Solutions for improving the competitiveness of posts & tel. joint stock insurance company = Một số giải pháp nâng cao năng lực cạnh tranh của Tổng Công ty Cổ phần Bảo hiểm Bưu điện

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

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF TABLES ix

LIST OF FIGURES x

LIST OF DIAGRAM x

INTRODUCTION 1

CHAPTER 1: BASIC ARGUMENTS ON COMPETITIVENESS IN NON-LIFE INSURANCE BUSINESS 4

1.1 Concept and feature of insurance business activity 4

1.1.1 Concept on insurance business activity 4

1.1.2 Feature of insurance business activity 5

1.2 Non-life insurance business activity 6

1.2.1 Concept on non-life insurance business 6

1.2.2 Operation content of non-life insurance enterprise 6

1.2.3 Criteria for evaluating the product‟s competitiveness 16

1.2.4 Necessity to improve competitiveness of product in international economic integration condition 21

1.3 Overview of non-life insurance market in 2011 23

1.4 Competitiveness of non-life insurance enterprise 24

1.4.1 Competitiveness and competitiveness forms 24

1.4.2 Competitiveness of non-life insurance enterprise 27

1.4.3 Factors reflecting competitiveness of non-life insurance enterprise

31

1.4.4 Some factors affecting to competitiveness of non-life insurance enterprise 36

CHAPTER 2: REAL SITUATION OF COMPETITIVENESS OF POSTS & TEL JOINT - STOCK INSURANCE COMPANY (PTI) 38

2.1 Introduction about Posts & Tel Joint - Stock Insurance Company (PTI) 38 2.1.1 Introduction about the Company 38

2.1.2 Apparatus organization of PTI 41

2.2 Some features on competitiveness situation in non-life insurance market in Vietnam at present 45

2.2.1 Number of insurance enterprises: 45

2.2.2 Market share of non-life insurance enterprises 48

2.2.3 Insurance products to be deployed 50

2.2.4 Distribution system of non-life insurance enterprises 51

2.2.5 Financial resources of enterprise 51

2.3 Real situation on competitiveness of PTI 54

2.3.1 Financial 54

2.3.2 Product of PTI 57

2.3.3 Distribution system 62

2.3.4 Commercial partner 65

2.3.5 Human resources 65

2.3.6 Product price, assessment quality and compensation settlement 68

2.4 Operation result, position of PTI in the market 69 2.4.1 Result 69 2.4.2 Market share of PTI over the years 74

CHAPTER 3: SOME SOLUTIONS AIMED AT IMPROVING

ENTERPRISE 78

3.1 Some recommendations for the State to improve the competitiveness

on non-life insurance enterprises 78 3.2 Solutions for PTI insurance enterprise aimed at improving competitiveness in the market 79

CONCLUSION 100 REFERENCES 101

Table 5 Process of increasing charter capital of PTI 53

Table 7 Total provident fund of PTI (period 2009 - 2011) 56

Table 8 Revenue structure of PTI under operations (period of

2007- 2011)

60

Table 9 Statistic table of agents in the period 2007 - 2011 63

Table 11 Original insurance revenue in the period 2007-2011 69 Table 12 Insurance revenue of PTI under each operations

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 COMPETITIVENESS IN

NON-LIFE INSURANCE BUSINESS 1.1 Concept and feature of insurance business activity

1.1.1 Concept on insurance business activity

Each individual or organization has demand on the safety; therefore, they always find way to protect them, their relatives and the assets they are having

in the face of the upheavals in the life which can happen at any time Being aware of this issue, people from long time ago organized many forms having features similar as insurance Insurance really came out into society for the first time in 1942, (with marine insurance company) Up to now, insurance has developed very strongly and becomes popular financial activity all over the world

It can be understood that insurance business is the activity of the insurance enterprise aimed at revenue-earning, thereby insurance enterprise accepts the risk of the insurance buyer on the basis that the buyer pays the premium so that the enterprise pays the insured amount to the beneficiary or compensates the insurance buyer as happening the insured events This concept expresses clearly the following contents:

Firstly: Insurance business has the economic and profit purpose, this is the

purpose which the insurance enterprises direct toward Only by gaining the profit, can the insurance enterprise exist and develop in the condition of the market economy Profit helps the enterprise pay off to the individuals and organizations and provide capital for itself High profit level also helps the enterprise maintain the reserve fund source which is big enough, limit the assignment and re-insurance and have condition for improving the income level for personnel Besides the profit objective, the insurance enterprise must

meet the demand of the customers, help the customers stabilize their life and business production as having sudden loss and damage happened to them, at the same time, the insurance enterprise is responsible for implementing fully the obligations to the State Besides, the appearance of the insurance business form also contributes to guaranteeing the safety and stability for the society to develop stably

Secondly: The nature of the insurance business activity is that insurance

enterprises accept the risk which is transferred to them by insured party; that means they accept to pay the insured amount or compensate as happening the insured event On the contrary, the insurance enterprise will collect the premium, this revenue source will form the reserve fund, compensation fund, pay off other related and profitable insurance costs However, the insurance enterprise only accepts the insurance for the risks which will happen in the future and have unexpected, unreliable nature and do not depend on subjective desire of the person insured… The specific characteristics of the insured risk express the scope in which the insurers must determine and select This thing also affects partly to the business activity of the insurance enterprise

Thirdly: Insurance business is often attached to the reinsurance business

activity Reinsurance business is the activity of the insurance enterprise aimed

at creating profit, thereby the insurance enterprise receives another premium amount to undertake to compensate for the responsibility to be insured Besides, reinsurance business also helps the insurance enterprise expand the relations with commercial partners, take advantage of the capital resources, experience to grasp more information, support the training of officers…

1.1.2 Feature of insurance business activity

Insurance business is the special service business sector; it has the following

specific features:

Firstly: The legal capital level applied for insurance enterprise is very great; it

is not true that any individual or organization has ability to organize the insurance business activity In Vietnam at present, the legal capital applied for non-life insurance enterprises is 300 billion Vietnam dongs

Secondly: Insurance also has social significance; it is the guarantee on the safety of financial situation, it helps the person insured be stable on life and business production Therefore, the State is interested in this business field, the State regularly checks and controls closely; this issue not only helps ensure the interest of the person insured but also contributes to stabilizing the society

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”

1.2.2 Operation content of non-life insurance enterprise

1.2.2.1 Business of original insurance operations

a Feature

This is the basic activity, basis for the existence of the insurance enterprise This activity is an uninterrupted process from the stage of issuing the

application to the person insured, collecting the premium, monitoring the process of implementing the insurance Contract, assessing the loss and settling the insurance compensation

The enterprise implements the activity of original insurance business according to some operations, thence collects the premium and implements its main function which is to form the monetary fund from the contribution of the majority to compensate the damage and loss of some individuals, contribute

to stabilizing the business production and the life of the person insured

The procedure on implementing the activity of original insurance business start from the work that insurance enterprise through agent network or employees exploits, offer the insurance services to each customer object having demand As both Parties agree the basic conditions in order to enter the insurance contract, the person having demand on participating in the insurance will send to insurance the request or requirement on being provided the insurance service, on that basis, the insurance contract is established and signed The contract is the legal proof showing the establishment of rights and obligations between both Parties: insurance enterprise and person insured According to the regulations of the Law on insurance business (Article 17, Article 19 and Article 20), the insurance enterprise has the following basic rights, obligations and responsibilities:

- Obligation to compensate for pay the insured amount timely to the person insured or the beneficiary

The Law on insurance business also stipulates clearly that if two Parties in the contract do not have specific agreement on this term, the insurer has to the insured amount or compensate within 15 days from the date of receiving fully the valid claim dossier requiring the payment of the insured amount or

compensation (Article 29)

- The insurance enterprise is responsible for providing sufficient information relating to the insurance contract, explaining the conditions and terms of insurance; rights and obligations of the person insured, guiding and explaining every necessary procedure so that the person insured prepares the claim dossier for requiring the insured amount as the insured event happens

- Insurance enterprise also has specific rights corresponding to the received responsibility; that is the right to collect the premium, the right to request the amendment of some conditions and terms of the contract, contract termination…

If the insurance enterprise has implemented the compensation, it is allowed to transfer the rights of the person insured in order to require the third person returning the entire or a part of the compensated amount due to the fault caused by such third person

The person insured also has specific rights and obligations:

- The person insured has obligation of declaring honestly the information they know relating to the insurance object since the signing of the contract, paying the premium fully, declaring honestly as happening the insured event, has obligation of taking precautions and preventing from risk, limiting the loss, preserving the right to claim the third person for insurance enterprise…

- The person insured has right to enjoy the compensation money or be paid the insured amount from the insurance enterprise as the insured event happens; right to be provided information relating to the insurance contract and the process of preparing the insurance claim dossier, right to change some conditions and terms in the contract…

Through the result of the activity of original insurance business, the insurance

enterprise will show its position and image, thereby promote its competitiveness in the market and especially in front of the competitor The result from insurance business work is the foundation and basis for insurance enterprise having sufficient potentials to expand the activity and strengthen the investment activity aimed at bringing high profit and sustainable development

b Division of non-life insurance operations

Depending on different division method, the non-life insurance operations can

be divided into the following basic types:

b1 Classification under the insurance object

According this method, it is divided into three groups: Property insurance, civil liability insurance, non-life human insurance

- Property insurance: This is the type of insurance in which the insured object

is property (fixed or current) of the person insured For example, insurance for the material damage of mechanical vehicle, goods insurance of the goods owner in imported and exported goods insurance, property insurance of the house owner in robbery insurance The insurance value is the actual value of the insured property; it is the important base to calculate the premium and payment limit of the insurance compensation money

- Civil liability insurance: the insured object is the civil liability of the person insured for the third person in accordance with the law For example, the civil liability insurance of the mechanical vehicle owner, civil liability insurance of the employer, public liability insurance etc… are different from property insurance and human insurance; the object of the civil liability insurance is abstract The civil liability insurance applies some principles such as: compensation principle, legal right transfer principle

- Non-life human insurance: is the type of insurance having the insurance object being life, health, working ability of human but it is different form life human insurance, non-life human insurance is the type of insurance only relating to the risk such as: disease, accident, loss of working ability and death The feature of this type is that it does not relate to the life-span of human For example: accident insurance 24/24, passenger accident insurance, tourist insurance…, the principle of paying a flat rate is applied mainly as paying the insured amount (i.e on principle, the insurance payment amount will be based on subjective regulation of the contract and the insured amount

is agreed as signing the contract, not be based on the actual damage However, it is possible to apply in combination with the compensation principle as paying the arisen medical costs in the insured scope of the human insurance contracts

b2 Classification under the compulsory nature

According to this method, there are: Compulsory non-life insurance and voluntary non-life insurance

- Compulsory non-life insurance: is the type of insurance in which the law has regulations on obligations of participating in the insurance of the organization and individuals having certain relations with the compulsory object to be insured Normally, for the type of compulsory insurance, the law will regulate the insurance condition, premium level, minimum amount of money which the organizations and individuals insured and the insurance enterprise have obligation of implementing

Compulsory insurance is only applied for some types of insurance aimed at protecting the public interest and social safety However, the compulsoriness does not lose the voluntary, equal principle in the contract relation as the

parties are voluntary to select the partner and agree on the issues which do not have to comply with in accordance with the united regulations of the law

- Voluntary non-life insurance: is the type of insurance in which the person insured has full right to select according to his demand and desire, the insurance contract is signed on voluntary basis between the insurer and the person insured

1.2.2.2 Reinsurance 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 enterprise, a form which the insurance enterprise insures for itself after receiving all risks of the customers At the same time, the reinsurance activity also helps the enterprise 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

a Agreeing reinsurance

Agreeing the reinsurance means an insurance enterprise accepts the insurance for

a risk part of other insurance enterprise in an original insurance contract In the view of insurance business, the activity of agreeing the reinsurance is a form of selling the insurance After agreeing the reinsurance, the person agreeing the reinsurance can transfer the reinsurance to other people agreeing the reinsurance The activity of agreeing the reinsurance has the purpose of increasing the

revenue source from premium for the enterprise, besides, the greater purpose

of the activity of agreeing the reinsurance is to share the risks between the insurance enterprises In the mixing relation in the market, an insurance enterprise sometimes stands at the position of the person receiving the risk but

it is sometimes at the position of the person sharing the risk

The enterprise agreeing reinsurance is responsible for the risks it accepts which are equivalent in terms of scope and conditions, terms as the original insurance enterprise accepted with the customer However, liability limit will

be corresponding to the rate of agreeing reinsurance in the original insurance contract Thereby, as the insured event happens, the Company agreeing reinsurance also has to implement the obligation of compensating and paying the insured amount to the original insurance Company in strict accordance with the liability part it accepted

To compensate for the costs spent by original insurance enterprise to sign the insurance contract with customer, the Company agreeing reinsurance must pay to reinsurance transfer Company a certain fee amount called reinsurance transfer commission Corresponding to the liability part to be accepted, the reinsurance agreeing Company will receive a premium revenue part from the reinsurance transfer Company; this is the revenue from the activity of agreeing reinsurance

b Reinsurance transfer

It can be seen that the safety demand in the activity of insurance business is always put on the top level; therefore, an insurance enterprise must find way to insure for itself through reinsurance transfer Reinsurance transfer means an insurance enterprise transfers a part of its insurance liability undertaken to the customer (person insured) to one or many other insurance enterprises

Capital resources of an insurance enterprise are always limited number, but for the activity of original insurance business, at the same time, the insured amount which the insurance enterprise undertook with the customer may be very great If the loss happens with disaster nature, the enterprise will have danger of default This matter makes the enterprise bankrupt and the customer cannot overcome the loss consequence as well Thus, the activity of reinsurance transfer helps insurance enterprise stabilize the financial situation; helps customer participating in insurance feel secure about the compensation payment ability of the insurance enterprise; helps insurance enterprise be active in calculating the maximum financial liability limit at any certain point

of time; help share the risks in community… Thereby, create for insurance enterprise the best competitiveness to develop its activity of original insurance business

Being similar to the activity of receiving reinsurance but at reverse position, the reinsurance transfer Company also has to transfer to the Company agreeing reinsurance a part of the original premium corresponding to the liability part to be transferred In return, reinsurance transfer Company will collect a certain amount of reinsurance commission under the agreement from the Company agreeing the reinsurance The liability for settling the compensation and claim arising from original insurance contract will be shared between the transfer Company and agreeing Company under reinsurance contract

However, in both cases of transferring and agreeing reinsurance, the clue to settle compensation and claim with customer still is original insurance Company - the one directly signing the insurance contract

1.2.2.3 Assessment, compensation and claim to third person

Insurance enterprise can also implement directly the activity of assessment, compensation and claim to third person to serve the business activity of the enterprise or be the agent implementing service on assessment, compensation and claim to third person for other insurance enterprises

In the consideration of the angle being activity serving the direct insurance business activity of the insurance enterprise:

Assessment is the activity implemented directly by insurance enterprise 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 enterprise 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 enterprise 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 enterprise compensated and accepted right transfer from the person insured

Assessment, compensation and claim to third person is very important stage

in insurance business activity, it is the factor affecting directly to quality of the insurance product because at this stage, product of the insurance enterprise will be actually used and evaluated by customer If the quality is good, the insurance enterprise retains old customers and attracts new customers, increases market share, increases prestige Therefore, many insurance enterprises consider the activity of assessment, compensation as a form of

advertisement without cost of the Company

In the consideration of the angle being agent implementing the service on assessment, compensation and claim to third person:

Insurance enterprise can use its available advantages with the verifiers, compensators providing the service on assessment, compensation to other insurance enterprises in case the insurance enterprises have no ability to implement well that work Then the incomings from the service supply are considered as revenue of the insurance enterprise In the condition as present, for some small, newly-established insurance enterprises, the branch network

is not spacious, the lease of some other insurance enterprises as the agent for assessment, compensation as the insured event happens is necessary, it contributes to settling quickly the rights for customer participating in insurance, improving product quality of the enterprise For some big, prestigious enterprises having apparatus for implementing the assessment, compensation professionally, the supply of this service brings relatively great incomings and has special significance in the condition that the activity of original insurance business is more and more difficult

1.2.2.4 Investment activity

Besides the original insurance business activity of the Company, the investment activity also brings a relatively great income source for the enterprise The profit source from the investment activity helps the enterprise improve its financial considerably; therefore, all insurance enterprises 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

The insurance business activity has reverse business cycle; it means the

enterprise will have revenue first and the business cost is determined later For this characteristic, the insurance enterprises always hold a very great free temporary capital amount And of course, to take full advantage of this capital resource, the insurance enterprise will use it to invest into the fields permitted

by the State such as: depositing at the bank, buying public bond, investing into securities, contributing capital into joint venture, investing into real estate… The profit from the investment activity will help the enterprise improve the financial , thereby, increase the ability of paying insurance to the customers

According to the statistics of some big insurance Companies in the world, the revenue of insurance premium gained from insurance business activity is often approximate to the amount of money which the enterprise has to compensate Therefore, if there is no investment activity, the profit of the enterprise is nearly zero; thus, the investment activity will be the factor deciding the profit of the insurance enterprise

Capital resources from operations provision of the enterprise is considered as the debt which insurance owes the customer Therefore, to void the situation

of default of the enterprise as well as guarantee the interest of customers, the State needs regulate closely the use of this fund, including the limit and fields

to be invested

1.2.3 Criteria for evaluating the product’s competitiveness

Today, together with the globalization and international economic integration, defining and measuring the international competitiveness is increasingly attracting the concern of economists, especially in the international analysis Due to the complication, multi-trend of research area, it is difficult to unify in the way of measuring, analyzing and evaluating products

We can evaluate product‟s competitiveness via different criteria‟s including quality and quantity-based criteria

In the scope of this theme, the referred criteria are as follows:

1.2.3.1 The growth speed of product

The evaluation of product‟s growth speed is to emphasis on the variation from this period to others It is used to compare the data by the time The calculated results are performed by the relative numbers reflecting the trend

of event It is also defined by inter- growth speed or fixed growth speed The inter-growth speed is to define the vibration by comparing the letter data and the very previous one

The fixed growth speed is to define the vibration by choosing a fixed root (maybe business period or landslide period) Taking the data from one period compared with one from the fixed one By this way, a standard of results is gained to reflect the trend of considered event

To evaluate the growth speed of the product, criteria of the revenues of sold product

The comparison of revenue growth speed shows the enterprise‟s product consuming level compared with the competitors in the same field This criterion is more advantageous than the market share criteria in the way the enterprise cannot define the whole consumption of whole market, especially

in so big market On addition, in case of so small or insignificant market share this criteria does not have much meanings and in this institution, it is more meaningful to compare the revenue growth speed with competitors

1.2.3.2 The market share of the product

The market share of a product evaluating its ability to occupy that market The bigger market share the stronger its competitive is That the market share

of an enterprise or a nation increases or decreases reveal their competitive with other competitors

The product‟s market share in a specific market is defined via the formation:

This criterion shows the market occupation, role and position of that product

on the market In the international market, this criterion is used to evaluate the efficiencies of export activity of each nation because the common target of export nation is to enlarge the market share for its product

Therefore, to exist and compete strongly, the product has to occupy an amount of market share whatever much or little Therefore, w can evaluate the product‟s competitive , strong point or weak point compared with other competitors in that field

1.2.3.3 The product’s attraction on design and pattern

The unique and attraction in the product„s design and pattern is an important factor affecting strongly on the product consumption Among the criteria to choose a product, the pattern is almost paid more attention although the quality of that product has not known about For the texture product this criteria is more especially crucial because the aesthetic demand of consumers

is more and more appreciated, they choose the product according to the fashion trend so that product is just used in a certain time and that is why the factor of pattern is positioned at first However, to satisfy the demand of almost consumers it is essential to censor cautiously in every phase of

production in order to achieve perfect product both in quality and its attraction character

In the export market, this criterion is also in the form of catalogues of the products

1.2.3.4 The quality and price of the product

The quality is the satisfaction of the technical demand The product‟s quality represents in: the usage criteria, technology criteria, safety etc…For the texture products, it is represent by the material, quality of product processing The quality of product depends mainly on the technology applied in the activity of product quality management Nowadays, together with advanced scientific achievement the factor of quality more depends on the factor of technology Price (according to the Marketing‟s definition) is the symbol of product value in the commercial activities Therefore, Price has great impact

on the enterprise‟s decision to participate in the competitive market

Price is under the impaction of many factors: revenues, cost, benefit, product quality etc…so that, to enhance the competitive position, enterprises need to minimize the cost of business and production activity because they are very the factor making the price increase

Apparently, quality and price are two important criteria in promoting the product‟s competitiveness and decide the buying in the bigger market of consumers The demand and purchasing ability of consumers are different Thus, a reasonable price will hook consumer at different part of market Moreover, the product quality is the measurement of the enterprise‟s mark credit

1.2.3.5 The profit rate

The purpose of business is to bear profit, of enterprise establishment is to seek for profit and act on profit Therefore, profit is the most efficient measurement

of the competitive strength of enterprise

The profit is the balance between the revenues and the cost spent during the business activity To evaluate the business management the criteria of profit rate is used

Profit rate is the criteria reflecting the profit that an enterprise gains in a certain time per one unit revenue from selling pure product

This criterion is defined as following:

The profit rate =

The profit rate reflects the competitive of enterprise, the management ability

of board of directors Because if this criterion is low, it means that the competitive level on the market is very hard so competitors have to decrease price to take over the market In converse, if this criterion is high, it means that the consumption market of this enterprise is quite advantageous and the competitiveness level is not high now

It can be said that, the profit rate is one criteria helping to reflecting clearly the competitiveness of enterprise Therefore, during the operation, enterprise should continue improving technology, reduce the production cost, maintain the price stability to keep the competitive of product and prevent other competitors to penetrate in the market any time

1.2.4 Necessity to improve competitiveness of product in international

economic integration condition

Competitiveness is considered as the important factor in the market economy

To exist and develop, the enterprises have to accept the competitiveness participation For enterprises, the competitiveness is a two-blade knife, in one hand, it eliminates weak enterprises which do not have sufficient for competitiveness in order to stand steady in the market; on the other hand, it is the condition for creating the development impetus for the enterprises to operate the business better and do business more effectively

Mike Moore, former General Director of WTO in the visit to Vietnam on 11/4/2005 said: “WTO will create the business environment which is more explicit, easier to predict and limits the corruption of member countries The experience over 50 years proved that countries with the highest living standard are the countries pursuing the trade liberalization policy Healthy business environment will create businessmen who are ready to face with competitiveness, do not seek profit from the assistance of the government or make corrupt use of limitations, protection of the State”

It is true that WTO is the common “playground” in global scale WTO brings

a comprehensive opportunity on goods market, service market, capital market and labor market With a much wider new economic space, with explicit, predictable law and policy regime system, through the global labor assignment, joining WTO or participating in the globalization process will help participation enterprises enjoy the advantages:

- Expanding the market, strengthening the ability to approach the market (increasing the number of goods export market for the enterprise, increasing the number of goods exported to the countries, creating the production and

export opportunity for the enterprises have competitiveness advantages) because: joining into WTO means the integration into the world economic organizations with the number of members of 148 (calculated to 10/2005), accounting for 85% of the total goods trade and about 90% of the total global service trading

- Improving the position in the international trade relation and equality in the settlement of international trade dispute (equally approaching into the markets

of member countries, protecting domestic production according to the regulation framework of WTO, using the equal and effective dispute settlement system of WTO to settle the disputes in trade, avoid being blocked

by big countries as happening international trade dispute)

- Increasing the attraction of foreign investment capital

- Acquiring technology, management skill, business administration, marketing, trade name construction of foreign countries

Besides, the enterprises also have to face with the challenges:

- Danger of losing the market share and losing the market

- Danger of narrowing the production, converting into other field, even many enterprises will be bankrupt due to be impossible to compete with imported goods

- Danger of being taken over, repurchased, blocked, “taken” employee, corrupt high-ranking leader through high salary payment and promotion promise by foreign enterprises

Like this, we see that as standing in a business environment containing many advantages and challenges like that and “playground” is only one, “rule of the game” is only one, however, the knowledge of “players” cannot be similar

To exist and stand steady, there is no other way; the enterprises have to find out the settlement method themselves; and for production enterprises, the best way is to improve the product competitiveness of the enterprises, improve the competitiveness position of the enterprises in front of the competitors

1.3 Overview of non-life insurance market in 2011

Non-life insurance market in 2011 attained the revenue of 20,497 billion Vietnam dongs, growing 17.56%, the insurance enterprises 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 enterprises grew with high revenue were Samsung Vina 105%, Groupama 93%, Xuan Thanh 79%, PTI 61%, Fubon 53%, Hung Vuong 52% Original insurance was settled compensation with 8,445 billion Vietnam dongs in which Vietnam insurance enterprises were 7,765 billion Vietnam

dongs with compensation rate of 42%, enterprises with foreign capital were

680 billion Vietnam dongs with compensation rate of 33% High compensation rates were fire and explosion insurance 68%, ship insurance 57%, aviation insurance 54%, mechanical vehicle insurance 51%, health insurance 43% The enterprises with high compensate rate were Bao Minh 57%, BIC 56%, Bao Long 52%, Liberty 54%, Baoviet Tokyo Marine 50%, Aviation 44%, Phu Hung 42%

(Data: Vietnam Insurance Association -

http://avi.org.vn/News/103/vi-VN/Default.aspx)

1.4 Competitiveness of non-life insurance enterprise

1.4.1 Competitiveness and competitiveness forms

1.4.1.1 Competitiveness

Most of the countries in the world recognize competitiveness and consider competitiveness as the environment and the driving force of the socio-economic development Therefore, competitiveness can be understood as

follows: “Competitiveness 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”

Like that, competitiveness is a factor which cannot be lacked in the market economy at present Each individual, enterprise needs to understand more clearly about this issue, and bases on its advantages to equip itself with suitable and flexible competitiveness forms in order to adapt itself to each period and different objectives to rise up to the highest position However, Vietnam is a socialist country and the development strategy of the nation is to develop the market economy under the socialist orientation; therefore, it is required to consider the factor of competitiveness and cooperation at the same

time The following forms will present clearly this issue

1.4.1.2 Competitiveness forms

a Competitiveness by product quality

Talking about product quality, Philip Crosly - An expert in quality of America thinks that “Quality is not a property, it is actually the price you have to pay

to joint in the game and if you do not create the quality, nobody will care about you”

Thus, to exist and stand stably in the market, the enterprise 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 enterprise needs attach special importance to this issue

Nowadays, as the economy is more and more developed, the demand of the consumer is higher and higher, it makes the life cycle (life-span) of each type

of product is shorter and shorter Therefore, the enterprise must care more about its products, quality as well as design, model to meet quickly and timely the requirements changed regularly of the customers

b Competitiveness on product price

The premium is the price of insurance product; that is the amount of money which the insurance buyer has to pay to insurance enterprise in strict accordance with the time and method agreed in the insurance contract Therefore, the price is also an important factor in attracting the customers, occupying the market of the insurance enterprise If the product, goods, service is sold with high price, the enterprise cannot find its standing position

in the market Therefore, if the quality of goods, service product of the

enterprises supplied to the market is similar, the competitive strategy aimed at reducing the selling price of product, service will be the decisive factor to the survival of the enterprise in the market In order to be successful in the competitive strategy by price, the enterprise has to know the costs and impact factors that make the actual cost of product, service reduce The objective of the enterprise is to provide for the customers with the goods, service products with suitable quality with acceptable price level and to be provided in right time; the things that can be done is that enterprise attains a lower cost level compared with the competitive opponents

The competitive strategy by price helps the enterprise 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 Competitiveness 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 enterprises trading in intangible service product, this matter has greater significance

As the economy is developed to a certain level and the life of people is improved, the customers care more about the serving factor Especially, for intangible service products, the customers feel the quality of intangible service products, the customers feel the quality of products through the satisfaction on how the demand is met They will care about serving attitude, quick and timely serving, difficulty settlement, customer care, due warranty Recognizing the importance of this issue, each enterprise bases on the feature

of the products being traded and their economic potentials in order to have

reasonable policies, serve the customer the best

1.4.2 Competitiveness of non-life insurance enterprise

1.4.2.1 Competitiveness

Competitiveness (competitiveness strength, competitiveness ability) is considered under three angles: National competitiveness , competitiveness of enterprise and competitiveness of product

- National competitiveness or competitiveness of an economy is understood

as real strength and advantage which the economy or that country can mobilize to maintain and improve its position in comparison to other competitive opponents in the world market in long-term and willingly to gain the higher and higher interest for its economy and its country

- Competitiveness of enterprise: it is the real strength and advantage which the enterprise can mobilize to maintain and improve its position in comparison to other competitive opponents in the world market in long-term and willingly to gain the higher and higher interest for its enterprise An enterprise can trade one or many products or services; therefore, we need distinguish the competitiveness of the enterprise with competitiveness of product and service

- Competitiveness of product, service is measured by market share of specific product or service in the market The economy only has higher and higher competitiveness as having many enterprises with high competitiveness strength, and the enterprise has high competitiveness as having many goods with high competitiveness compared with the competitors Therefore, the improvement of competitiveness is the basis, condition for improving the competitiveness of the enterprise and national economy

1.4.2.2 Competitiveness forms of non-life insurance enterprise

Competitiveness is a very important factor in the market economy, it creates the pressure and it is the driving force to impulse the development of the enterprise Studying this matter will help the insurance enterprises understand more clearly about themselves as well as understand more clearly about the competitive opponents Thence to have suitable strategies in order to create the best competitiveness potential for itself The competitiveness between the insurance enterprises is normally through the following forms:

a Competitiveness on quality of insurance product

Non-life insurance product is the service providing the financial safety guarantee for the person insured; they are intangible products, easy to imitate, the customer cannot know the quality and model of product as selecting, it is the type of product which is impossible to feel the stature, dimension, color, it

is the product not being protected the copyright Being different from many other types of service which is purchased and sold to satisfy the demand of the customers at the time of selling, the insurance product is only used in the future The buyer does not expect the insured event happen in order to be compensated or paid the insured amount AT the time of selling, the customer only receives the commitments on compensating in cash or by goods according to the value equivalent to a loss under the agreement in the insurance contract The determination of product price is normally carried out under the reverse cycle because the biggest spending amount for a insurance product is normally the expense for compensation; but this expense cannot be determined accurately as fixing the premium

From the features above, most of the customers, most customers do not care

or have indifferent attitude to the product of the insurance enterprise

Therefore, the quality of insurance product is evaluated completely through the demand satisfaction level of the customer and after sales services such as: assessment, compensation…, This is the competitive feature suitable with the development of the market economy with the customer factor to be the center

of the serving To improve the competitiveness in the market, the non-life insurance enterprises must incessantly improve the product quality to satisfy the best the demand of customer

b Competitiveness on price:

Premium is the price of the insurance product; it is the amount of money which the insurance buyer pays to the insurance enterprise under the term and mode agreed by parties in the insurance contract, in turn, the guarantee for risks is transferred to the insurance enterprise

Premium structure often includes two parts:

- Net cost is the cost receivables which allow the insurance enterprise ensuring the payment, compensation for the insured losses that may happen This cost often accounts for great proportion in total cost and is calculated on the basis of some bases such as: probability of happening risk; loss intensity; insured amount, insurance term; investment interest rate

- Supplementary cost is the necessary fee for insurance enterprise to ensure the costs in the insurance operations, including: commission cost, administrative management cost for preventing loss limit, cost for State tax

Normally: Premium = Cost rate x Insured amount

Where the premium rate is often determined according to a rate (percentage or thousandth rate)

Competitiveness by price must be ensured in term of law through the regulations on premium management Then, premium must ensure the requirement in term of finance of the enterprise, including the ability to pay the compensation, operation costs and ensure the profit

The competitiveness by cost is implemented by non-life insurance enterprise through the action of lowering the fee to bring the interest to the consumer Normally, the enterprises often find way to lower the cost through reducing the administrative cost, management cost, contract signing fee…, However, to improve the competitiveness of the insurance enterprises, it is necessary to calculate carefully the fee reduction to ensure the profitable payment ability

c Competitiveness through distribution and advertisement system

This competitiveness form is expressed to be plentiful and diversified, including: brokerage agent, online sales, sales offices, sales through banking system, advertisement board, advertisement through means of communication…, This competitiveness form requires big cost; the enterprises applying this competitiveness form are often the enterprises having big capital, veteran operation experience and having exploitation

strategy for each objective market clearly, accurately to attain the efficiency

1.4.3 Factors reflecting competitiveness of non-life insurance enterprise

Starting from the concept on competitiveness of the enterprises in the market economy, the competitiveness in the field of insurance business (KDBH) in general and non-life insurance enterprise in particular also has such nature However, the level and nature will be different due to the characteristics of insurance business activity governs

Competitiveness of the insurance enterprises in the insurance market reflects the stable existence and development ability of an enterprise To evaluate the competitiveness of a non-life insurance enterprise, it is often based on the following basic factors: financial , human resources, trade name of enterprise, operation experience, efficiency of investment activity, distribution system, quality and policy of product…

1.4.3.1 Financial

Financial plays a decisive role in the construction of competitiveness strategy

of the enterprise It can be said that financial condition is the first element that any business will have to consider when developing, selecting and deciding

on a long term strategy of the enterprise

For the field of insurance business in general and non-life insurance business

in particular, the financial is a premise condition of utmost importance, allowing the insurance enterprises improving their competitiveness Financial capability is a leading target in the system of targets used to assess competitiveness and rank the insurance enterprises Financial capability is expressed through summary of many targets: capital resources, liabilities, provision funds, reserve funds, retained profit, the market price of the share For the financial of non-life insurance enterprises, it is mentioned through a

number of targets: the ability of capital, provision fund for operations and retained level of the insurance enterprises reflected through reinsurance activity

1.4.3.2 Product system and service quality

Insurance product is an intangible product, so as soon as paying for buying, customers would not feel and see the products of the enterprise Product quality is assessed through satisfaction of customer‟s requirements Grasping these characteristics, insurance enterprises have improved their product quality through attached services, especially customer care service, and the enterprise also diversifies the product and is continuous in renovating the product to be in tune with the changing needs of customers Stage of assessment, compensation for loss is also very important stage, a factor directly affects directly to product quality The insurance enterprise with rapid assessment and compensation will make a good impression for customers so that customers will be more loyal to the enterprise

With any business enterprise, price policy is a very important policy, and insurance enterprise is not an exception The price policy of insurance enterprises means the insurance enterprise constructs the premium list suitable with each type of product to be granted

The fixing of premium is a extremely complex stage, calculated on the basis

of the statistic data of many previous years Low cost fixing will help enterprises attract more customers, but the enterprise is subject to bankruptcy due to default However, high premium fixing makes the enterprise lose competitiveness Therefore, the reasonable premium fixing is very important,

it will affect directly to the competitiveness of insurance enterprises

1.4.3.3 Trade name of enterprise

Trade name is an extremely important factor; the popularization of the image will help enterprise improve their competitiveness in the market Insurance business is an intangible service product; therefore, the construction and development of the trade name in competitiveness is very essential Thus insurance enterprises in general and non-life insurance enterprises in particular constantly popularize their name to increase revenue, occupy their market shares of insurance

Trade name is defined as the name associated with the product, the enterprise producing such product, used to distinguish this product and other competitive products on the same market It is a qualitative target used to evaluate the competitiveness of an enterprise

Insurance product is intangible product, insurance buyer only gets insured amount when the insured event occurs, when customers pay money to buy insurance products, they only receive the commitment to be compensated or paid insured amount from the insurance enterprise Thus, when deciding to participle in buying insurance, the customers often attach much importance to the name and reputation of the insurance enterprises In addition, the insurance product is easy to imitate due to not having exclusive technology or techniques Meanwhile, with the same products, the insurance enterprise with stronger trade name may fix the higher fee level, but many customers still select them because they believe that will be ensured safety and served better Moreover, with the psychology of believing in the enterprise, it will create the driving force for them to continue the signing of the insurance contract That thing created for the insurance enterprises the stable customer force, and thereby increase revenue and market share in the insurance market

Competitiveness is increasingly severe in all areas of business production, in all types of product and service That context creates fierce competitive pressure on price along with the variety of forms of product popularization, trade name, makes the finding of a place for trade name become more and more difficult Image, symbol, trade name of the enterprise are intangible assets but they play more and more important role in the asset structure of the enterprise Together with the same quantitative factors on price of product, the capital of the enterprise the enterprise with better image, trade name will surely create higher competitiveness than the remaining enterprises This forces enterprises to constantly focus on the construction of their image, trade name concurrently with the construction of their reputation for enterprises

1.4.3.4 Human resources

Human resources is fundamental, long-term factor having decisive nature in improving the competitiveness of the insurance enterprises and also the endless resources, the sustainable competitive advantage of enterprises Human is the source of all creation and manager of all sources of knowledge, plays a decisive role to the economic development of a country, as well as the enterprises in general and insurance enterprises in particular Personnel structure of insurance enterprises includes: management officers, employees and intermediaries in the distribution system of the enterprise When an insurance enterprise has on hand the staff being dynamic, professional and creative at work, having high professional qualifications, experience, profession ethics will create the maximum strength to help the insurance enterprise overcome all difficulties to win in the competitiveness

Officers play a leading role, decide the efficient operation of people in the insurance enterprise, affect to product quality An officer having full needed,

effectively operating will reduce management costs Besides the management team, the staff in the insurance enterprise plays an important role, determines the final effect of the deployment process of the insurance operations Insurance staff is the person who is in direct contact with customers, the image of the insurance enterprise in the eyes of the customer at first must be the person directly meeting and contacting with them in the process of selling products, in the care in specific services This objective is only attained as the enterprise has staff, agent system having sufficient knowledge on operations, having high convincing , having operation experience and professional ethics

1.4.3.5 Distribution system

Developing a broad branch, agent network will create a good opportunity for insurance enterprise to exploit many insurance contracts, because the flexibility and convenience will create psychology to the customer being served more thoughtful Customers will be more preferred and feel more secure when participating in the insurance at an enterprise having broad branch, agent network throughout the provinces and cities, serving customers

in many different areas Moreover, many branch, agent system will help popularize the name and trade name for enterprise, help the image of the enterprise go closer to customers Therefore, the competitiveness of enterprises will be stronger when building a branch, agent system in many places and many different regions across the country

1.4.3.6 Operation experience

The operation experience of the insurance enterprise is only obtained when there is operation thickness in reality through the process of rubbing with the environment, dealing with many business situations in order to survive and