, and death) and property risk (damage or loss) Micro insurance products include crop and pet / livestock insurance, theft or fire insurance, health insurance, term life insurance, and term life insurance, disability insurance and natural disaster insurance More specifically, according to the statistics of the IAIS, the main micro-insurance products in the world today include:

- Micro term insurance: mainly term insurance associated with credit loans of the poor In some cases, micro-mixed insurance products are also offered

- Micro-health insurance: mainly insurance products that cover hospitalization benefits, medical examination benefits, sickness benefits, and maternity benefits

- Micro-injury insurance: death insurance due to accident with bodily injury benefit

- Microfinance insurance: property insurance for households, but also rarely implemented

- Agricultural insurance micro: seasonal insurance according to weather index

- Micro-catastrophic insurance: pay when natural disasters occur

- Micro package insurance: combine life insurance, health insurance and property insurance in one micro insurance policy

Specially, micro-insurance is present in the following types:

 Life micro insurance products

Micro insurance's life insurance products are mainly traditional and simple life insurance products According to Micro Insurance Center Micro Insurance's 100 poorest countries global coverage, life insurance products are most offered in micro insurance and focus on credit life insurance Credit Life Insurance covers the outstanding (possibly plus lost interest) of the loan in the event of a borrower's death This type of insurance reduces some of the risks for the creditors, but the value for the living depend on it is minimal In essence, this product protects microfinance institutions and credit institutions Currently this product line accounts for 60% of micro-life insurance products in poor countries

Term insurance (term life insurance): is a simple and very popular life insurance product in micro insurance Insurance products for the event of death of one or more household members This product is simple in terms of pricing and risk management, but the biggest challenge for product development is the delivery and minimization of costs

Long-term life insurance products: including mixed life insurance, pension insurance (old - age pension) and life insurance These are products that are rarely distributed but there are still a few organizations or insurance businesses combined with organizations trying to grow The challenge to the development of this product line lies in the distribution channel, unstable macroeconomic conditions and high inflation in poor countries, and low income for the target group of micro insurance

In addition, a few additional terms are also designed to increase the scope and scale of protection for major insurance products such as:

- Extra benefit insurance: A type of term life insurance that is available to the borrower and corresponds to the term of the loan If the borrower dies during the loan term, the beneficiary will receive a fixed payment to cover funeral costs and other expenses The term “extra benefit” is used because it is sold with credit life and credit disability insurance

- Additional life insurance: Always sold with a "supplemental benefit" product This type of term life policy further covers some other family members The insurance term also corresponds to the loan term

- Continuation insurance: This type of policy with a term and monthly renewal

is a continuation of an additional benefit policy Clients of a microfinance institution can purchase this product at the end of the loan term if they wish to be insured and do not want to borrow another loan

 Medical and health expense insurance

Medical and wellness cost insurance is the category in greatest demand in micro insurance services Health risks are one of the keys to poverty Health problems are often the cause of income loss due to treatment costs and a shortage of breadwinner in the family

Medical and health cost insurance products include many types:

- Insurance to support medical expenses for the poor

Health insurance has several specific features based on which it is possible to distinguish health insurance from some other types of insurance such as life insurance and property insurance Health insurance in micro-insurance basically provides limited protection when the insured uses medical services (Insurers only support a certain amount and usually limits the number of times paid for one year of coverage)

Injury Insurance: The sum insured is paid in accordance with the set amount when the risks occur, including medical expenses, injury, or death

- Accident and incapacity insurance: Payment amount depends on the case of temporary or long-term incapacity This product is often associated with microcredit and mainly protects creditors Overall this product is still a new product compared to the currently deployed micro insurance products

Products that support a portion of the costs incurred or pay a set amount for each risky event The most difficult issue for health and cost insurance lies in the

size of the number of people insured If the number of insured is too low, effective loss distribution cannot be ensured

 Property insurance products

- Agricultural insurance:

An insurance product for crop and livestock productivity that farmers or fishermen can use to protect their crops from natural disasters, epidemics, pests This is the type of product Micro insurance faces the most difficulties in product design as well as risk management measures due to cumulative and widespread risks and complex technical foundations

- Household insurance product package

This is a comprehensive insurance product for households that includes health insurance and property insurance This package is designed with affordable price and be cheaper than other single insurance products When the poor use this package, they will not have to worry about the risks happening to their health and possessions The insurance products in this insurance package include injury or death due to accident, illness; insurance for all property risks for the house

According to the Micro Insurance Center's investigation on micro-insurance in developing countries, micro-insurance products are being deployed in countries with a focus on design towards some of the priority risks:

- Urganda: insurance for risks of illness, death, incapacity, loss of property, risks of loans

- Malawi: insurance for death risk (especially related to HIV/AIDS), crop failure, illness, education

- Philippines: insurance for death, old age, sickness

- Vietnam: insurance for risks of illness, natural disasters, accidents, illness / death of livestock

- Indonesia: insurance for sickness risks, children's education expenses, crop failure

- Laos provides insurance for sickness, disease of livestock, risk of death

1.2.2 Micro insurance distribution

Providing and distributing micro insurance is challenging business Distribution channels are very important in bringing insurance products to customers Micro insurance distribution channels are basically the same as conventional insurance distribution channels, including direct distribution channels, intermediary channels such as agents or brokers

However, the distribution of micro-insurance will face more difficulties when distributing ordinary insurance because the target market of micro-insurance is low-income customers, having financial difficulties, and less knowledge and the ability

to receive information from distributors is also very limited Say nothing of the distribution of micro-insurance must also ensure the cost factor at the lowest possible level because the premium of micro-insurance is much lower than normal insurance

Direct distribution channel: employees of insurance providers directly

distribute products to customers This distribution channel is usually in place when distributing property insurance products such as agricultural (crop and livestock) insurance

Affiliate distribution channel: this is the most common channel in micro

insurance Agents are usually individuals or entities that have direct relationships with low-income client groups, for example professional associations (farmers' associations, women's unions), financial institutions, credit agents

These agents are trained by the supplier on product and product propaganda skills The fact proves that in countries such as Urgranda, Indonesia, India, distribution channels including microfinance institutions, association organizations with interests associated with low-income associations are the distribution is very efficient

Bancassurance distribution channel: This is a distribution channel applied by

many insurers to take advantage of the lenders However, only a few insurers can

effectively apply this distribution channel when distributing micro-insurance, which

is derived from the characteristics of the bank's customers themselves

Other distribution channels: other traditional forms of distribution applied by

ordinary insurers such as network distribution, mail distribution, These forms are not recommended for micro-insurance due to limited access to technology from customers

1.2.3 Micro insurance implementation models

insurance is an area that is still not really popular in Vietnam insurance providers focus primarily on non-governmental organizations

Micro-In Vietnam, the micro-insurance distribution model focuses on two models:

 Partner-agent model: For this model, associations will sign a partnership or agent contract with an insurance enterprise and an insurance company providing services, co-insurance for association members;

 Mutual association model: Under this model, the association directly provides services and implements insurance for its members

1.3 Factors affecting the micro insurance market

 Regulatory environment:

The operation of the micro insurance market cannot be outside the legal framework of each country It is not simply a matter of the insurance company in the market having to comply with the law Establish a fair and coherent insurance business environment to ensure a healthy competitive environment for other insurance companies But also, to ensure benefits policies for the insured, or also known as customers Since then, there is a foundation to promote the development

of the insurance market

 Economic, cultural, and social environment

A country whose economy is on the rise means industry is getting a boost Specifically, the development of production and service industries Of course, the need for insurance will arise from the desire to be guaranteed for stability

 Competence of insurance enterprises

For any type of product or service that wants to be present as well as promote and develop in the market, it must be due to its own capacity to trade in such products or services That competence will be demonstrated through the ability to formulate marketing strategies, promote products, business analysis, the ability to operate, organize, manage staff, employees, financial ability

 Economic conditions and perceptions of customers

The people of developed countries around the world always see insurance as a civilization of mankind because of the humanitarian benefits that it brings Insurance is a form of risk management, protecting buyers against future losses Improved living conditions will cause people to seek for "safety" Not really insurance is just for the rich Insurance comes in many types And micro insurance was born for the people with lower conditions than the common ground because of low cost However, knowledge about insurance is not really popular among some people and especially low-income people, because they do not want to spend an amount in advance for the future "patronage" is unlikely to have happened From here, it can be seen that perceptions of the need and the value of insurance greatly affect the decision to buy insurance

1.4 Experience in implementing micro insurance in the world

1.4.1 Microinssurance in countries

Insurance for low-income people, also known as micro-insurance, has been recognized by many international organizations such as ILO International Labor Organization, World Bank and many countries around the world specially is during two decades

Micro insurance also receives participation from insurance companies (such as AIG, PhilHealth) In fact, several deployment models have been successful in countries such as India, the Philippines, with the participation of insurance companies, mutual organizations, international organizations and governments

Philippines, Pakistan, and Japan - countries in Asia, with certain cultural, social and developmental similarities economy with Vietnam, thereby we must take a lesson to the implementation of insurance for low-income people in our country

1.4.1.1 Experience in implementing micro insurance in the Philippines:

In the Philippines, the implementation of insurance for the poor is done mainly through mutual associations and non-profit organizations The operational objectives of these mutual associations are:

(1) Payment of benefits for death, accident and health of members of the association, their relatives;

(2) Financial assistance in case members lose their jobs;

(3) Insurance members with low premium: no more than 10% of the minimum income / day (equal to 1 USD) Maximum sum insured: 4,200 USD (about 68 million VND)

Operational requirements of these mutual associations: The Terms must be easy to understand; The claim procedure is simple so that claim is done easily and quickly; The premium payment period coincides with the payer's income stream; Number of members of the association: at least 5,000 people

Operational requirements of these mutual associations: The Terms must be easy to understand; The claim procedure is simple so that claim is done easily and quickly; The premium payment period coincides with the payer's income; Number

of members of the association: at least 5,000 people

Regarding the distribution model, two models are used The first model is a Partner-agent, in which the association cooperates with an insurance enterprise and that insurance enterprise provides services and insurance contracts to its members The second model is a mutual association, in which the association directly provides services and provides insurance for its members

In order for these mutual associations to operate successfully, the Philippine state management agencies perform the management and supervision of such

aspects as: solvency (investment monitoring, contingency), performance activities, management and communication of associations

Examples of successful models of the Center for Agricuture & Rural Development Mutual Benefit Association (CARD) in the Philippines:

- In 1994, Mutual Fund (MMF) was established, providing insurance to customers with loans

- In 1997, a monthly premium was provided at the rate of 300 P / month and P400 for members over 65 years old

- 1999 - CARD Mutual Association licensed to operate by Insurance Administration

Factors driving the rapid development of CARD Mutual Association:

- The association has a large number of members with 154,251 members who are compulsory to participate in life insurance and pension insurance, thus helping

to fight against the opposite choice (anti-selection);

- Proposing a level of contribution consistent with the member's income Currently, the weekly contribution rate is 5 Pesos for life insurance and 5 Pesos for retirement insurance;

- Use the existing premium collection network with 157 branches and 5 headquarters The presence of CARD network facilitates the collection of insurance premiums;

- Low administrative costs: 2% of total premiums are used for premium collection; 20% of the total premium is devoted toGA (General Administration Expense) but the actual usage is only 18%;

- As a separate entity that carries out insurance, you can focus on insurance activities maintaining business / professional relationship within CARD;

- Implement effective communication campaigns CARD's wide network simplifies communication and improves communication efficiency;

- Building an effective compensation system with settlement days of 1 day, 3

- Professional management performance The association can ask for help from experts, dedicated volunteers;

- The Association also receives support from state agencies and donors

With the help of the actuary, CARD Mutual Association has repackaged products, developed new products and provided non-financial services, these are:

- Life insurance program: Life insurance program combined with permanent total disability and accidental death add-on products;

- Pension fund: Mixed insurance up to 65 years old;

Insurance package for all types of loans: Annual renewal group term insurance This product pays off all outstanding loans, including principal plus interest;

- Health insurance through a partnership with the Philippine health insurance company (PhilHealth);

- Insurance premium refund: Cashback value is paid to members after 3 consecutive years;

Non-financial services include: extracurricular programs for youth and collective wedding;

- Perform members' history tracking through the claims assessment, risk assessment and insurance acceptance tool (MunCET)

As a result, on December 31th, 2007, CARD Mutual Association had the participation of 469,457 people; Total assets under management is 670 million pesos (equivalent to 16.5 million US dollars); The compensation amount in 2007 was 45 million pesos (equivalent to 1.1 million US dollars)

Here is a typical product of CARD Mutual Association - MICRO Family Protector (Small Household Protection Product)

MICRO Family Protector is a microfinance family loan insurance product, designed to provide timely financial protection if any member of the family dies and financial loss resulting from the fire

MICRO Family Protector Insurance Plan Features:

Term insurance, annual renewal or insurance term associated with the loan repayment period The program terminates when the premium is not paid after the grace period

- Pay the premium every week, the grace period is 30 days

- Insured: aged from 18 to 63, in good health and with a source of income, no health check required when participating

- Risks are insured and the levels of responsibility are determined as follows:

Table 1.1 The coverage of small-scale family financial protection products

The risks are insured Liability insured (peso)

Main insured Husband/wife Child

Financial assistance in case of fire 40,000

Source: Chuchill (2013)

Through the activities of CARD Mutual Association shows:

• Micro insurance is a good form of risk protection for the poor

• Risk protection should be seen as an effective element of the poverty reduction strategy

• The dare-to-think poor people are willing to participate in the micro insurance program

• Mutual associations can take advantage of the social network in terms of microfinance and the internal payment system providing micro insurance services

• The main challenge for the regulator is to closely monitor operations to ensure the sustainable and efficient operation of the micro insurance mutual associations

1.4.1.2 Experience in implementing microinsurance via mobile phone in Pakistan

The provision of life micro-insurance products through mobile phones and mobile toll collection is considered as an innovation in the application of electronic technology, in particular the strong development of mobile phone and the rise of modern banks (non-branch banks) into the field of micro-insurance The essence of this business is to undo the traditional method of attracting customers that are expensive and of low quality This contributes to increase the expectation that insurance businesses will gain profits in the first years of life insurance business activities for the poor

In Pakistan, MCB bank, one of the leading banks in the country, has started trying to offer life insurance via mobile phones as part of a suite of mobile banking services This activity was still at a low volume at first, but it has brought an important meaning in providing awareness on this issue

Another project is Zong Mobile insurance Accordingly, subscribers of Zong Mobile can register for life insurance with an insurance cost when using via mobile phone Information is confirmed immediately, and customers are provided with insurance confirmation for 30 days along with other information via SMS service Another exclusive vendor recently launched its Easypaisa Khushaal program Under this plan, mobile bank account holders are offered monthly life insurance based on the average monthly balance in their mobile bank account This promotes

an increase in savings and various insurance offers This product is designed to cater to all segments of customers who maintain a mobile banking account

1.4.1.3 Experience in implementing agricultural insurance service in Japan

Japan's Agricultural Insurance Service started with livestock insurance in

1929 After that, the system was increasingly developed into other fields to meet the diverse needs of farmers and improve the efficiency of the insurance system Currently, the system plays a central role and is a supportive tool of the

Government for losses in agricultural production caused by natural disasters (Yoshii, 1999)

The main features of the insurance system are:

 Central government reinsurance for the programs

 In principle, implementing 3 types of rice, wheat and barley insurance programs; silkworm rearing; and insurance for livestock is required

 The central government subsidizes farmers' premiums

 The central government subsidizes people who insure part of the administrative costs

It is noteworthy that the Agricultural Insurance in Japan was built because of the collective action of local farmers to establish general contingency funds by accumulating insurance premiums

This insurance system is structured in 3 levels: State level; district and village levels The basis for this structure is the risks that can occur across the country as natural disasters often cause damage that spreads over a large area

DISTRICT LEVEL Federation of district-level agricultural synergies

(ARSA)

AMRA is an independent, autonomous organization formed in each village and its members are all local farmers AMRA is responsible for the operation of the system at the lowest level of government, especially in mutual assistance contracts,

in collecting insurance claims, estimating damages for compensation, providing technical assistance for farmers to prevent and prevent damage

Members pay premiums to AMRA and where appropriate they can receive compensation payments from AMRA PFAMRA was created to regulate insurance implementation at the district level PFAMRA takes reinsurance from the AMRAs and shares part of the AMRA's insurance liability PFAMRA pays reinsurance and transfers part of its reinsurance liability to ARSA Furthermore, PFAMRA provides guidelines for pest and disease control and damage assessment ARSA performs partial reinsurance of AFAMRA's reinsurance liability and pays reinsurance indemnities to PFAMRA when a certain degree of extraordinary damage occurs When the contract between the member and the AMRA is signed, these relationships automatically form

Products covered: This system covers all agricultural products such as Rice (both upland and wet rice), barley, and wheat; Fruit: oranges, tangerines, and citrus fruits; apple, pineapple, chestnut, grape, pear, peach, persimmon, plum, camellia, cherry, potato, bean, adzuki red bean, fire bean, beet, sugar cane, hops, tea tree and works in service of cultivation such as materials, greenhouses

Programs:

- Rice insurance,

Members (farmers)

Figure 1.1: Model of micro insurance implementation in Japan

- Wheat and barley,

- Silkworm breeding insurance, livestock insurance

implemented at the national level because insurance products produced nationwide, while others are only grown in certain regions

In principle, participation in programs 1, 2, and 3 is a must for all farmers with

a specified production scale The reason is

(1) to prevent reverse choice,

(2) to make the programs viable and viable and

(3) because the production methods of these products across the country are similar

However, there is no direct penalty for those who do not participate in these insurance plans For other insurance plans enrollment is voluntary because there are different ways of production in each region

The administrative management of the agricultural insurance system is different in each program The main elements are the insurance policy (including: Participation, accidents, period, insurable level and insurable) and damage assessment (including damage claim, adjustment of damages in different degrees and the payment of the compensation)

The most important point is that the Government subsidizes this insurance system a lot and mainly subsidizes the insurance premiums for policy holders and subsidizes the office expenses of the insurance organizations (AMRA) and reinsurance (PFAMRA) The premium rate for most insurance premiums is approximately 50%

The rate of coverage in the plans is different (the ratio of the covered area to the total cultivated area of the insured crop, or the ratio between the total number of cattle insured against with the total head of cattle being raised) The rates of programs 1, 2 and 3 are very high, nearly 90% (except pigs) In contrast, the coverage rate for pigs and the 4,5 and 6 programs (on a voluntary basis) is low,

In general, the Japanese agricultural insurance system has been operating relatively well, meeting the needs of farming communities with homogeneous structures and achieving set targets The system is also considered to be relatively successful in terms of its sustainable development and proper operational structure The explanatory factors for this success are: There is a balance between government leadership with participation of voluntary farmers, well-organized social infrastructure and regular support from the central government financially (Kada and Shigeno, 1991) However, it seems that this insurance system is facing several problems, of which the most prominent is the systemic dissatisfaction of small-scale farmers, agricultural activities only account for a part of their working time, agricultural production is mainly rice cultivation and the main source of income from non-agriculture Therefore, they feel reluctant to join and pay insurance for the rice insurance program And those with large production scale, usually people with good production skills, so they think that they have to pay higher insurance premiums and receive less compensation compared to farmers who have small production scale

1.4.1.4 Experience in implementing micro-insurance in Latin America and the Caribbean

Research on micro-insurance in Latin America and the Caribbean shows that insurance is concentrated only in certain countries 90% of the nearly 45 million people (and assets) in 19 countries with micro insurance are located in five countries, and over 55% are in Mexico and Brazil In addition, insurance for personal accident, health and property has increased, showing an improvement in micro insurance for products that customers require

In Latin America, micro-insurance development was primarily for commercial purposes with little donor intervention or government regulation to expand the audience, unlike in Africa and Asia However, national financial cooperation strategies (eg in Mexico, Brazil and Colombia) are playing a key role in promoting the link between insurance and social security planning The government and

donors are actively pursuing different approaches to the development of the industry, such as agricultural insurance schemes in Mexico and disaster protection

in the Caribbean

The frequent occurrence of natural disasters has given MiCRO the idea of creating insurance products based on parameters such as rainfall, wind power and seismic activity When these ratios exceed a predetermined threshold, the client receives a premium In case the customer incurs actual losses but the indicators are not up to the standard, the insurance company will compensate 85% of the damage with a maximum rate of 1 million USD per year

The reason for the existence of many businesses does not dare to risk investing

in micro-insurance because when deciding to provide these insurance products, the business strategy is changed, the product is changed in a simple direction Cutting costs to fit low-income customers are the problems they face

However, the reality is that in many developing countries, insurance companies are actively deploying micro-insurance products and becoming top micro-insurance organizations For example, in China, the Insurance Administration launched a pilot program to encourage the development of life insurance in rural areas in 2008 As of the end of 2009, this program has been implemented in 19 provinces with fee revenue of 230 million yuan (US $ 33 million) and the number

of insured people of 11.1 million In the largest insurance market in Latin America, Brazil, micro-insurance is mainly deployed by commercial insurance companies The key products that this market is currently focusing on are the life insurance sector, including insurance, credit insurance, burial insurance, human accident and micro insurance From here, another question arises, why even though the profitability is not high, but these pioneering enterprises still decide to choose micro-insurance as their development goals?

According to a recent report by the US Agency for International Development, there are several grounds for businesses to choose micro insurance business as follows:

 Meeting the insurance needs of a large number of low-income people

 Insured facts can be clearly identified and virtually easy to verify, and thus can overcome the phenomenon of personal gain and ethical risks from customers

 Does not depend much on infrastructure conditions of hospitals or clinics

 Easily associate short-term insurance products with various types of microfinance savings and loan services

Another study by Swiss Re also suggests that implementing micro-insurance can offset costs and benefits Thus, microinsurance has a complete basis to develop

in developing countries through commercial insurance enterprises without resorting

to financial support This is the basis to hope for a future development in the micro insurance sector that many businesses are still hesitant to dare to deploy

1.4.2 Experience for Vietnam

- Legally

The government plays a reasonable regulatory role, making appropriate decisions for each stage of micro insurance development In the early stage of micro insurance implementation, governments introduced supportive policies such as tax exemptions and reductions for some products, establishing a legal model and, most importantly, the recognition of micro-insurance is part of the insurance market but

is also an effective tool in the country's poverty reduction policy system

- Organizational model

The insurance distribution channel is the decisive factor for the success of the development of micro insurance services Obviously, there are many insurance companies in countries that want to participate in the micro insurance market, but many of them are hesitant about the fact that it is difficult to access customers, low premiums, customers are not habitual In countries such as Inddonesisia, India, and the Philippines, effective distribution channels are still mainly focused on the model

of Partners - Agents or mutual associations supplying products while having support from the Government in receiving insurance for insurance products with the nature of risk accumulation The focus of service providers is on microfinance institutions, credit institutions, and unions - those that are easily accessible and regularly communicate with their customers

- About the product

The development of rational micro products is the basis for the success of micro insurance Most of the countries that have succeeded in implementing micro insurance have in common that micro insurance products are developed very simply, focusing mainly on accident and injury insurance products disability; credit loan insurance and agricultural insurance In the early stage, service providers focus

on personal accident insurance products due to the simplicity and ease of management of products, gradually insurance products, medical expenses, insurance The property is developed but towards a low insurable amount, applying the lump sum principle to simplify product and cost management

CHAPTER 2 MICROINSURANCE DEVELOPMENT AT VIETNAM

AGRICULTURAL BANK INSURANCE JOINT STOCK COMPANY

2.1.1 History and Development

Implement the strategy to turn the Bank for Agriculture and Rural Development of Vietnam (AGRIBANK) into a leading financial and banking group

in Vietnam and strong in the region with a multi-ownership structure and business operations With diversified businesses and the ability to provide a system of increasingly perfect financial products and services for the socio-economy, the Board of Directors of the Bank for Agriculture and Rural Development of Vietnam decided to expand its business into the field of non-life insurance by promoting the establishment of an insurance company This decision has been approved by the Ministry of Finance and the State Bank On 08/08/2007, the company officially went into business operation, participated in the insurance market and is ready to serve the non-life insurance needs of customers nationwide

Implementing Decision No 161/2001 / QD-TTg dated 23/10/2001 of the Prime Minister on the "Approve Strategic Development Bank of Vietnam Agriculture and Rural Development 2001 - 2010" with the objective of becoming a financial group - the leading bank in the region, the Bank for Agriculture and Rural Development of Vietnam (Agribank) initiated establishment Insurance Corporation Agricultural Bank (ABIC), business activities in the field non-life insurance and financial investment This proposal has been the Governor of the State Bank approval and the Finance Minister has granted permission to establish and operate the 38 / GP-KDBH date 18/10/2006 for ABIC

ABIC was born in the period in which economic context facing many difficulties due to the crisis, the competitiveness of insurers harsh place, insurance human resources are insufficient in number and often highly variable but with the

cooperation and strong support of the founding shareholders, especially AGRIBANK system, together with unity, strive collective leadership and staff of more than 500 companies, ABIC has successfully completed the goals and tasks of strategic business orientation the first 5 years (2007-2011) was approved by the General Meeting of shareholders adopted: sales revenue growth reached an annual average 52%; The growth rate of average annual reserve fund reaches 62% operations; Profits grew steadily over the years; Incomes and living conditions of workers are guaranteed, year after year Especially ABIC is one of the leading insurers deploy insurance products and services to the area of Agriculture, Agriculture through 140 villages with more than 14,500 General agents of Agribank system, successfully providing insurance products to 1.6 million households, small and medium enterprises have relations and loans use banking services at Agribank system

After nearly 20 years of operation, ABIC be one of the 10 professional and reputable leading insurance corporations in Vietnamese market with efficiency, sustainability operations, and safety investment ABIC has a developing sustainable and effective Bank-Insurance distribution channel model with business activities in the area of agriculture, rural areas and farmers

ABIC has an best profitability among insurers in nonlife insurance in Vietnam, optimizing profitability to meet shareholder expectations

About awards and achievements, based on business results, ABIC is rated in the top 10 Nonlife insurance Corporations in Vietnam, leading in terms of revenue and operational efficiency Two consecutive years 2009 and 2010, ABIC was awarded the Certificate of Merit by the Minister of Finance In 2011, ABIC was honored by the Prime Minister with the Certificates of Merit due to the many achievements and contributions to the development and operational efficiency of the Vietnamese Insurance market between 2010 and 2020

It is could be said that ABIC was born in the context of the economy facing many difficulties and challenges due to the crisis, however, with a new direction