Solutions For Improving The Competitiveness Of Posts Tel. Joint Stock Insurance Company

In order to achieve that target, there are some objectives that should be reached:  Throughly research current theories of competitive theory including: Non-life insurance activities, c

VIETNAM NATIONAL UNIVERSITY, HANOI

Major: Business Administration

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Nguyen Thi Phi Nga

HANOI - 2012

TABLE OF CONTENTS ACKNOWLEDGEMENT

1.1 Concept and feature of insurance business activity

1.1.1 Concept on insurance business activity

1.1.2 Feature of insurance business activity

1.2 Non-life insurance business activity

1.2.1 Concept on non-life insurance business

1.2.2 Operation content of non-life insurance enterprise

1.2.3 Criteria for evaluating the product’s competitiveness capacity

1.2.4 Necessity to improve competitiveness capacity of product in international

economic integration condition

1.3 Overview of non-life insurance market in 2011

1.4 Competitiveness capacity of non-life insurance enterprise

1.4.1 Competitiveness and competitiveness forms

1.4.2 Competitiveness capacity of non-life insurance enterprise

1.4.3 Factors reflecting competitiveness capacity of non-life insurance enterprise 1.4.4 Some factors affecting to competitiveness capacity of non-life insurance

enterprise

CHAPTER 2: REAL SITUATION OF COMPETITIVENESS CAPACITY OF POSTS & TEL JOINT - STOCK INSURANCE COMPANY (PTI)

2.1 Introduction about Posts & Tel Joint - Stock Insurance Company (PTI)

2.1.1 Introduction about the Company

2.1.2 Apparatus organization of PTI

2.2 Some features on competitiveness situation in non-life insurance market in Vietnam at present

2.2.1 Number of insurance enterprises:

2.2.2 Market share of non-life insurance enterprises

2.2.3 Insurance products to be deployed

2.2.4 Distribution system of non-life insurance enterprises

2.2.5 Financial resources of enterprise

Source: Summarized by VNDIRECT

2.3 Real situation on competitiveness capacity of PTI

2.3.6 Product price, assessment quality and compensation settlement

2.4 Operation result, position of PTI in the market

2.4.1 Result

2.4.2 Market share of PTI over the years

CHAPTER 3: SOME SOLUTIONS AIMED AT IMPROVING

COMPETITIVENESS CAPACITY OF PTI NON-LIFE INSURANCE

3.2.1 Constructing and developing the trade name

3.2.2 Developing and improving insurance product quality

3.2.3 Implementing statistic and costing work suitably

3.2.4 Strengthening the advertisement, communication activities:

3.2.5 Expanding distribution channel

3.2.6 Increasing financial potential of the enterprise

3.2.7 Completing apparatus organization and training human resources

3.2.8 Modernizing by application of information technology

3.2.9 Active in improving efficiency of capital investment activity

CONCLUSION

REFERENCES

SOLUTIONS FOR IMPROVING THE COMPETITIVENESS

CAPACITY OF POSTS & TEL JOINT STOCK

INSURANCE COMPANY (PTI)

Hoang Nguyen MBA Candidate 2007-2009 Vietnam National University, Hanoi

School of Business Supervisor: Dr Nguyen Thi Phi Nga

INTRODUCTION

1.1 Necessity of the thesis

Insurance market is considered as promising market that attracks most financial investment co-operation Revenue from non-life premiums increased over the years, and accounted for a large proportion of the total revenue of insurance in the entire market Besides, insurance products are easy to copy The market for non-life insurance is a promised land which the companies are directing towards Therefore, it can be seen that each year the companies entering the non-life insurance market are increasing in number The increasing number of insurance companies will lead to the risk of reducing the market shares of the insurance companies, non-life insurance market of Vietnam will compete more and more severely and violently This matter will require every business need to form a specific business strategy suitable with each specific period, to enhance their capacity in the market, as well as in front of the competitors, to not be “moved” out of the non-life insurance market which is very eventful at present In order to develop stably and gain the expected market share, PTI should strengthen their competitive capacity Within the contend of this thesis, the author propose a number of recommendations in order to increase PTI competitive capacity

1.2 Research aims and objectives

The aim of this thesis is to create a competitive plan for PTI with a numbers of recommendations in order to enhance the competitive capacity of PTI in non-life insurance market The ulitmate aim of this thesis is to make PTI become more

competitive in term of more efficiency of using finance resource, human resource, brand name exploited and so on In order to achieve that target, there are some objectives that should be reached:

 Throughly research current theories of competitive theory including: Non-life insurance activities, competitiveness capacity of non-life insurance company, competitiveness forms and the necessity to improve competitive capacity

 Analysis the real situation of competitiveness capacity of PTI and point out the position of the company in the market

 Recommendations to PTI aimed at improving competitiveness capacitiy of PTI’s non-life insurance company

1.3 Research questions

In order to give recommendations to improve PTI competitiveness capacity, the thesis should finding answers for the following questions:

 Why PTI need to improve their competitiveness capacity?

 How to improve PTI’s competitiveness capacity?

 What are solutions for PTI to improve their competitiveness capacity?

1.4 Research methodology

In the thesis, the author adopts statistic and analytical methods to identify the most suitable solution for PTI for improving their effectiveness in administrative and business activities in order to improve competitiveness capacity

Both primary and secondary data used in this thesis to analyze current situation of competitiveness capacity of PTI Based on the theories of PTI and the author’s own judment, the author presents the operation result and the position of PTI in the market and gives suggestions to improve PTI’s competitiveness capacity

1.5 Scope of the research

The thesis aims to find solutions to improve competitiveness capacity of PIT The thesis focus on:

 Study the PTI business result in field of capital, investement activities and the main business activities in non-life insurance

 Give suggestions to improve PTI’s competitiveness capacity

1.6 Significant of the research

The thesis has both theoretical and realistic significance The thesis provides a review

of competitive theories that cover many aspects of business activities including: cost management, human resource administration, finance management and communication

The thesis also provides the recommendations that are applicable to the curren competitive activities of PTI

CHAPTER 1: BASIC ARGUMENTS ON COMPETITION IN

NON-LIFE INSURANCE BUSINESS 1.1 Concept of insurance business activity

It can be understood that insurance business is the activity of the insurance company aimed at revenue-earning, thereby insurance company accepts the risk of the insurance buyer on the basis that the buyer pays the premium so that the company pays the insured amount to the beneficiary or compensates the insurance buyer as happening the insured events

1.2 Non-life insurance business activity

1.2.1 Concept on non-life insurance business

Non-life insurance is still used as a general concept with the significance containing all operations of damage insurance (property insurance, civil liability insurance) and human insurance operations not belonging to the life insurance (accident insurance, disease and illness insurance…) According to the law on insurance business of

Vietnam, the term of non-life insurance is explained as follows: “Non-life insurance

is the type of insurance operations for property, civil liability and other insurance operations not belonging to life insurance”

1.2.2Reinsurance business

Reinsurance is the operations which the insurer use to transfer a liability part accepted with the person insured for one any many other insurers on the basis of transferring to that person a part of the premium

Reinsurance is a very important activity and always goes abreast with the original insurance business; it is considered as the shield for the operation of each insurance company, a form which the insurance company insures for itself after receiving all risks of the customers At the same time, the reinsurance activity also helps the company have more revenue source, thus, this activity is attached special importance

Reinsurance business includes the activity of agreeing the reinsurance and activity of transferring the reinsurance

1.2.3 Assessment, compensation and claim to third person

Assessment is the activity implemented directly by insurance company or through a

company or other assessment agent to implement the reason determination and loss level aimed at serving the compensation settlement and payment of insured amount to customer

Compensation or payment of insured amount means the insurance company implements the commitment in the insurance contract to pay the person insured a certain amount of money as the insured event happens

Claim to third person is the activity implemented directly by insurance company or through a company or another intermediate agent to require the third person compensating for the loss due to the fault of such third person after the insurance company compensated and accepted right transfer from the person insured

1.2.4 Investment activity

Besides the original insurance business activity of the Company, the investment activity also brings a relatively great income source for the company The profit source from the investment activity helps the company improve its financial capacity considerably; therefore, all insurance companies in the world place the investment activity parallel with the insurance business activity, and these two activities have assistant and supplementary relation to each other

1.3 Overview of non-life insurance market in 2011

Non-life insurance market in 2011 attained the revenue of 20,497 billion VNĐ, growing 17.56%, the insurance companies with foreign capital attained the revenue

of 2,013 billion Vietnam dongs, growing 55.23% All operations grew in which agriculture insurance increased 193%, credit and financial risk insurance increased 87%, transport goods insurance increased 43%, business damage insurance increased 37%, human heath and accident insurance increased 34%

Leading the first is mechanical vehicle attaining 6,134 billion Vietnam dongs, growing13%, property and equipment insurance attained 5,034 billion Vietnam dongs, growing 24%, health insurance attained 3,323 billion Vietnam dongs, growing 34%, ship insurance attained 1,850 billion Vietnam dongs, growing 1%, transport goods insurance attained 1,783 billion Vietnam dongs, growing 43%

Leading the first on revenue from original insurance exploitation was Bao Viet with

4,900 billion Vietnam dongs, PVI 4,228 billion Vietnam dongs, Bao Minh 2,140 billion Vietnam dongs, PJICO 1,852 billion Vietnam dongs, PTI 1,095 billion Vietnam dongs

The companies grew with high revenue were Samsung Vina 105%, Groupama 93%, Xuan Thanh 79%, PTI 61%, Fubon 53%, Hung Vuong 52%

1.4 Competition capacity of non-life insurance company

1.4.1 Competition definition

Most of the countries in the world recognize competition and consider competition as the environment and the driving force of the socio-economic development Therefore,

competition can be understood as follows: “Competition is the race, the severe,

drastic struggle between opponents in the market in attracting customers, occupying the market, thereby, consuming much goods and gaining high profit”

1.4.2 Competition forms

a Competition by product quality

To exist and stand stably in the market, the company has to determine that quality is the objective with strategic significance, and it is the basic means to ensure that the social-economic development is in correct direction, solid and attains high efficiency, satisfies the demand of consumers in the market Therefore, each company needs attach special importance to this issue

b Competition on product price

The competitive strategy by price helps the company protect and increase their market shares, and it is also the barrier preventing the joining of the potential opponents who do not comply with the orientation of the Government, and reduces the danger from the products having replacement ability

c Competition on guarantee and after sales services

As the quality of goods and service products is similar, the selling price is similar; the competitive and winning factor is the quality of after sales service such as: warranty, after sales service Especially, for the companies trading in intangible service product, this matter has greater significance

CHAPTER 2: REAL SITUATION OF COMPETITION CAPACITY

OF POSTS & TEL JOINT - STOCK INSURANCE COMPANY2.1 Introduction about Posts & Tel Joint - Stock Insurance Company (PTI)

2.1.1 Introduction about the Company

Posts & Tel Joint - Stock Insurance Company (hereinafter referred to as PTI) was issued a certificate of eligibility and conditions of operating the insurance business

No 10TC/GCN dated 18/6/1998 by the Ministry of Finance and issued the establishment license No 3633/GP-UP dated 01/08/1998 by the People’s Committee

of Hanoi city Posts & Tel Joint - Stock Insurance Company officially went into operation on 01/09/1998 The main activity of PTI is the business on non-life insurance and reinsurance domestically and internationally

The company has 07 founding members including Vietnam Post and Telecommunications Corporation (VNPT), Hanoi Construction Corporation (HACC), Vietnam Construction Import & Export Joint Stock Corporation (VINACONEX); Vietnam National Reinsurance Joint Stock Corporation (VINARE), Vietnam International Joint Stock Commercial Bank (VIBank), Bao Minh Joint Stock Corporation (BAOMINH)

Business lines:

 Original insurance business: Health insurance and human accident insurance; Techniques asset insurance; Insurance for cargo transported by road, seaway, waterway, railway and airway; Joint liability insurance; Mechanical vehicle insurance; Fire and explosion insurance; Business damage insurance; Satellite insurance; Aviation insurance; Ship insurance

 Reinsurance business: Agreeing and transferring reinsurance for all non-life insurance operations

 Loss assessment: Assessing, investigating, calculating, distributing loss, loss assessment agent, claim third person to compensate

 Implementing the investment activity in the following fields: Buying government bond; Buying share, company bond; Trading in real estate; Contributing

capital into other companies; Lending in accordance with the regulations of credit organization law; Depositing money at credit organizations

2.2 Real situation on competition capacity of PTI

2.2.1 Financial capacity

2.2.1.1 Capital ability:

Posts & Tel Joint - Stock Insurance Company was incorporated in 1998 with the list

of shareholders and capital contribution level as follows:

Table 6: List of shareholder of PTI

(Unit: Million VND)

Charter capital 70,000

I Legal shareholder 48,300

1 Vietnam Posts and Telecommunications Group (VNPT) 28,700

2 Bao Minh Joint Stock Corporation 7,000

3 Vietnam National Reinsurance Joint Stock Corporation - Vinare 5,600

4 Vietnam International Joint Stock Commercial Bank - VIB 2,800

5 Hanoi Construction Corporation 1,400

6 Vietnam Construction Import & Export Joint Stock

2002 was 70 billion VND, to 2007, it increased to 150 billion VND, in 2008, it was

150 billion VND To 2010, it reached 450 billion VND Although the capital level of PTI increased relatively, but when comparing with some other non-life insurance

companies such as Bao Viet Bao Minh, Pjico, PTI at present has capital level belonging to average type of the market

2.2.1.2 Reservation

Insurance has reverse business cycle; that means as the contract is signed, the customers will have to pay to the company an amount of money namely premium (it

is called as price of insurance product), and insurance company will undertake to pay

or compensate them as the insured event occurs as agreed in the contract Like this, insurance company will always have in their hands a very great idle and relatively stable capital resource, a big part will be appropriated to become a fund called operations provident fund and the company is allowed to use this capital resource to invest for earnings

Table 7: Total provident fund of PTI

(period 2009 - 2011)

(Unit: billion VND)

Unit: billion VND

Provision for compensation 74,513 107,686 245,767

Provision fee not enjoyed 131,168 182,270 132,127

Provision for major fluctuation 114,938 126,166 130,227

Total operations provident

fund

320,619 416,122 508,121

Source: Consolidated auditing statement

in 2010 and consolidated financial statement in 2011

The reservation as above supplemented into the annual provident fund of PTI with nearly 25 billion VND To 2011, the operations provident fund of the Company reached above 508 billion VND, thereby, ensured the high safety in the activity of insurance business and created big idle capital resources for the financial investment activity of PTI This is the important financial factor creating favorable condition for PTI in the next years

2.2.2 Product of PTI