Proposing a number of orientations and solutions with scientific and practical background to improve state management for business activities of non-life insurers in Vietnam.
Trang 11. Rationale of the research
Vietnam's nonlife insurance market, although newly formed, has continuously expanded its operations, gradually meeting the insurance needs of organizations and individuals in society. Compared to normal business activities, nonlife insurance businesses activities carry many specific characteristics about business operation, business cycle, products and services and contract. Therefore, nonlife insurance business activities not only impact on the income of insurers and the financial stability for insured participants but also affect the socioeconomic development of the country generally However, in a comprehensive way, its market size is still small compared to its potential, specifically the object and the scope of insurance are limited; the insurance diversity is fairly simple and the insurance business efficiency is not high. The limitation in this activity stems from many reasons, in which the limitations of orientation and management from state management agencies need to be considered. For these reasons, it is of great importance for the State to manage nonlife insurance business in order to protect the insured participants’ benefits, promote insurance market development and ensure healthy and sustainable development of financial institutions
The following questions are in high demand. What are the business activities of nonlife insurance companies? How are these activities going on in Vietnam and how does the state manage it? Are the management mechanism of the state with the current conditions and with the vision in the next 10 years suitable? And what are solutions needed to help improve the state management of business activities of nonlife insurers to achieve the most efficiency? This is considered as an urgent issue that deserves attention and research. Therefore, the PhD candidate choose the topic "State management for
business activities of nonlife insurance enterprises in Vietnam" for her PhD
Systematizing and clarifying the theoretical bases of nonlife insurance and business activities of nonlife insurers; state management of business activities of nonlife
Trang 2 Determining the limitations, shortcomings and the problems raised in nonlife insurance business development and business activities of nonlife insurers in Vietnam
Analyzing and evaluating the state management of business activities of nonlife insurers in Vietnam according to management content and evaluation criteria. Finding out the advantages, limitations and causes of restrictions in state management for business activities of nonlife insurers in Vietnam
Determining the objectives and views of developing the nonlife insurance market and proposing orientations and solutions to improve the state management of nonlife insurers' business activities from now on to 2030
3. Research objects and research scale
* Research objects
The research object of the thesis is the theoretical and practical issues about nonlife insurance business activities; state management of business activities of nonlife insurance companies; factors affecting the state management of nonlife insurance business activities; criteria for state management evaluation of business activities of nonlife insurers
* Research approaches
In terms of content:
+ Business activities of nonlife insurance companies generally include original insurance business; reinsurance business; investment However, in order to ensure the meaning of the thesis, the PhD candidate only focuses on researching on original insurance business activities and investment activities of nonlife insurers, which is the main business activities of nonlife insurers in Vietnam
+ State management activities for business activities of nonlife insurers can be done in advance, during and including the business dissolution process of nonlife insurers. However, in this research, the PhD candidate only targets her thesis research scope in the process of operation of nonlife insurers
+ There are many stakeholders in participating in managing business activities of nonlife insurers including the Government; Ministry of Finance and related Ministries. However, the research scope of the thesis only focuses on the organization of management, which is the Ministry of Finance and the direct management agency is the Department of Insurance Management and Supervision
Trang 3*In terms of time:
+ To limit the time to study the status of business activities of nonlife insurers and state management for business activities of nonlife insurers is in the period of 2010 to 2017
+ Time to apply proposals, orientations and solutions to complete state management will be used by 2030
4. Emerging contributions of the dissertation
* Theoretical and knowledge contributions
The thesis systematized and clarified the theoretical issues about nonlife insurance, business activities of nonlife insurance enterprises, the content of state management for business operations of nonlife insurance companies; factors affecting state management of business activities of nonlife insurance enterprises. In particular, the thesis has developed the criteria for state management evaluation of business activities of nonlife insurers in four groups: effectiveness, efficiency, suitability and sustainability
From studying the state management experience for business activities of nonlife insurance enterprises in some countries such as the US, EEC, Japan, Korea, China and Singapore, the thesis has drawn the lessons which can be applied in Vietnam according to management content
* Practical contributions
From secondary data, status of business activities of nonlife insurance companies across the market from 2010 to 2017 has been analyzed the current before coming to conclusion about the issues of Nonlife insurers business activities in Vietnam
Results of quantitative research through IPA model and data processing on SPSS
to assess the importance and performance level of 24 elements based on four criteria: effectiveness, efficiency, suitability and sustainability, thereby giving policy suggestions. The results of the model show that four criteria assessing the performance level of nonlife insurers are positively and statistically correlated, in which validity and suitability are quite satisfied while Efficiency and sustainability are assessed at an average level. From the scattering graphs, in 24 elements, there are 12 factors to focus on improvement, seven factors should continue to maintain, two factors should not invest in excessive resources and three factors should be low attention.
Trang 4The results of qualitative research and quantitative research in the thesis show that: (i) the promulgated legal policy system does not fully meet the management requirements; (ii) operational capacity, model and method of state management on insurance business still have limitations and shortcomings; (iii) the implementation of inspection and supervision of business activities of nonlife insurance companies has not been highly effective.
* Recommendation of policy and solutions
The dissertation came to the findings with three groups of solutions. (1) Solutions related to the promulgation of state management policies for business activities of nonlife insurers in Vietnam; (2) Solutions related to the implementation of state management for business activities of nonlife insurers in Vietnam; (3) Solutions related to the inspection and supervision of business activities of nonlife insurers in Vietnam.
In particular, some remarkable solutions are concretizing a number of regulations related to executive management and internal control in nonlife insurance businesses; to propose to build capital model on the basis of four types of risks thereby supplementing regulations on calculating minimum capital, solvency and investment capital in enterprises In addition to the regulations that need to be amended, the thesis also proposes to promulgate new regulations to regulate insurance supplement activities, insurance agency activities. In order to improve the efficiency of state management, apart from improving the level of management staff, the application of information technology
in monitoring management is a solution suitable to current conditions
5. Dissertation organization
Apart from the introduction, conclusions, annexes; the thesis content is structured into four chapters:
Chapter 1: Overview of research situation and research methods
Chapter 2: Theoretical basis and practical experience of state management for business activities of nonlife insurers
Chapter 3: Current situation of business and state management for business activities of nonlife insurers in Vietnam
Chapter 4: Orientation and solutions to improve the state management of business activities of nonlife insurers in Vietnam
Trang 51.1.1 Researches related to nonlife insurance companies and business activities of nonlife insurance enterprises
The thesis has analyzed four publications of Doan Minh Phung and colleagues, (2015); Trinh Chi Mai (2013); Nguyen Thi Thu Ha (2016); WenYen Hsu & Pongpitch Petchsakulwong related to business efficiency, investment efficiency, internal control, business risks in nonlife insurers
1.1.2 Researches related to state management for insurance companies and insurance markets
There are five studies explored by the author related to state management of the market and nonlife insurers like Hoang Tran Hau and Nguyen Tien Hung (2013); Hoang Tran Hau and Dr. Hoang Manh Cu (2011); Pham Khac Dung (2007); Dennis Lebar (2012); Mladenka Balaban. These studies emphasized on the management role of the State in improving the operational efficiency of enterprises and insurance markets, mainly financial management activities, and using research methods that aiming to devise solutions to promote the development of insurers
1.1.3 Researches related to state management of nonlife insurance market and business activities of nonlife insurance enterprises
These are studies close to the thesis, including three research of Trinh Thi Xuan Dung (2012); Trinh Huu Hanh (2012); Nguyen Thanh Nga (2015). These studies used the approach of perspective of management and supervision to the operation of the nonlife insurance market and nonlife insurers
1.1.4. Research gaps and inherited scientific values
* Research gaps and the direction of this research
The content of state management for business activities of nonlife insurance businesses follows the approach from the functions of state management;
Criteria for evaluation of state management for a specific business area, which is business activities of nonlife insurers;
Check the importance and level of performance of the criteria to assess the state management of business activities of nonlife insurers to determine the factors which needed to focus on improvement and factors which should continue to maintain besides those one that should not invest too much resources or having limiting development;
Trang 6 Advantages, limitations and causes of limitations in state management for business activities of nonlife insurers in Vietnam;
Scientific and practical basis for the development orientation of insurance market and business activities of nonlife insurers in Vietnam by 2030;
Orientation to improve state management for the operation of nonlife insurance businesses to develop safely and sustainability
* The academic and practical values that are inherited in the thesis
Refer to a part of theory and research methods of research works
Refer to management experience for business activities of nonlife insurers in some countries, thereby drawing lessons for Vietnam
Inherit the approach of quantitative models to study management efficiency or the influence of state management on business activities of Vietnamese insurers
1.2. Research questions
1. What is the content of state management for business activities of nonlife insurers?
2. What factors affect and what criteria to assess the state management activities for business activities of nonlife insurers?
3. How is the state management of business activities of nonlife insurers in the period of 2010 2017 implemented?
4 How is the state management situation for business activities of nonlife insurers in the period of 2010 2017 evaluated?
5 What specific solutions should be set up to improve state management of business activities of nonlife insurers in Vietnam?
1.3. Research methodology
1.3.1. Qualitative research method
The author selected samples with the intention of 10 officers including: 2 state managers directly in the field of nonlife insurance, 2 officers in charge of finance, 3 leading officials of 3 nonlife insurance companies and 3 researchers in finance
Steps: (i) preparation; (ii) interview; (iii) recording the interview. The results after the interview will be sent back to the interviewees to double check to ensure the validity and transparency
1.3.2. Quantitative research method
Trang 7Step 1: Develop 24 evaluation elements of state management of nonlife insurers’
business activities of in four groups of criteria: efficiency, effectiveness, suitability and sustainability. To be more specific, which of those elements are seven in efficiency, six in effectiveness, five in applicability, and six in sustainability. Each element is stated into a statement in the survey
Step 2: Distribute a questionnaire to 250 participants including government
officials, officials in nonlife insurers as well as financial and insurance researchers to collect data on assess the importance and performance level of each factor
CHAPTER 2LITERATURE REVIEW AND PRACTICAL KNOWLEDGE ON STATE
MANAGEMENT FOR BUSINESS ACTIVITIES OF NON – LIFE INSURANCE ENTERPRISES
2.1 Theoretical issues of nonlife insurance and business activities of nonlife insurance enterprises
2.1.1 Overview of nonlife insurance
2.1.1.1 The concept of insurance and nonlife insurance
Insurance is a method of sharing and dispersing risks in order to overcome the financial consequences of risks occurring to individuals and organizations participating in insurance based on the principle of mutual support, the majority of them compensate for the few. Insurance participants pay premiums to insurers in exchange for a commitment that when risks occur, insurers will compensate or pay insurance premiums to insurers or beneficiaries. Nonlife insurance is understood as a type of insurance that guarantees risks, financial losses related to property, civil liability and other objects and is often independent of human life expectancy. Nonlife insurance contracts are usually shortterm (1 year) with wide coverage
Trang 8 Nonlife insurance only accepts insurance for damages of nature without saving nature
Nonlife insurance policies often have a short period of insurance and there is a difference in value between insurance products
Nonlife insurance applies "split" technique in managing insurance fund while life insurance applies "cumulative" technology
Characteristics of the operational reserve fund in nonlife insurance
2.1.1.3 Types of nonlife insurance
* Property insurance: This is a type of insurance including insurance operations
subject to insurance of assets, material and benefits related to insured assets
* Civil liability insurance: It is a type of insurance which in exchange for
insurance premiums of insured participants, the insurer commits to compensate the insured's civil liability in the manner and level in which two sides have agreed in the contract. When participating in this insurance, the insured people have the purpose of transferring the risk belongs to the insured's civil liability to the insurer
* Human health and accident insurance: A shortterm type of insurance with the
subject of insurance being the life, health and working ability of the insured. Unlike other insurance, human health and accident insurance does not cover property and liability risks, but insurance for risks affects the insured
2.1.2 Nonlife insurance enterprises and their business activities
2.1.2.1 Definition of nonlife insurance enterprises
Nonlife insurance enterprise is a type of enterprise that specializes in providing insurance products to ensure risks related to property, civil liability and health, life, and human ability to work.
2.1.2.2. Business characteristics of nonlife insurance enterprises
Nonlife insurers have a reverse business cycle, so there are many risks
In nonlife insurers, there is always a close correlation between risk and capital
Nonlife insurers must set up operational reserves to ensure future commitments with the insured
Investment is an important activity that is indispensable in the business of nonlife insurance businesses
Trang 9* Original insurance business activity: It is a continuous process from the
exploitation stage (including product design, risk assessment to accepting customers' insurance claims, issuing insurance policies, collecting insurance fees, monitoring the process of implementing insurance contracts until the stage of loss assessment and insurance compensation settlement
* Reinsurance business activities: Reinsurance business is a business activity
based on risk sharing between insurers on the basis of original insurance contracts
* Investment activities: With business characteristics that are prepaid and post
paid compensation, nonlife insurers have an amount of idle capital to bring investment back to the economy. In fact, the idle capital to invest in nonlife insurers is the liabilities
to implement the compensation commitment of insurers for the insured in the future.2.2 State management of business activities of nonlife insurance enterprises
2.2.1 Definition of state management for business activities of nonlife insurance enterprises
2.2.1.1 The concept of state management for business activities of nonlife insurance enterprises
State management of business activities in nonlife insurance enterprises is the entire management activities of the state from promulgating and implementing policies and inspecting and supervising business activities of nonlife insurers by management method to ensure business activities of nonlife insurers take place according to management objectives
2.2.1.2 Objectives of state management for business activities of nonlife insurance enterprises
Protecting the benefits for insured participants (consumers)
Maintaining the financial ability of insurance businesses to develop healthy insurance business activities
Promoting the sustainable development of nonlife insurance businesses, serving the common interests of the economy
Trang 10The management agencies develop a longterm development strategy along with specifying strategies into business development plans of nonlife insurers in accordance with the orientation and objectives of the State This is the basis for building and promulgating legal policies for the operation of nonlife insurers on the following aspects: (i) On administrative and human resource organizations; (ii) Financially; (iii) About business process; (iv) Other.
2.2.2.2 Model selection and stage management apparatus organization for nonlife insurer business activities
* State management system on business activities in the field of insurance is divided into 3 forms: published management system model; norms management system model; comprehensive system model
* Organization of state management apparatus for business activities of nonlife insurance enterprises is a mechanism to coordinate activities between state management agencies from policy making, institutional building to implementing. and checking and supervising and handling violations Regulatory bodies may be directly under the Government; The state bank may be an independent agency
2.2.2.3 Inspection, supervision and handling of violations of business activities of non life insurance enterprises
This is the management content including: Remote monitoring; Onsite inspection and examination; Sanctions against violations of nonlife insurers business activities. Remote monitoring is mainly implemented by management agencies through regulating the reporting regime from enterprises to collect information and onsite inspection and examination is the selection of some insurers to directly check the books, documents and related files at a reasonable time. From the results of inspection and supervision, it will detect the violations of law so that management agencies can take timely measures (administrative handling or criminal handling) in order to ensure the interests of participating parties, healthy financial markets and increase the effectiveness of state management
2.3 Evaluation criteria and factors affecting state management for business activities
of nonlife insurance enterprises
2.3.1 Criteria for assessing state management activities for business activities of non life insurance enterprises
2.3.1.1 Validity of state management activities
It is the criterion for assessing the ability of the State to influence the business operation of nonlife insurers and the observance of nonlife insurers as management objects. Expression of validity is the performance of administrative regulations, a way of
Trang 112.3.1.2 Effectiveness of state management activities
It is the criterion for assessing the level of minimizing the total input cost for an output unit (or maximizing the number of outputs corresponding to the total input cost determined). The effectiveness of state management generally reflects labor productivity and efficiency of the apparatus's use. High efficiency of state management when state management activities achieve the set objectives with the lowest cost or state management achieve the highest results with a certain cost of resources
2.3.1.3 Relevance of state management activities
It is a criterion for evaluating the appropriateness and feasibility of state management activities for business activities of nonlife insurers in terms of policies, implementation and supervision in socioeconomic conditions
2.3.1.4 Sustainability of state management activities
Criteria for assessing the level of sustainable impacts over time of state management results for business activities of nonlife insurers It is a system of sustainable, effective and fair management ways to meet the development needs of nonlife insurance businesses, ensuring the safety for the people, contributing to the socioeconomic development of the country
2.3.2 Factors affecting the State management of business activities of nonlife insurance enterprises
The sense of law observance of nonlife insurance enterprises
Professional qualifications of staff performing business activities in nonlife insurance businesses
Trang 122.4.2 Lessons learned for Vietnam
Firstly, to formulate policies and issue legal documents on business activities of
nonlife insurers: (i) issue regulations for types of insurers allowed to operate; (ii) Requirements on standards for executives of insurers; (iii) Infrastructure development policy for business activities of nonlife insurers
CHAPTER 3
Trang 13SITUATION OF BISINESS AND STATE MANAGEMENT FOR BUSINESS ACTIVITIES OF NON – LIFE INSURANCE ENTERPRISES IN VIETNAM3.1 Overview of nonlife insurance market and business of nonlife insurers in Vietnam
3.1.1 Overview of the nonlife insurance market in Vietnam
In this section, the thesis presents: The birth and development of the nonlife insurance market in Vietnam; The number of companies, business networks and financial capacity of nonlife insurers in Vietnam
3.1.2 Business status of nonlife insurance enterprises in Vietnam
Based on the secondary information sources collected in the period of 2010 2017, the thesis describes the business situation of nonlife insurers through the situation: Premium collection; Assurance compensation; Professional provisions and investment activities of nonlife insurers throughout the market in Vietnam
Limited application of information technology in insurance business of nonlife insurers3.2 Situation of state management for the business of nonlife insurance enterprises in Vietnam