Luận văn business performance of investment linked insurance products at baoviet life corporation

performance report, as well as published figures by ‘Vietnam Insurance Assoviation and Insurancs Supervisory Authorily of Ministry of Finance ‘he findings of the research are i ‘Theory:

ACKNOWLEDGEMENT

I would like to send iny sincere thanks to my supervisor; Dr Nguyen Thi Hai Duong,

whose kind support and continued advices helped me with the completion of try thesis

T would like to send my great thanks to professors, lecturers and staf al the TVNUS,

performance report, as well as published figures by

‘Vietnam Insurance Assoviation and Insurancs Supervisory Authorily of Ministry of Finance

‘he findings of the research are (i) ‘Theory: clarified theoretical issues relating to life insurance, characteristics of life insurance and the procedure of life insurance business (i) Practice: the research has analyzed the business performance of investment- linked products

at BaoViet Lite with respect to product development, distribution channel, customer service, and has detailed their achievement and outstanding concems due to limitations on product range, agen! professionalism, custorter services in addition to the investment results from

premium nol yet matched lo the investment resources

From the findings, the research proposes schulious to enhance business performance of

investment- linked product at BaoViet Life centering on (i) diversifying investment- linked

products (ii) upgrading distribution channel, (iii) bettering investment efficiency to bring

value to participating customers, and (iv) improving customer services

In addition, the thesis also makes recommendations to the authority to facilitate life

insurance companies in promoting business performance of investment- mked insurance

products in Victnam in the time to come

hii

L.4 Objective and Research Questiơn ao wd

2.1.2 Characteristics of life insurance

21.3 Life insurance products

2.2 Investment- linked Insurance Produets

INSURANCE PRODUCTS AT BAO VIET LIFE CORPORATION (2015-2616)

3.1 Influcncing factors on the development of life insurance market in Victnam

3.1.1 Economic condition as the developmen! basiz of LIƒ© Ìituftiice `

3.2 Introduction to Bao Viet Life

3.2.2 Organiztation SIUCHIE seems nenienninneiiinsin sentiments 3.2.3 Bussiness Oper na .ố

3.3 Business Performance of Investment- linked insurance Products of Bao Viet Life 31 4.3.1, Jnvestment- linked Insurance Products of Bao Viet Life - 3

CHAPTER 4: SOLUTIONS TO IMPROVE BUSINESS PERFORMANCE OF

INVESTMENT- LINKED INSURANCE PRODUCTS AT BAOVIE! LIFE - 46

4.1 Vietnamese insurance market development strategies to 2020 AG 4.2 Forecast the development of the life insurance market in Vietriam 7

4.3 Devcloprnznt oriontation of Baovizt Lift aslrtenl- linked Trsuranee Produc

4.4.1 Diversify prvestnent- linked insurance products provided to the market sử

4.4 Solutions to improve business performance of Inv

4.4.2 improve the quality of distribution channels, promote product promotion activities .51 44.3 Improve the efficiency of investment and fund management ta preserve and develop the

capital and increase the value for customers when investing in the investment- linked fiuid 52

4.4.4 Improve the quality of customer service

LIST OF TABLES AND CHARTS

Table 3.1 The number of agents of Baoviet Life (2013-2016) _ - Table 3.2 Data on new business premium revere of Baoviet Lite 2013 2016) 2.36 Table 3.3 Total premium revenues of Baovict Tile by product linc (2013-2016) —

Table 3.4 Sunmnary on business performanec of Baoviel Life's Universal Fund (2013-2016) 39

Table 3.5 Premium revere of universal tife product and investment revenue of Baoviel

Figure 3.1: Rusiness organization model diagram of Baoviet Life (Raaviet Life, 2016) .28 Figure 3.2: Diagram of product distribution channel of Raoviet I.ife (Baoviet I.ife, 2016) .43 Figure 3.3 Number of universal life policies and attached riders products hy years 36 Figure 3.4 Marketshare of new business premiuhi revenuie gỆ Liaiversdl Liựt (2013-2016) 38 Figure 3.5 Marketshare of total premium revenue of Universal Life (2013-2016)

Figure 3.6 Growth rate of Universal Fund by years (2013-2019) 0

Figure 3.7 Armounced interest rale for Universal Life Poly (2009-2016)

Figure 3.8 The policy persistency rate of Universal Life products (2012-2016)

CHAPTER 1: INTRODUCTION 1.1 Background

Since the first life insurance contract appeared in Vietnam more than 20 years ago, Vietnam life insurance industry has been growing at remarkable rate, The market size is

increasing with widespraad netwark in every cities and provinces throughoul the country As

at 31 December 2016, there were 18 life insurance cnterpris

induding 1 Vietrames: insurer, 4 joint vonture insurers and 13 insurers walh 100% forcign capital, The competition among life insurers is becoming intense as all of them possess substantial financial capacity, good brand reputation, innovative products and effective marketing strategy

In 2016, along with the prosperity of the Vietnamese economy, the life insurance market continued to maintain its positive momentum The total gross written premium in

2016 was VND 50,471 billion, which was 32% higher than in 2015, in which the greatest contiibution care from endowment insurance with VND 24,012 billion, accounting for 47%

Next came investment- linked insurance with 41% of the total gross wrillen premium,

approximately VND 21,081 billion New business premium in 2016 was approximately VND

17,546 billion, equivalent to an increase of 32% in comparison to 2015 figures Of which,

new premium from investment- linked insurance represented the highest proportion of 51%

and was VND 8,903 billion

According to the statistics of the Insurance Supervision Authority, the average new premium in 2016 was VND 10.4 million per policy, which was 8.3% higher than 2015, in

which Investment- linked insurance had the highest average mew promimm at VND 12.8 million per policy

These figures clearly show the increasing trend of people in choosing investment

linked insurance In the past, life insurance was often viewed only as a protective and saving

channel, but now it is also considered as an investment channel and chosen by many clients

With the development of the life insurance market, a number of saving heavily-characterized

After 10 years off presence in the market, investment: linked insurance has gradually

affirmed its important role and has become a core product of life insurance cnterpriscs Scleeted by the majority of customers because it combines all factors: Protection — Saving -

1

Investment, ‘The emergencs of investment- linked insurance product is an inevitable requirement for market development, as well as a way to bring many benefits to all parties: to the life insurance market, to the stock market, and to the investors

Despite the significant growth in recent years together with the general upward trend

of the world insurance markel, Ihe marcher of investment tinked insurance policies issued in Viclnam, in fact, accounted for only 16.5% of total naw policies, Meanwhile, il made up

about 31% and 39% in China and Hong Kong respectively Experts’ opinions demonstrate that, although this is an emerging market, the number of new investment: linked insurance policies of several life insurance enterprises has not yet surpassed those of traditional products,

‘The revenue growth rate reaches over 20% of the insurance indusiry in recant years, in which the average growth rate of the life insurance sector leveled up to 30% in the past 3 consecutive years, However, this Gigurz was still a inodest achicvernent as the total market famnover remained a only 2% of Gross

Domestic Product The propertion of the population protected by life insurance was slill very tow, only at 6-7%, a very low percenlage compared with many markets in the region The government’s Vietnamese Insurance Market

Development Strategy in the 2011 — 2020 period stated that, by 2020, the insurance market

was forecasted to achieve total reverme of 3-4% of Gross Domestic Product Investors also

expect that, in 3 to 5 years, Vietnamese insurance market is likely to grow by 60 to 120%

The lite insurance market in Vietnam, with a population of over 90 million along with

the increase in disposable income and consumption, and the improvement in standards of living, as well as the increased cuslorner awareness of lift insurance, are considered key

elements in driving the growth of the Vietnamese life insurance market

1,2 Reason of the research

Baoviet Life is the only Vietnamese enterprise in the Vietnamese life insurance market ‘Taking the advance of that, during the past years, Baoviet Life has maintained the rapid growth in gross written premium and new business premium Especially, in 2016,

Baoviet Lite ranked 1* in new premium with 20.9% market share and grew by 41% which was higher than the average market growth of 32.6%

After more than 20 years operating in the ficld of life insurance, the insuranec products of Baovict Life al the moment are very diversified, focusing on 4 main product groups which are traditional insurance, investment- linked insurance, pension insurance and term life insurance Currently, the increasing number of foreign life insurance enterprises entering the market leads to fierce competition of product, distribution channel, customer service, investment, etc, between Baoviet Life and foreign competitors which are big life insurance corporations with many years of operation in the world market, So as to survive and develop, Baoviet Life has to determine suitable solutions to enhance their competitiveness with focal point on strengthening financial capacity, diversifying products as well as distribution channcls to mect the varied necds of customers, improving management

2

technology, applying electronic commerce in dealing with oustomers, developing brand, raising human resources, ete

In the new trend of the market together with the increase of demand for insurance - saving- investment, investment- linked insurance is regarded as a new investment channel selected by many customers Investnent- linked insurance is predicted to become a popular frend of pzople thanks to the great benefits if brings Therefore, m order to keep up with the rising demand of the customers, life insuranee onterpri

besides dealing with the fierce competition and constant quest for product innovation, distribution channel expansion, also pay special attention to the operation of investment- linked insurance product, guaranteeing benefits for customers |owever, investment- linked insnrance product operation requires extensive knowledge of market and product characteristics due to the more complex management technique for investment- linked insurance product compared to those for tradiional producls

As an officer working in the finance — investment arca of a Tife insurance enterprise, T recognize the huge potential of investment- Hinked insurance product in Vietnam in the near future Furthermore, with the significance and benefits of life insurance in general and of investment- linked insurance product in particular, researching and providing solutions to enhance investment- linked insurance product tmsiness performance at Baoviet Life Corporation is extremely necessary in both theoretical and practical bases

For such reasons, I selected the topic: “Business Performance of Investment- linked Insurance Products at Baovict Life Corporation” This is not only an opportunity to research,

summarize and propose a strategic i

apply the knowledgs into the busi

suc of life insurance cntcrprisc, bul also to practically

s activitics of the Buovict Li

researching the topic, I will be able to gain comprehensive knowledge of Vietnamese life

insurance market, a thorough understanding of the business operation of investment: linked insurance product, its advantages and disadvantages, and ultimately propose solutions to promote business performance this product line at Baoviet Life Corporation

1.3 Subject and Scape of the Research

The subject of this thesis is the Business Performance of Investment- linked Insurance

Product at the Baovict Lift Corporation

The scope of rescarch:

Regarding time: The scope of the research focuses on the current status of business performance of investment- linked insurance prodnets in Bao Viet Life Corporation in the

period 2013-2016

Regarding Space: ‘The scope of research focuses on Business Performance of

Investment- linked Insurance Products at Bao Viet Lite Corporation, at the same time,

compare with some life insurance companies having majority market share in Vietnam’s life

insurance market The scope of rescarch is also extended to the eration of an cnvironment for

the business performance of investment- linked insurance products at life insurance enterprises, including legal environment, macroeconomic environment

1.4, Objective and Research Question

In developed countries over the world, investment- linked insurance products have

1 develaped for a long me and become extromely famitiar to many people, Meanwhile,

in Vietnam, inveshmern- linked insurance products arc still very new; Ibere is slill a Tiitation

‘im busines

performance of this product line at insurance cnterpris:

‘Therefore, the objective set for thesis research is to assess the coment status of

Business Performance of investment- linked Insurance Products at BaoViet Life Corporation

and propose solutions to promote the development of this produet line in addition, the thesis also aims to:

- Firstly: The thesis will systematize and clarify the theoretical foundation in the business performance of investinent- Enked insurance products

~Secondly: Ass

s the actual slalus of the imptcmentation of investment- linked insurance products, thereby clarify the shorteomings in business performance of invesiment- linked life insnrance products

- Thirdly: Based on the shortcomings, solutions are proposed to enhance growth of investment linked insurance products, snable the life insurance companies to promote the business performance of this product line in Vietnam, attract more and more people to

participate in insurance, contributing to ensuring social security, promoting the

industrialization and modcinization of the country

To clanly the above objectives, the thesis should solve the following rescarch

questions,

~ What is an investment: linked insurance product? Which product do we have and

what are their characteristics?

-[low is BaoViet Life Corporation operating its invesiment- linked insurance

products? Shortcomings and their causes?

- Which measures should be taken to promote business performance of investment- linked insurance products?

1.5, Literature Review

Nguyen Thi Phuong Thac (2008) in her thesis on “Discussion aboul investment-

Yinked insurance and its potential for growth in Vistnam”, focused on the analysis and comparison of investment- linked insurance policies to traditional policies, evaluation of the growth potential of investment- linked insurance policies in the Vietnamese life insurance

market, as well as providing recommendations to promote investment- linked insurance

policies in the Vietnamese market in the future The research was canducted quite a long time ago, when the life insurance market in Vietnam had not achieved high growth and the

ccononzy was still having difficulty At that time, investment- linked insurance just started in Vietnam, thus the rescarch did not cxplain the origination as well as technical basis to launch

4

investment linked insurance policies, there was ne basis to fully and objectively evaluate the

status of the product in the Vietnamese market ‘Therefore, the recommendations given to

promote investment- linked insurance were only for reference and not related to insurance enterprises” actual operatians

Vo Dinh Tri (2008) in his arti

the July 2008 Reonomic Revelopment Journal iss

“Promole investment- linked insurance pol

Pham Hong Nhung (2017) in the article “Development of investment- linked insurance policies in the life insurance marke!” in the August 2017 Finance Journal issuz stated that, investment- links pol

cable future Tn the article the author @) analyzed characteristics and benefits of investment- linked insurance policies, (i) pointed out the current status of investment- linked insurance in Vietnam during the recent time, (iii) gave recommendations to authorities, insurance enterprises and customers However, the article did

insunmes would be the main policy type of the BÉ

imsurance market within the for

not explain the origination of investment- linked insurance policies, technical basis to operate

‘the policy type and the particular challenges insurance enterprises faced when operating

investment- linked insurance Besides, the recommendations were on the macro scale, not attached lo the actual operation of the market and insurance enterprises

studics do nol analyze the busin

for one life insurance Company The studies are limited to the general theoretical scope of

investment- linked products and have not yet been applied to the actual conditions in the business performance of the insurance company ‘Therefore, the results and limitations of the

Bascd on the limitations of previous studics, the topic “Business Performance of Investinent- linked Insurance Products al Baoviel Life Corporation” will focus on analyzing the business performance of investment- linked products in the perspective of one life insurance company in the market of Vietnam, The thesis will assess the actual status of developing the investment- linked insurance products of BaoViet Life Corporation, thereby clatifying the shortcomings and causes in the business performance of this product Then, the topic will provide solutions in business activities for life insurance enterprises to promote the business performance of investnent- linked insurance products

1.6 Rescarch Mctho dology

‘The main research methods used in the thesis include the method of comparative

analysis and synthesis between theory and practice, illustrated by diagrams and graphs

The method of analysis is commonly used in the development of theoretical points in

cach lopic, By analyzing cach aspect of research objcel, the thesis will elahorate the conezpls

or argue the given (heoretival points

The statistical method is uscd in synthesizing business resulis of insurance products: charting in order to reflect the volatility in business performance of the company, salss of product groups

‘The comparative method is used to analyze the increase and decrease in business

indicators and results, showing the increase and decrease in sales of insurance product groups

over time

The ructadala included in this arlicle is secondary data collected from sources of

financial statements and consolidated business results for the period 2013-2016: sector

statistics and reporls analyzing the situation of the Vietnarn insurance markel by the Vieunazn

Insurance Association and Insurance Supervisory Authority of the Ministry of Financs;

Articles analyzing and forecasting the development of the life insurance industry

Chapter 4: Solutions to push Business Performance of Investment- linked Insurance

Products at Bao Viet Life

CHAPTER 2: TUEORETICAL ISSUES 2.1 Overview of Life Insurance

2.1.1 Definition of Life Insurance

According lo the Glossary of Insurance Business Terms, Fife insuranec refers to the

According to Kozlowski (2017), lit insurance is defined as a type of insuranee that pays the doath of the insured person

According to the Law on Insurance Business of the Sociatis! Republic of Vietrarn, Clause 12, Article 3 of the Law on Tnsurance Business defines: "Life insuminec is the type of insurance operation for the cases where the insured person lives or dies”

‘Thus, it can be understood that life insurance is a commitment between the insurer and the insurance policy holder, in which the insurer will pay the insurance policy holder (or the beneficiary) a certain amount of mony when certain predetermined events occur (the insured parson dies or lives to a certain point of time), and the insurance policy holder must pay the

far risks

promium in full and on time, In other words, fife insurance is the insurance proces:

relating lo fife, lives and Tongevity

2.1.2 Characteristics of life insurance

a Life insurance is both economical and financial protection

When participating in the type of insurance, each policy holder will periodically pay a small amount (called as premium) to the insurance company, in contrast, the insurance company is responsible for paying a large amount (called as the face amount) to the beneficiary as agreed priot to the occurrence of insurance events The face amount is paid when the insured reaches a corlain age and is fixed in the contracl, Or this amount is paid to relatives and farnilics of the insured when the insured unfortunately dics even if the insured only saves a small amount of moncy by paying premiums, Therefore, Lifs insuranes is bath economical and financial protection for the insured Being economical is shown at each individual, family in a regular, planned and disciplined way

b, Life insurance meets many different purposes for the insured:

In addition to the purpose of helping to overeome the consequences of risks, thereby contribute to financial stability for participants, life insurance also meets many other purposes such as saving to create a children's cdueation fund, startup, procurement of asscts, income generation at retirement age, prescrvation of asscts for future gencrations In addition, life insurance policy sometimes acis as a collateral to horrow money or life insurance credit is

usually sold to borrowers to buy houses, buy cars, household appliances or other personal purposes

¢ The life insurance vatidity is very long, while the relationship between ihe parties ir euch life insurance policy is very diverse and complicated:

Because life insurance meets the various purposes and requirements of the insured, there arc many difference types of insurmes and insurance policies, Tn arldition, the duration

of life insurance is usually extended for many years; there arc differences in face amount, the payment method, the age of the participants Also in a policy, the relationship between the parties is very complicated In each life insurance policy there may be 4 related parties: insurance company (insurer), the insured person, policy holder and beneficiary,

d Life insurance premium is influenced by a manber of factors, so the process of

seiting premium is complex:

In the process of bringing insurance products tu thz public, insurance companies have

fo spend a Tol of moncy to create products

a number of factors such as mortality rate, contract cancellation rate, investment interest rate,

inflation rate, etc must be assumed Therefore, the process of setting premiums 1s quite

complicated and requires a firm grasp of the characteristics of cach type of product, analysis

of the cash Dow, analysis of the development trend of cach product in the market in gencral,

2 Life msurance is craated and developed in certam socto-economic conditions:

In developed countries, life insurance was created and has developed for hundreds of

years In contrast, some countries in the world have not yet implemented life insurance, although its role and benefits are known very well ?o explain this issue, most economists

said that the main basis for life insurance creation and development is the development socio- economic conditions

Economic conditions include: Gross Domestic Product (GDP) growth; Gross domestic

product per capita, Income level; Inflation rate, Exchange rate

Social conditions include: Conditions on population, Life expectancy, Acadcmic

Jevel: Infant mortality rate

Apart from socio-economic conditions, the legal environment also has a considerable impact on the birth and development of life insurance In particular, the Law on Insurance

Business and relevant documents will address issues such as finance, investment, contracts,

taxes, etc

2.1.3 Life insurance products

Currently, in the world as well as in Victnam, lift insurance products are more diversified in types to mect the different needs of customers There arc many ways to classify

8

life insurance; however, within the research scope of the thesis, the most common way of

insurance classification is by the insurance market

According to life insurance operation, life insurance products have the following

main types:

a) Tern Insurance

Article 3 of the Law on Insurance Business 2000 defines: “Term insurance is an

insurance operation where the insured dies within a ceriain period of time, whereby the insurer must pay the face amount fo the beneficiary, if the insured dies within the period of time agreed upon in the insurance policy”[25]

‘Term insurance has the following characteristics: defined validity, temporary ability

and benefits This type of lite insurance is only protective Term insurance products are available for a variety of purposes, such as burial or burial costs; sponsor for family and

relatives, repaysnent of the insured’s debis

tỳ Permanent Life Insurance

This is the type of insurance thal the facz amount will be paid to the insured person upon death This type of insurance usually comes with a long-term insurance policy having investment element and the contract is definitely paid till a certain time Article 3 of the Law

on Insurance Business 2000 defines: "Permanent Life insurance is an imsurance operation

where the insured person dies at any time during his or her lifetime” |25|

Kozlowski (2017) divides whole lif insurance into two mam types as below:

<1) Traditional product of Permanent life insurance: Whole life insurance

Whol life insurance is a type of cash value Life insurance that provides lifetime

insuranee coverage, usually at a level premium mate thal docs nol inercase as the insured ages

Whole life insurance provides for payment of the face value upon death regardless of when

the death may occur As long as the premiums are paid, the policy stays in force

Whole life insurance has the following characteristics:

~ Death benefits: fixed level

- Cash value: Guaranteed amounts

- Premiums: Fixed level

- Policy loans: allowed

- Partial withdrawals: nol allowed

~ Surrender charges: none

- Types of Whole life insurance: straight life, limited-payment life, single-premium life (2) New generation of Permanent life insurance: includes Universal life insurance,

Variable life insurance, Variable-Universal hfe insurance

> Universal life insurance: is a form of cash value insurance that is characterized by

its separation of the three primary policy elements and its flexible face amount, death benefit

amount, and premiums Universal life insurance appeals to policy owners who are intercsted

in the flexibility and transparency that such insurance offers

9

Universal life insurance has the following characteristics:

“The key feature of the product is its flexibility to meet changing consumer needs: Flexible premiums change the amount of premium periodically, discontinue premium and resume them at a later date without lapsing the policy, and Change the amount of death

protection

+ Separation of Elements mortalily, investment, expense

+Fach policy owner has a separate accounl, poliey provides # transparent, Death benefits: Level or increasing

Variable life insurance has the following characteristics

* Death benefits: Guaranteed minimum plus increases ftom investments

* Cash value: Minimum not guaranteed, depends on investment performance

+ Premiums: Fixed level, + Policy loans: Yes

+ Partial withdrawals; Not allowed

> Varluble-Universal life insurance, also called ñexitlz- praniưm variable life insurance, combines the premium and death benefit flzxibility of universal if

acc with the investment flexibility and risk of variable life insurance Like a universal life policy, a

variable universal life policy allows the policy owner to choose the premium amount and face amount As with a variable life policy, the policy awner chooses to allocate premium among several subaccounts and may change the chosen option periodically, depending on the terms

of the policy (Kozlowski, 2017)

Endowment insurance has the following characteristics: (i) the face amount paid at the

expiry of the policy or death of the insured person during the insurance period; (ii) the defined insurance period (usually 5 years, 10 years, 20 years, .) (iii) premium is normally paid

periodically and romain unchanged throughout the term of coverage and (iv) Interest is

10

distributed through premium investment and may also be refimded without any conditions of following up

&) Supplementary Benetits

The various complementary products are designed to help customers supplement and

extend their life insurance coverage including the main types such as hospital and surgery insurance, ancident insurance, health insurance Iw adttition, in some life insuramec poticy

insurance companies atso points oul other benefits include: refimd of premium, free of charge

in case of accidents, injuries ete to increase atiractiveness and attract participants

2.2 Investment- Linked Insurance Products

2.2.1 Definition

The investment- linked insurance product is a non-dividend-paying life insurance product consisting of two relatively separate parts: insurance and investment, of which the invesuuent part is principal, When parlicipating in the investment- linked insuranec, customers have to pay the premium in exchange of reesiving the financial protection of the

insurance company atu] the opporluity Lo accurnulate investment with high interest rates The

premium of the customer will be divided into two parts

- the first part Vor life insveance (accounting for a small percentage of premium)

- the second part: \ior saving, investment for profit (accounting for a large proportion

in premium) Normally an insurance company has two or more investment finds chosen by the insurance buyer; each investment fund is invested in a defined portfolio, Most of the premiuun is allocated to purchase sclocted fund units The insurance buyer is entitled to profit

a the value of the fund unit increases or suffers losses as the value of the fund units

The benefit of the actual insurance policy is the value of these units This value is not

fixed, may increase or decrease depending on the value of the investment property Thus, when joining investment- linked insurance, customers have to pay premium in exchange of receiving the financial protection ffom insurance companies and the opportunity to

accumulate investment with high interest rates

The product of investment- linked product is a lif: insurance product that in addition

to insurance benefits like pure life insurance products, insurance buyers arc also cligibls to participate in the investment fund of the insurance company and share profils Grom this fund

So far, the life insurance products have two main forms such as universal life and unit linked life For Universal life, the insured receives the investment return from the universal find

based on premium For unitlinked life, insurance buyers have the option to invest their premiumis to purchase units of unit linked funds established by the insurer, are entitled to all investment results and bear all investment risks corresponding to such premium part for

investment

11

2.2.2 Characteristics of investment- linked insurance

In addition to the characteristics of pure instance products, investment linked insurance products also have the following basic characteristics:

Firstly, the premium is split into two parts: one for risk insurance (death, permanent {otal disability ) and the remaining amount for investment The investment, premium is contributed to an investmon! fund managed by the insuranec enlerprise and the insures

purchaser is entitled to recsive the entire investment result from the investment- linked fund Apart from the premium already agreed upon in the insurance policy, the insurance buyer may pay addition premium for participation in the investment fund, All additional premium will be invested into the fimd after deducting an initial fee Llowever, according to regulations, the total amount of additional premium to be paid per contract year shall not exceed five times the first year premium for periodie premium policy or 30% of fizst time premium for lump sum policy;

Sccondly, Insurance bonicfits are als

separated info hedges (the amount the customer recuives when facing risks such as death, permanenl total disability, ofc.) and investment benefits (benefits from the premium for investment)

'thirdly, the premium portion for the investment is contributed to an investment fund managed by the insurer and the insurance buyer receives the full investment return from the investment fund Thus, the investment results to be enjoyed by customers depend on the investment results of the investment fund camied out by the insurer For this reason, the insurer must inform the cliont about the operation of the investinent- linked fund, However, in order lo reduce the investment risks that customers incur, under the provisions of the

commitment to the minimum investinent interest rate

imvestinent- inked insuran

for customers must be given The insurer is entitled to the fees paid by the purchaser as agreed

upon in the policy, such as initial fee, contract management fee, universal fund management

fee, cancellation fee when customers terminate the contract The fees to collect as well as the method of collection should be notified to the customers

Fourthly, high flexibility The insurance buyer can change the investment rate to suit his/her investment objectives, pay additional premium (when there are more money to invest

more), withdraw part of the valuc from the fund, the face amount This product line has many benefits thal the imsurance buycr has just been insured and can achieve invesunent

objectives: the buyer can be active in selecting investment finds and allocate preminms for investment corresponding to the level of risk tolerance Remarkably, with a small amount of premium, the insurance buyer can invsst in a variety of portfolios thereby spreading risks and maximizing profits This cannot be done if the insurance buyer himself/herself makes investments in shares, bonds Moreover, the insurance buyer also enjoys professional investment services ftom the fund management companies

Fifthly, high transparcncy Insurance buyers can know the usc of premiums for cach purpose (premium portion for risk insurance, management costs, premium part allocated for

12

each funds, etc.) then, the customer is well aware of the fees to be collected by the insurance company as well as how it 1s collected At the same time, the Company always provides sufficient, accurate and public information relating fo investment funds, investment activities, management expenses and costs, profits which are separated and communicated clearly to the cuslorners Conscquently, customers can know where their premiums arc invested and atso

control their risks by choosing fo invest their premiums in the finds that they consider most

appropriate

2.23 Kunds in investment- Linked Insurance Products

2.2.3.1 Definition and Features

‘The find in an investment: linked insurance product is formed from the premiums of

the investment- linked insurance policies and is part of the policyholder's fund Each investment- linked fund has its source (i) the initial capital from the equity and (ii) the

invesUuent capilal of the customers when buying the investment- linked insurance product

Asscls and revenues and expenditures related to investment-retated funds Gincluding universal

fund and unil-linked funds) arc chrecily recognized in cach fund

Accordingly, the management of investment- linked funds, insurance business enterprises must be separated from the equity fimd and the policyholder’s funds, according to the following principles:

- The fund’s assets and other direct revenues and expenditures are recognized for such fund;

- Assets and revenmes and cxpenditures related to many funds shall be distributed to cach fund on the principle of faimess, rationality and objectivity,

-Clear disclosure of avenues and expenditures for funds are consisienlly

implemented in the fiscal year,

- The performance results of each fund (including revenues, expenses, profits) must be publicly disclosed,

-The investment policy of Investment funds nmust be formulated on the basis of

complying with the law on investment activities, ensuring safe investment and fulfilling obligations to policy holders when participating in investment- linked insurance products

2.2.3.2 Operational Mechanism of Fund

a) Universal Fund

Universal Fund is made up of the premiums of universal life policies and is part of the policyholders’ funds Assets of universal fund are not divided but generally defined for all linked policies When participating in the universal fund, the insurance buyer shall enjoy all investment results from the universal fund after deducting the fund management expenses and setting up the reserve for the contract maintenance interests, Thus, the investment results to be enjoyed depend on the investment results of the universal fund implemented by the insurer

Insurance enterprises (insurers) shall enjoy the insurance premiums paid by the insurance buyer as agreed upon in the insurance policies, such as initial premium, contract

13

management fees, tniversal fund management cost and fees collected upon cancellation of the insurance policy ‘The customer is well aware of the charges to be collected and it payment mode

Traditional cash-value life insurance products do not clemly show the separate efffzct

of their mortality, investment, and expense components The distinguishing characteristic of

universal life contracts is a clear separation of Ihesc three clements This is called unbundling

‘The separation is rsported al Icast annually, by a disclosure stalernenl The disclosure

slatcinent shows:

-'[he gross rate of investment return credited to the account

~'Lhe charge for death protection

- New premiurus paid

- Guaranteed interest credited

- Excess interest credited

‘The cash outflow items, from a consumer perspective, consist of:

- A mortality charge for death protection

~ Administrative and marketing expenses

- Withdrawals or loan

The differen

accumilating valuc account Accounling usually occurs on a monthly basis, follawed by ¢ between income and outflow becomes a new contribution lo the

annual disclosure of the monthly cash flows

The first premium is at least a minimum amount specified by the insurer, subsequent premium are flexible in amount, even zero if the cash value is large enough to cover the current cost of death protection and any applicable expense charge

Administrative and marketing expense charges are subtracted each period Some policies do not make explicit deductions Instead, they recover their expenses by lowering

investrnent credits or increasing mortality charges (limited by guaranteed maximums) Another periodic deduction is for mortality The policy owner decides whether withdrawals

(that is, partial surrenders of cash valnes) or policy loans are made They cannot exceed the

current cash value If the entire cash value is withdrawn, the contract terminates Withdrawals and loans reduce the death benefit as well as the cash value

After deductions at the beginning of each accounting period for expenses, mortality, and withdrawals, the acoumulation value is increased periodically by the percentage that reflects the insurer’s current investment experience for the portfolio underlying universal

life policies

14

‘The difference between the accumulation value and what can be withdrawn in cash at any point in time is determined by surrender expenses

According to Baranoff (2004), the steps in the patiodic flow of funds for a universal life policy as below:

Paid for Current Period Previous Period (*)

Fronl-Rud Expense Morlality charges for Withdrawals and

- Charges for Current | - Current Period - policy loan for

Accumulation Value _ Subject to investment | | investment retum for | | Accunmulation Value-

credits at beginning of current peried Lind of current Period current Period

Surrender Fxponse for _ Cash value - End of

(*) This accumulation value is zero for a new policy (Source: Risk Management and Insurance, BaranoffE.2004) For universal fife products, premiums paid by customers arc divided into premiums for risk insuranec and premiums for investment contributed to the universal fund In addition, insurance buyers can pay additional promiums to join the Universi Fund, However, according to regulations, the total amount of additional premiums to be paid per year shail not

exceed five times the first year premium for periodic premium policy or 50% of first time premiums for lump sum premium policy

‘The premium portion for investment is contributed to an investment fund managed by

an insurance enterprise and the insurance buyer shall be entitled to all the investment results from the universal fand after deducting the fund managcment expenscs and making provision for Policy maintenance interest Thus, the investment results to be enjoyed by the customers depend on the investment results of the universal fund implemented by the insurcr, For this reason, insurance companies have to inform customers about the opsration of the Universal Pind Tlowever, in order to reduce the tisk of investment suffersd by the customers, the universal life poticy states the commitment of minimum investment interest rate to be received by the customers Insurance enterprises shall enjoy the insurance premiums paid by the insurance buyers as agreed upon in the insurance policy, such as initial premium, policy management fees, universal fund management charge and fees collected upon the cancellation

as

of the policy Customers are well aware of the premium and fees to be collected and their payment mode

For a universal linked produet, the inswance benefits are also separated into hedges (the amount of money to be received by the customer when he or she is exposed to risks such

as dzalh, lotal permanent disabilily, cic.) and investment privileges (benefits from premiums for investment)

anusl alse disclose clearly, fully premiums and f225 and the maximum level applicable to the jnsurance buyzr in the produet introduction documents As a result, the customers know the fees and premiums collected by insurance companies and their payment mode

b) Unit-link und

Linit link fund are formed from the premium source of unit linked insurance policies

‘When joining a unit-linked life insurance product, the insurance buyer has the option to invest his/her insurance premium to purchase units of link funds established by the insurance

company, to cnjoy all the investment results and bear all the investment risks corresponding

to those premiuzus Lor investment

When the

= The structure of premiums and insurance benefits is separated between risk insurance

part and investment part The insurance buyer is flexible in determining the premium and the

customer joins a unit Finked insuranee product

face amount as agreed in the policy,

-The inswance buyer has the right to choose the investment of his premiums to purchase the units of unitlinked fds set up by the insurance enterprise, enjoy all the investment results and bear all risks from these unit link funds corresponding to the premiums invested,

~ Insurance cnlerprises shall be culitled to enjoy premiums paid by the insurance bnyers as agreed upon in the policies

Insurance enterprises may only calculate the following types of charges and premiums

- Initial premium is the sum of money that the insurer is allowed to deduct before the premium is allocated to the Unit link Funds

- Risk premium is a fee te pay the risk insurance benelits as committed in the policy

~ Policy management foc is a charge to cover expenses related to the maintenance of insurance contracts and the provision of information related to the policy to insurance buyars,

16

- Fund management fee is used to pay for unit-link fand management activities

- Unit link fand conversion fe is the amount paid by the insurance buyer to the enterprise when converting the investment assets between unit-link funds The insurance buyer is entitled to convert the unit-link fund tiee of charge for the first conversion in each

contrael year

- Cancellation fec is the foe charged to the customer upon cancellation of the pohey

due date to cover the relevant reasonable expenses

- Other charges (if any) must be approved in writing by the Ministry of Hinance

- Apart ftom the premium already agreed upon im the policy, the insurance purchaser may pay additional premiums for purchasing units of Unitdink Inds All additional

premiums will be invested in Unitdink Funds after subtracting the initial premium In each contract year, the total additional premium do not exceed 10 times the first year premium for

periodic premium ¢ontrael or nol more than the inital premium for a single premium contract

Thitlink funds must comply with the provisions of law and contain the following

infornnation:

- Investment objectives and policies of each unit-ink fund,

-'he distribution rate of premiums for purchase of units;

- Proportion, specific amount, maximum level and calculation method of premiums

related to unit linked policy;

- Assessment method of units of Unit-link Fund;

-The options for insurance buyers to change their risk interests, the percentage of premiums allocated to unil-lnk funds, premiums, conversion between unit-link funds and

key role to bring the life insurance product to the consumers

Like other types of businesses, insurance cnlzrprises also sell their producls through

distribution channels Due to the different business and strategy characteristics of each

insurance enterprise and depending on their strength, each insurance enterprise will use one or

more distribution channels

Over the world as well as in Vietnam today, insurance enterprises providing life insurance products usually have basic distribution channels including direct distribution and

indirect distribution

‘There arc many criteria for classifying distribution channels, but within the scope of this topic, we will mention the simplest and most common way of classification:

1

a Direct distribution channel

Direct distribution is the direct sale of the insurance products to customers through the

network of employees and offices to sell inswance products without the distribution intermediaries This distribution channel is usually set up by the insurance enterprise directly

inlemel lo rach customers, Then, the customer responds by contacting the cmplay

b indirect distritution channel

Indirect distribution channel is the buying of insurance enterprise’s produets through

‘the third intermediary Intermediary distribution has long been the main distribution channel

of insurance cnlerprises, accordingly, the life insurance policy is signed with the arrangement

of a third enlity on the basis that this intermediary entity will be paid a corlain feo (called insurance commission) by insurance cnlerprisce Inlormediary entities distributing tile insurance products on the market today are mainly insurance agents (organizations or individuals), brokerage organizations and banks Include

- Distribution through agents is the intermediary channel through which the insurance agent will contact the customer and arrange the policy According to the law of many counties, insurance agents (individuals or organizations) have the right to represent insurance cuterptises to aurange the signing of life insurance policy

Distribution channel through agents has the advantages such as: very exible, can

contact cuslomers more effective

y thant the dircel chanel thanks to the flexibility of time as

well as the readiness to meet customers at the suggested place This channel is also a cost

effective way for insurance enterprises ‘because the insurance agent's income is mainly proportional to the amount of sales from the signed life insurance policies Llowever, in order

-Distribution through brokers is the distribution channel whereby a life insurance policy is signed with the insurance broker's arrangement, ‘Iypically, a broker is an organization that is established and operates under a license and has a legal status Theoretically, the fundamental difference between the broker entity and the agent entity is that thc cntity conducting a brokerage has its independent status, usually advising or

18

representing the insurance buyer to enter into a life insurance contract agreement with life insurance but not as a representative for insurance enterprise

- Distribution channel through bank (bancassuzance) has been developing rapidly in recant years and is considered an important distribution channel of life insurance produets in the file Rameassurance has many different definitions Simply, baneassurance is a

prodsets on the ba

advantages such as a sysizin of oultels, paymenl snpport systems as well as branding

In practice, insurance companies often diversify distribution channels, Distribution channels also vary between each insurance enterprise, and each distribution channel has the advantage of one or some of the selected life insurance products

The result of the distribution process is that the insurance enterprise and the insurance buyer enter into the life insurance policy Insurance commitments as well as rights and obligations of the partics in life insurance arc expressed in the life insurance policy,

2 Customers Services

Tn cs: ence, customer service is a form of markcling activity Tt encompasses all the essential services required to ereate, maintain and develop customer satisfaction with products

and services that build trust and attract potential customers, contribute to the overall the value

of supply to customers, help businesses increase sales, business development, and enhance the

prestige of enterprises Along with the superiority of the lit insurance product, customer care services give customers satisfaction equal to ot even higher than what they expected

In the life insurance business, customer service consists of bwe main contents:

2.3.2.1 Customer Service in the policy

Th s include the proc

premium payment term, notice of fee payment process, premium liability, settlement of

customers’ requirements related to contracts such as periodic changes in premium payment,

changes in participants, changes in face amount settlement of risk cases to customers in a

Tvị s oŸ monitoring the status of the policy, the notice af

quick and accurate way, These services are part of the product that customers enjoy; the

customers can complain when not receiving these services in full and timely manner This is done by insurance companies regularly and periodically for customers to follow their policies

and help custorners quickly overcome difficultics and stabilize their lives The procedures and process for the implementation of these services are specified in the documents guiding the

implementation and management of the operations of each company

2.3.2.2 Out-of-comtract customer services:

Out-of-contract customer service or value-added services for customers are

complementary activities not covered by the policy and provided by the insurer to add the value of insurance products, thereby increasing the satisfaction of customers when using the service These services make a difference for each company For different companies, the

services provided to customers arc diffcrent at some points This scrvice includes: giving gifts, visiting gucsts on the occasion of the big day in the lift of customers, national and

19

intemational holidays, on the occasion of customers participating in insurance or on the occasion of contract expiration, free medicat care, offering discount cards, sweepstakes, and customer conferences, consulting and providing financial information that our customers arz interested in, This is mainly provided by the company The agents can also provide this service lo the cuslomer (or their account, in some eascs, the insurance company can support them These additional

2.3.2 Criteria to assess Business Performance of Investment- Linked Insurance

23.3.1 Distribution Channel Development

The development of the distribution chamel sysicur of insurance cnterprises is roflectzd in the inoreasc in the number of distribution charmels

reas in the muonber of

jnsurance cnlerprises’ agents A diversified and developed distribution nelwork is the decisive factor in the competitive advantage of insurance companies in the market, help to provide insurance products and qualified services to customers in a timely manner, facilitate and

enhance the level of awareness and enhance the brand of insurance companies in the market

Through the distribution network, insurance companies can reach a large number of potential customers, so as the distribution channel system is expanded, insurance companies

will continuously develop the market and new customers, rise in their new business premium and dominate the market corupared to other cormpelilors

2.3.3.2 Product divarsity

The diversity of life insurance products is reflected in the mumber of products provided

by the insurer in the market An insurance company offering a variety of insurance products

io the market will provide customers with a wide choice of products to satisfy different purposes of insurance

2.3.3.3 General criteria for assessing business performance of insurance products

a) Growth of reverate and market share: This indicates how rapid the development is,

the expansion of types of business

policy and customer at the time of signing will not be changed duing the tenn of the policy

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Life insurance enterprises shall recognize the principal premium into revenue when insurance liability arises for insurance buyers, concretely as follows

(i) When the policy has been entered into between the insurer and the insurance buyer and the premium has been fully paid

Gi) There is evidence thal the policy has becn entered into and that the insuzanes buyer has fully paid the premium

Gii) When the policy has been entered into, the insurer shall reach an agreement with the insurance buyer on the payment term of the premium (including the grace period)

- Market share

In lifs insurance business, for many different insurance companies, the market share to

be occupied by the enterprises is based on two basic criteria: (i) Firstly: revenue of new business premium received by lif insurance companies in comparison with the revenue of new business promiumn of the whole markel at some time poinls int the year; i) Secondly, the lolal premium cared by the enterprise during the year (including new business and pali

im forec)

compared 1o the total premium revenue in life insurance of the whole markel in thal year

Formula for market share by new business premiton revenue (year)

Market share (New business prenitm} = (New business premium revenne of the enterprise ‘Total new business premium revenue of the whole market in that year)

Formula for market share by total premium revenue (year)

Market share ‘prenrim; — (Annual premium revenue of the enterprise/Total premium

revenuc of the whole market in that year)

b) Profitability of the product

Profitability shows

participants This criterion is evaluated by the following indicators’

- Profit of investment find

‘rhe performance of an investment fund shall be determined on the basis of the income

s performance brings to cnterpri

earned ftom the investment activities of the fund after deducting the relevant expenses

‘Where, G) investment fund income includes interest on investment assets (deposits, bonds ) and interest on securities trading transactions during the period: (ii) the investment

fund's expenses include the fund management expenses paid to the insurance company in accordance with the pre-determined (crs (usually 2% of the fund's asset value) ) and direct

expenses for investment activities of the fund

Performance result of the investment fund = Income of investment find — overhead

expense of the find

- The interest rate of the investment- linked insurance product

The investment- linked insurance policy provides the minimum commitment investment interest in the event of death, policy termination, and policy maturity, The value of

the customer's account is added by the annualized investment interest rate on the basis of the

minimum commitment interest rate

21

Accordingly, in order to compare the superiority of the investment- linked insurance products of the same group, the published interest rate of the product will be an important

factor to evaluate

The published interest rate is the interest rate published annually by Life Insurance connpanios and is used to determine the amount of official interest allocated ta the Contract Account al the ond of the financial year This inlercst rale is determined from the investment resull of the Universal Fund afier subtracting the investment expenses including expenses related to the transaction of assets of the fuind (such as bank fees brokerage fees and similar fees paid to third parties), Universal l'und management fees and contract maintenance fees

¢} Satisfaction level of custamer

‘Whether a matketed product or service gets a market acceptance and whether the enterprise has a place in the market depend on the customers Beside profit targets, insurance cnlsrprises erzale products and services in order (o salisfy the demand of consumers, gain market share and salisty customers with s

whether the customers have continued to maintain contracts with enterprises he products

require the insurer to have strong financial resources, and the policy is signed on the trust and assurance of the insurer for the customers The higher the customer's expectations about insurance products, the more difficult it is for the insurer to meet the customers, On the other hand, the higher the perceived quality of the products and services than the customer's

expectations, the more likely it is thal the insurer will bring satisfaction lo the customers and

will get cuslomer loyally In the life insurance business, the level of customer satisfaction will

impact whether the customer continues to want to maintain the insurance contract signed with

the enterprise and to renew the contract with insurance enterprises

Often an effective customer service is understood in different ways, but customer

service in general is considered effective if it satisfies conditions such as fast, complete, accurate, polite, contidential and convenient

- Fast: Customer service is fast if it is done promptly Customers always want the

insurer to solve their problems quickly

- Complete: Custumer service is complete when all the requirements of the

customer are satisfied Often the customer will not be satisfied until their requirements are

met in all aspects

- Accurate: Customer service staff must be careful to provide accurate information to

help customers make wise decisions about their coverage Accurate information is to avoid future problems

- Polite: Customer service staf must always be polite, able to handle, considerate to

any attitude of customers and in any circumstances Politeness and courtcousness arc

important to make the customer comtinuc to commit te the company

22

- Confidential: ‘The insuance company will do anything to ensure the confidentiality

of customer service, Customer service personnel, for example, must determine whether the customer service claim is legitimate and only authorized employees can access and review customer information and make transactions Confidentiality in the service helps the company ‘build the trust of custorners as well as strengthen the relationship between customers and Ihe company

~ ConvenienL: Convenience in customer service micans thal customers have

support these transactions through the intemet

23

CHAPTER 53: BUSINESS PERFORMANCE OF INVESTMENT- LINKED

INSURANCE PRODUCTS AT BAO VIET LIFE CORPORATION (2013-2016)

3.1 Influencing factors on the development of life insurance market in Vietnam

3.1.1 Economic condition as the development basis of Life Insurance

During the period since 1996, when Baovict launched its first life insurance product, tll new when the socio-economic situation of Vietnam continuss to rise and stabilize aller the

of Vietnam

Enhanced living standards have helped Vietnamese people start accumulating and using their money to reinvest back into the economy, And life insurance is one of the channels that people can choose to invest This is an important economic base for the development of 1ife insurance

From 2001 tp 2010: This is the peried when the country continued the periad of economic reform and innovation in depth and gol many important achievernents, Reonomic growth was stable, with an average growth rate of 6.9%, one-digit inflation, and improved living standards

In the period of 2011-2015, Vietnam's economy entered a new phase with a 4-year average Gross Domestic Product growth rate of 5.8% per year In spite of the difficult macroeconomic situation, the highly growing life insurance market is a bright spot for the financial market in the pariod of 2011-2015 Total prontium revenue maintained high grow

In 2016, along with the prosperity of the Vietnamese economy, the life insurance market continued to maintain positive momentum, total premium revenme reached over 50 tuillion dong, up 30% over 2015 2016 is also the year of the strongest growing life insurance markel in the Tast 10 ycars Where, premium revenus of endowment insurance stil] aecounted

for the highest proportion of 49%, fullowed by investiment- linked insurance with 40%, lerm insurance of 0.7%, ponsion insurance of 0.6%, the Temaining accounting for negligible

proportion New business premium revenue reached VND17,546 billion, growing 32%

compared to 2015 Of which, the largest occupancy was investment: linked insurance, with

new business premium revenue of VND8,903 billion (about 50%)

3.1.2 Cultural-social condition

a Population

As one of the countries with the lergss| population im the world, Vietnam has greal

24

potential for life insurance By the end of 2016, Vietnam has a population of 92 million,

ranking the third in Southeast Asia, the eighth in Asia and thel Sth in the world Liowever, the

number of participants in life insurance is only more than one million people, very little compared with other countries in the region and in the world Along with the economic

development, the people's life has been improved, life expzctaney has increased, so far Vietnam's average life expectaney has teached the world average (about 70 years ald) These

are favorable conditions to attract life insurance buyers

‘Vietnam has completed universal primary education and is gradually improving the level of

edueation for the next level Therefore, life insurance is @ very suitable ceonormic solution for

Moreaver, the Vietnamese have the characteristics

of being ccononi

ensuring life for themselves and their relatives in the future Meanwhile, life insurance is a

powerfull tool to solve these problems

3.1.3 Information technology

The twentieth century can be said to be the century of science and technology, with

the birth of a series of inventions, giving the field of science and technology a bound development

far-sighted about

In developed counttics, scicnoe and technology have become the dircet production force of the cconomy, In Vietnam, thanks to inercased invesinent in cooperation and technology transfer, the sector has achieved certain development steps in the past years, especially in the field of digital technology, optical fiber, technique of information explaiting and processing The level of information technology in Vietnam has gradually developed into fields of printing, information, Internet, e-commerce and software technology

In the field of insurance in general and life insurance in particular, the application of information technology has allowed insurance companies to modemnize the service process, yeduec cumbersome organizational structure of insurance enterprises , diversify distzibution channels and forms of scrviecs, cnhanec customer services by high tech support services

2s

In addition, the rapid development of information technology has created a new consumer habit for customers Customers are increasingly demanding information through modem means such as Intemet, telephone, email , want fo be provided with general financial services such as inserance - investment payment Thus, this is an opportunity for insurance companies ta apply the achievements of science and technology to mcet the increasing and diverse needs of customers in the cormpelitive and inlograting environment 3.1.4 Openness and international economic integration

Prior to 1999, Vietnam’s Life insurance market had only one life insurance company,

Baoviet Life

1999 marks the milestone of the development of Vietnam life insurance market with three foreign-invested lite insurance companies licensed by the State: Chinfon- Manulife Life Insurance Co., Ltd (now Chinfon sold its shares to Manulife and changed its name to Manulife Lift Insurance Co., Lid, Bao Mink-CMG Life Insurance Company Limited (a joint

entre

tween Bao Minh and CMG) and Prudential UK Life Insurances Cormpanty

By 2000, ä 100% EDI life insurance company was allowed ta establish and operate in

Viemam, namely American Intemational Assurance Company, Ltd (AIA) Thus, at this

moment, the Vietnam life insurance market is really formed with strong competition among foreign invested companies

Openness and economic integration create conditions for lif2 insurance to jump off the front Openness and international economic integration are an inevitable trend for the

development of any country in the world today The opening of our cconomy in recent years has crsaicd many opportunilizs for the ficlds, including insuranee and life insurance The

participation in the Vietnarn life insurance market of large foreign life insurance companics

with strong financial potential and experience in life insurance business such as ALA,

Prudential has created a premise for rapid development of the Vietnam life insurance market, promoting the insurance market development

In pursuit of the policy of developing a sovialisl-oriented market economy, on

December 18 1993, the Government issued Decree No.100/CP on insurance business,

creating an important legal foundation for the development of the insurance market in

Vietnam

At present, the State and Government have paid more attention to promoting the development of the insurance industry in Viemmam in order to fulfill its commitment to building a secure and equitable business environment with legal reforms This is shown by:

- The National Assembly passed the Law on Insurance Business on Decomber 9, 2000

at the 8th session of the 10th National Assembly, creating an important fegal foundation for

26

ths healthy and sustainable development of Vietnam's insurance market, in line with the trend

of international integration ‘Throughout the implementation process the Law on insurance business was amended, supplemented and finalized at the Sth session of the 12th National Assembly, passed on November 24, 2010

-The system of legal documents on insurance business has been relatively complete according to intomnational slandards Most rzcznfly, the Government issued Deerse 73/2016/NT-CP dated 1Suly, 2016 detailing the implementation of the Law and the Law on Insurance Business amending and supplementing a number of atticles of the Law on Business Insurance insurance

~The Ministry of linance is a governmental agency performing the function of State management over insurance business The Ministry of Finance has set up an Insurance Supervision and Control Departmem to supervise insurance enterprises in their business activilics, Gom the reeruiunent and taining of agents to the system of performance monitoring indicators and finaneial regime of insuranes cntexprises

operating in Vielnarn

markel

So far, basically the legal documents on insurance business have been formed

relatively complete The system of legal documents meets the requirements of developing the insurance market and is an important tool for the management of the insurance market in a

safe and ettective way At the same time, state management has also been reformed in a way

‘hat gradually limits administrative interference to the operation of enterprises, raises the

autonomy and accountability of enterprises in law enforcement

3.2 Introduction to Bas Viet Life

3.2.1 History and Development

Baoviet Life Corporation (BaoViet Life), formerly known as Vietnam Insurance,

belongs to Vietnam Insurance Corporation with ifs long history of formation and dsvelopment

In 1965: Bao Viet was officially put into operation At that time, Bao Viet only

operated mainly insurance of cargo, ship and conducted compensation inspection for foreign

insurance companies

On 01/08/1996: the fust life insurance policy in Vietnam was issucd by Bao Vict,

affirming the slalus, prestige and great seale of Bao Vict in the insurance markel in Vict

during the period of integration and economic development

In 2000: Bao Viet established 27 life insurance companies in the provinces By 2001:

With effective management model, Bao Viet continued to establish 32 life insurance

companies and branches in the remaining provinces

During 2003 - 2004: Bao Viet separated two independent accounting corporations including Viemam Life Insurance Corporation (Baoviet Lite), with chartered capital of

VNDI,500 billion and Victuam Insurance Corporation (Baovict Victram) with a chatter capital of VXD900 billion

27

On 4" October, 2007: Bao Viet Financial Group (Bao Viet Holdings) successfully

organized the General Assembly of Shareholders to establish BaoViet Group And till 15*

October, 2007: Bao Viet Holdings was officially issued certificate of business

On 23" January, 2008: Baoviet Group officially launched At this ceremony, Baoviet

Group officially introduced its subsidiaries, including Baoviet Life Insurance Corporation

with a 100% capital invested by Baoviet Group, specializing in business of life insurance

Together with Baoviet Vietnam Corporation’s transformation into a joint stock corporation, BaoViet Life was transformed into Baoviet Life Corporation operating under the model of a one member limited liability company 100% owned by Bao Viet Group

Along with the process of establishment and development, Baoviet Life has been

growing comprehensively in terms of financial potential, human resources, distribution network as well as services provided to customers, contributing significantly to the Vietnam

economy in general and the life insurance market in particular, Currently, Baoviet Life Corporation has chartered capital of VND 2,500 billion, with a network of 75 branches, over

800 customer service rooms and hundreds of thousands of professional agents nationwide Baoviet Life is the life insurance company with the highest legal capital, total assets of VND 53,800 billion

3.2.2 Organization structure

Organizational structure and the management and operation apparatus of Baoviet Life

is being implemented according to the centralized management model as follows: