Insurance - Solution to prevent risks and promote economic growth

Developing a strong insurance market not only helps protect individuals and businesses from unexpected losses, but also creates new impetus for economic development.

This is the content mentioned by many delegates at the seminar "Insurance - Solution to prevent risks and promote economic growth" organized by the People's Representative Newspaper on October 17, in Hanoi .

Solutions to promote economic growth

Speaking at the seminar, Editor-in-Chief of the People's Representative Newspaper Pham Thi Thanh Huyen stated that this is a topical and strategic topic, not only for the insurance industry but also for the entire economy.

“Insurance not only protects financial resources, but also acts as an important source of capital for investment activities. When insurance companies collect premiums from participants, they accumulate huge funds and can reinvest in other areas of the economy. As a result, insurance contributes to providing capital for economic development projects, infrastructure and production and business activities, thereby promoting growth,” Ms. Pham Thi Thanh Huyen emphasized.

According to Editor-in-Chief Pham Thi Thanh Huyen, insurance is not only a tool for risk prevention but also an important driving force for economic growth. When insurance operates effectively, the economy will benefit from financial stability and long-term capital sources from insurance funds. Especially in periods of rapid economic development, the role of insurance becomes even more important.

“An economy where businesses can maintain continuous and stable operations will be a favorable condition to promote investment, expand production and increase product value,” Ms. Huyen stated.

Appreciating the role of the insurance industry, Mr. Nguyen Anh Tuan, Vice President of the Vietnam Insurance Association, also said that the insurance industry contributes to promoting economic growth, because the amount of money reinvested in the economic development of the insurance industry, both life insurance and non-life insurance, in 2023 is about 757,000 billion VND. In 2023, the Vietnamese life insurance industry paid compensation of 24,000 billion VND. Insurance still pays compensation for damages that occur every year. If the non-life insurance sector is included, the amount of compensation paid in 2023 is 84,000 billion VND - not a small number.

Shield of prevention, risk reduction

Typhoon No. 3 ( Yagi ) has left behind heavy damage to people and property in our country. Faced with this reality, insurance companies have promptly reviewed and paid insurance benefits to affected customers, promptly supporting people and businesses.

Mr. Pham Van Duc spoke at the seminar.

Mr. Pham Van Duc, Deputy Director of the Insurance Supervision and Management Department (Ministry of Finance) said that according to reports from insurance companies, as of October 16, the estimated damage was up to 12,811 billion VND, mainly technical property and motor vehicle insurance accounting for 96%. The total damage caused by Typhoon Yagi was more than 80,000 billion VND. If the total damage value is calculated, the insurance participation value falls to 17% of the damage.

This once again proves that insurance is truly an effective risk prevention solution, helping people and businesses reduce difficulties and recover quickly after encountering risks; thereby making an important contribution to ensuring social security and promoting economic growth.

However, looking at the insurance participation rate also shows that "the number of people with insurance is very small", Mr. Nguyen Anh Tuan, Vice President of the Vietnam Insurance Association, commented. Looking at countries around the world, recently, Hurricane Milton made landfall in the US, causing an estimated loss of about 170 billion USD. The insurance rate in the US is very high, with an insured value of 125 billion USD. In Vietnam, the insurance rate is only about 17%, while in the US the insurance rate is 71%.

Giving this comparative figure, Mr. Tuan said that Vietnam is in the low group of countries in terms of insurance rates. “Currently, the resources of Vietnamese insurance companies are still young. The total capital of Vietnamese insurance companies in 2023 is about 190,000 billion VND, showing that the development of Vietnam's insurance industry is still not as expected and not commensurate with its potential,” Mr. Tuan shared.

Referring to some remaining obstacles, Mr. Nguyen Hong Phong, General Director of Agribank Insurance, said: Since July 1, 2024, when the amended Law on Credit Institutions takes effect, the operation of the insurance distribution channel through banks (bancassurance) has undergone important changes, with a clear impact on the business results of insurance companies. However, Clause 5, Article 15 of the Law on Credit Institutions (amended) which took effect from July 1, prohibits linking the sale of non-mandatory insurance products with the provision of banking products and services in any form.

“The regulation prohibiting the sale of non-compulsory insurance products from being linked to the provision of banking products and services in any form is unclear, causing inconsistent understanding,” Mr. Hong Phong acknowledged.

General Director of Agribank Insurance Nguyen Hong Phong spoke at the seminar.

Also according to Mr. Nguyen Hong Phong, in order to facilitate the distribution of insurance through banks in the context of implementing the Law on Credit Institutions in 2024, Mr. Phong recommended that there should be a document soon clarifying the provisions of the Law on Credit Institutions in Article 15, Clause 5 "prohibiting the sale of non-mandatory insurance products with the provision of banking products and services in any form" so that credit institutions are allowed to provide a financial package for the agricultural sector including banking products combined with risk insurance products (mandatory according to the Law or mandatory according to the bank's regulations to protect loans).

Along with that, the State Bank of Vietnam and the Government have a policy mechanism for credit institutions to consider risk insurance contracts (especially natural disaster risks) as an additional condition to ensure eligibility for loans and to increase the limit of cheap loans from commercial banks, at the same time, the insurance premium is also lent by the bank according to the loan term...

Source: https://nhandan.vn/bao-hiem-giai-phap-phong-ngua-rui-ro-va-thuc-day-tang-truong-kinh-te-post837205.html