A study on micro–insurance at Viet Nam Agricultural bank insurance joint stock company and suggest the development for micro-insurance in Viet Nam

ĐẠI HỌC QUỐC GIA HÀ NỘI

LUẬN VĂN THẠC SĨ
Chuyên ngành: Quản trị tài chính

Đề tài:
NGHIÊN CỨU MƠ HÌNH TRIỂN KHAI BẢO HIỂM VI MÔ TẠI CÔNG TY
CỔ PHẦN BẢO HIỂM NGÂN HÀNG NÔNG NGHIỆP VIỆT NAM VÀ GỢI
Ý PHÁT TRIỂN BẢO HIỂM VI MÔ TẠI VIỆT NAM

HVTH: Hoang Dieu Quang Minh
MSHV: 18075006
GVHD: TS. Nguyen Thi Hai Duong

HANOI, 2022


VIETNAM NATIONAL UNIVERSITY, HANOI

MASTER THESIS
Major: Financial Management

Topic:
A STUDY ON MICROINSURANCE AT VIETNAM AGRICULTURAL
BANK INSURANCE JOINT STOCK COMPANY AND SUGGEST THE
DEVELOPMENT FOR MICROINSURANCE IN VIETNAM

Graduate Student: Hoang Dieu Quang Minh
Student code: 18075006
Supervisor: Dr. Nguyen Thi Hai Duong

HANOI, 2022


ABSTRACT

Currently, insurance is a rather hot field in modern life when people have a
high standard of living and high requirements in protecting themselves and their
properties. However, is this type of product only for the rich and the poor do not
have the opportunity to access? Agriculture Bank Insurance Joint – Stock (ABIC) is
considered as one of the leading insurance service providers in the Vietnamese
insurance market in general and the low-income people market in Vietnam in
particular. And this topic refers to the deployment model of micro-insurance for
low-income people of ABIC. The author used secondary information to make clear
about business risk management of the company. Although the company has
achieved lots of success in insurance business as well as risk management of
insurance, it still exists limitations and challenges that require the company to
recover. Thus, this research also recommends methods and solutions for both ABIC
and the State and Regulatory Agencies at aim to make risk management in
insurance field better.


ACKNOWLEDGEMENT

I sincerely express my gratitude to all the teachers in the International
Department and the Graduate School of Hanoi National University for dedicatedly
imparting valuable knowledge as well as creating all the most favorable conditions
for during your studies and research until your dissertation project. Sincerely thank
the Vietnam Insurance Association, the Insurance Company of the Agricultural
Bank of Vietnam - ABIC for helping me a lot in collecting data, capturing some
information on social security fields. of the company.

In addition, I would like to express my great appreciation to my advisor, Dr.
Nguyen Thi Hai Duong, Head of Insurance Economic Department, Faculty of
Insurance, National Economics University - who directly guided and advised me
during the time of this research topic.
Despite trying very hard in the process of researching the topic, but with limited
personal capacity, the thesis cannot avoid its shortcomings. Therefore, I would like
to receive comments from teachers, brothers and sisters who have the same interest
in my research topic to help me to be more complete as well as make dark solutions.
advantages in the process of promoting the macro insurance sector in Vietnam.
Thank you sincerely!
HaNoi, June 25th, 2022


TABLE OF CONTENTS

ABSTRACT
ACKNOWLEDGEMENT
TABLE OF CONTENTS
LIST OF TABLE
LIST OF FIGURE
INTRODUCTION ............................................................................................................. 1
CHAPTER 1. THEORITITCAL FRAMEWORK OF MICROINSURANCE .......... 5
1.1. Overview of micro insurance ................................................................................. 5
1.1.1. Dedinition and characteristics of micro insurance .....................................5
1.1.2. The role of micro insurance .......................................................................9
1.2. Micro insurance products and deployment model ............................................ 12
1.2.1. Products of micro insurance .....................................................................12
1.2.2. Micro insurance distribution ....................................................................16
1.2.3. Micro insurance implementation models .................................................17
1.3. Factors affecting the micro insurance market ................................................... 17

1.4. Experience in implementing micro insurance in the world .............................. 18
1.4.1. Microinssurance in Countries ..................................................................19
1.4.2. Experience for Vietnam ................................................................................... 29
CHAPTER 2: MICROINSURANCE DEVELOPMENT AT VIETNAM
AGRICULTURAL BANK INSURANCE JOINT STOCK COMPANY .................. 31
2.1. Introduction to Vietnam Agricultural Bank Insurance Joint Stock
Company ....................................................................................................................... 31
2.1.1. History and Development ........................................................................31
2.1.2. Organizational structure ...........................................................................33
2.1.3. Operations and Products ..........................................................................38
2.1.4. Business performance of ABIC (2016 - 2020) ........................................40
2.2. Microinsurance in Vietnam ................................................................................. 44


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2.2.1. Overview of Microinsurance in Vietnam.................................................44
2.2.2. Models of implementation of Microinsurance in Vietnam ......................46
2.3. The current situation of microinsurance development in ABIC ..................... 47
2.3.1. ABIC's microinsurance product ...............................................................47
2.3.2. ABIC's micro insurance client .................................................................52
2.3.3. Deployment model of ABIC insurance ....................................................53
2.4. Assessing of micro insurance performance results at ABIC ............................ 55
2.4.1. Achievement ............................................................................................55
2.4.2. Existences and Reasons of Existences .....................................................59
CHAPTER 3: SOLUTIONS TO DEVELOP MICROINSURANCE AT
VIETNAM

AGRICULTURAL

BANK

INSURANCE

JOINT

STOCK

COMPANY AND RECOMMENDATIONS FOR DEVELOPMENT OF
MICROINSURANCE IN VIETNAM ........................................................................... 61
3.1. Factors effect to Microinsurance Development ................................................. 61
3.2. Solutions to Develop Microinsurance at ABIC .................................................. 64
3.2.1. Improve service quality ............................................................................64
3.2.2. Diversify micro-insurance products .........................................................65
3.2.3. Choosing the direction and scope of business .........................................65
3.2.4.Choose a business strategy ........................................................................66
3.3. Recommendations for development of microinsurance in vietnam ................ 67
3.3.1. Constructing the legal framework for microinsurance operation ............67
3.3.2. Educate farmers about the importance of microinsurance .......................68
3.3.3. Diversify Suppliers...................................................................................68
CONCLUSION ................................................................................................................ 73
REFERENCE .................................................................................................................. 74

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LIST OF TABLE

Table 2.1. ABIC’s Recurring ROE (2016-2020) ......................................................41
Table 2.2. ABIC’s Recurring income and Recurring ROE (2016-2020) .................42
Table 2.3. ABIC’s One-time ROE (2016-2020) .......................................................43
Table 2.4. ABIC’s One-time ROE Growth (2016-2020) ..........................................43
Table 2.5. ABIC Annual BATD’s Premium Rate Schedule .....................................51
Table 2.6: ABIC Credit Security Insurance’s Short-term Premiums .......................51
Table 2.7: ABIC's Long-Term Credit Security Insurance’s Premium Rate .............51
Table 2.8. ABIC’s agent (20-2020) ..........................................................................56
Table 2.9. ABIC's credit security inssurance product business results .....................57
Table 2.10. Premium Revenue of ABIC's Credit Security Inssurance .....................58

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LIST OF FIGURES

Figure 1.1: Model of micro insurance implementation in Japan ..............................25
Figure 2.1. ABIC’s General Structure ......................................................................33
Figure 2.2. ABIC’s Headquarters Structure ..............................................................36
Figure 2.3. ABIC’s ROE (2016-2020) ......................................................................41
Figure 3.1: Distribution channel model Partners – Agents .......................................71

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INTRODUCTION

1. Rationals
The country reform has brought about many important economic and social
achievements, including the consolidation and improvement of the social security
policy system. Social security is to contribute to ensuring income and life for
citizens in society when they unfortunately encounter "social risks" or "social
events" that lead to stop or decrease in income. The aim is to create a stable life for
all members of society and therefore, it is deeply social and human. This is also the
ideology towards prosperity and happiness for everyone in society.
Each person in society from different social status, different race, different
religion are manifestations of a social value system. As a citizen, they must be
guaranteed in all aspects to fully develop their abilities, regardless of social status,
race, religion ... Social security helps the unfortunate the less fortunate people have
more conditions and supports necessary to overcome the "events" and "risks",
helping them have opportunities to develop and integrate into the community.
Since time began, Vietnam have been determined to develop a social security
system to ensure the better realization of the people's basic rights. Social security
policy has many forms, including "Micro Insurance". Micro insurance plays an
important role in ensuring social security, contributing to poverty reduction,
including insurance products designed and offered to the poor, the low-income and
the disadvantaged in social.
Not only seen as an effective tool to "protect" the poor, micro insurance also
contributes to improving understanding of the need for insurance in the low-income
and middle-income communities in rural areas. It can be said that micro insurance
brings knowledge about finance insurance or simply helps poor people to have the
habit of accumulating finance. In other words, micro insurance is a type of product
that offers safe protection and ensures the poor to avoid risks and damages. The
benefits of financial services for the poor are widely recognized and microfinance

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projects are top concern in developing countries. Meanwhile, micro insurance - the
type of insurance for the poor - that has the potential to significantly support
millions of the poor and weak in society, receive limited attention. The poor can
face big financial trouble when unexpected risks come to them. A poor person's
wealth may be limited to a few animals or plants and a modest place to live, but
destroying any of these can be a blow to their family's economy. Therefore, even a
small insurance premium can guarantee protection, peace of mind, even dignity for
the poor. However, from the insurers' point of view, the small sum insured means
small premiums and low profit margins, leading to many businesses not being too
eager for this type of insurance. In that regard, micro insurance must be well
managed, cost-effective and distributed on a large scale in order to bring both
benefits to the poor and insurance providers. This is not a simple problem.
So far, Agriculture Bank Insurance Joint Stock Corporation (ABIC) is the
most successful company that provide micro-insurance in Vietnam with very
respectable numbers. For Vietnam to make great strides on poverty reduction,
bringing insurance products closer to the poor, Vietnam urgently needs businesses
and organizations like ABIC. What model did ABIC operate on to receive such
success? This essay is enthusiastic research that stems from the desire to contribute
a part of strength in the cause of poverty reduction, bringing the poor and difficult
access to better values.
From that importance and meaning, along with the knowledge learned at the
school and my choice, I choose the topic: “A study on micro insurance at ABIC and
suggest the development for micro insurance in Vietnam”. Realizing that this is an
important and highly applicable study, the topic has studied the systematization of

the theoretical basis of microinsurance in general and the assessment of the current
situation of micro insurance operations, give solutions to push up micro insurance
in ABIC in pacticular, micro insurance in Vietnam in general.
2. Objectives of the research
- General Objective:

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Micro insurance is still not popular in Vietnam, so that the general objective of
the thesis focuses on researching theoretical issues of micro insurance such as
definition, characteristics, roles, types of micro insurance; assessing current
situation, difficulties, and opportunities of micro insurance development at ABIC;
and propose solutions to develop micro insurance in ABIC, in Vietnam in general.
- Detail Objectives:
To make clear the general objective, the thesis will be concentrated on the
follow detail objectives:
 Synthetize and systemize theoretical issues of micro insurance.
 Analyzing the current situation of micro insurance at ABIC, to point out the
advantage and disadvantage, micro insurance development process at ABIC.
 Assessing potentials and challenges in implementing micro insurance at
ABIC in the next future and propose solutions for development this one at ABIC.
 Recommendation to develop micro insurance in Vietnam.
3. Subject and Scope of the Research
- Subject of the research
The object of the thesis is the theory and practice of microinsurance, focusing

on product development, distribution channel network, and customer market
development.
- Scope of the research
The scope of the thesis is determined in terms of space and time. The scope of
research in the space focuses mainly on the development of microinsurance at
ABIC. The scope of research in term of time focuses on the period 2017-2020.
4. Research Methods
To clarify the research objectives, the thesis uses methods of synthesis,
statistical analysis, comparative analysis to analyze each content through
information and aggregated data to give out the comments, reviews.

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The data used in the study are secondary data collected from annual reports of
ABIC, data from the statistical yearbook of the Insurance Supervisory Authority
(ISA), the Market news of Vietnam Insurance Association (VIA).
5. Thesis structure
Structure of the thesis includes three chapters:
Chapter 1. Theoretical Framework of Microinsurance
Chapter 2. Microinsurance Development Model at Vietnam Agricultural Bank
Insurance Joint Stock Company
Chapter 3. Solutions to Develop Microinsurance at Vietnam Agricultural Bank
Insurance Joint Stock Company and Recommendations for Development of
Microinssurance in Vietnam

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CHAPTER 1. THEORITITCAL FRAMEWORK OF
MICROINSURANCE
1.1. Overview of micro insurance
1.1.1. Dedinition and characteristics of micro insurance
1.1.1.1. Definition
Until now, insurance is a kind of product that can be said to be essential in
people's thinking about business as well as life in general in developed countries
because it is a protection for risks what are unexpected things may happen in the
future. The insurance business is developing relatively strongly with high growth.
Insurance is formed because of the existence of risks and the need for people to
have preventive measures for the uncertainties that will happen, and also to
overcome and limit the consequences that the risks. It can be seen that the idea of
insurance was born very early, when people were aware of the need to store food to
prevent accidents such as loss, drought, and war. Insurance industry initially came
from insurance products for the marine industry, followed by the proliferation of
fire insurance, life insurance ... In everyday life as well as in business activities,
every individual, organ or business often encounters unexpected problems that no
one can foresee. Such risks can affect people, property and human responsibility.
Risks often lead to financial loss. And insurance is born to manage those risks,
which is a method to protect individuals or businesses against accidental financial
losses, lives, occupational accidents, traffic ... Insurance helps transfer risks, spread
losses, and minimize losses. Insurance also stabilizes costs, helps insurance buyers
feel secure and stimulates savings. So, the role of insurance is extremely important

in life, as a lifeline when you are in trouble.
Naturally, insurance is a "future" product, it seems only for the rich. Lowincome people almost never think of insurance because they consider it is luxury
thing. Therefore, the poor, the low-income people become more and more stuck
when they suddenly encounter accidents when they do not have protection from
insurance. This leads to serious economic disparities among the population classes

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as well as hindering national economic growth or many other consequences that
come with it. Realizing this serious problem, since the 1990s, the International
Labor Organization began experimenting with super-low-cost insurance policies
that started out as a form of charity. Micro insurance campaigns are born from here.
Micro-insurance is a massive development of microfinance projects developed
by the banker and Nobel Prize-winning Bangladeshi economist Muhammad Yunus,
which has helped millions of low-income people in Europe. Asia and Africa set up
businesses and buy houses.
American International Group Inc (AIG) was one of the earliest companies to
offer micro insurance and started selling policy in Uganda in 1997. Micro-insurance
soon was joined by other major insurance companies including Swiss Re, Munich
Re, Allianz and Zurich Financial Services. Today, many innovative micro insurance
products have been developed to protect poor workers from the financial impact of
losses.
Micro-insurance Network is a global non-profit organization comprising
specialists in the microfinance sector, comprising 80 institutional members from
more than 40 countries, committed to promote the development and offers a wide

range of insurance services for low-income people.
Micro Insurance is often distributed in cooperation with microfinance
institutions, rural banks, economic organizations, and humanitarian organizations
that provide non-financial services. Insured crops and livestock can be used as
collateral for loans to buy better equipment or improve farmers' productivity,
ultimately improving living standards.
With limited growth prospects in developed countries' insurance markets,
insurance companies see emerging economies with the potential to grow and deliver
more attractive returns. So far, the growth of insurance premiums in developing
countries has outstripped growth in industrialized countries. Swiss Re identifies
emerging markets as countries in South and East Asia, Latin America and the

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Caribbean, Central and Eastern Europe, Africa, the Middle East (excluding Israel),
Central Asia and Turkey.
With limited growth prospects in developed countries' insurance markets,
insurance companies see emerging economies with the potential to grow and deliver
more attractive returns. So far, the growth of insurance premiums in developing
countries has outstripped growth in industrialized countries Swiss Re reinsurance
group identifies emerging markets as countries in South and East Asia, Latin
America and the Caribbean, Central and Eastern Europe, Africa, the Middle East
(excluding Israel), Central Asia and Turkey.
1.1.1.2. Characteristics of micro insurance
Micro insurance is not quite the same as ordinary commercial insurance

because micro insurance are risk reduction and allocation products related to costs,
terms, level of support and distribution channel are designed appropriately for lowincome clients and often covers a wide range of areas, from life and healthcare to
weather, property, crops, livestock, and natural disasters. Target groups are farmers
and rural areas, people who have low incomes.
There are quite a few perspectives and views on micro insurance from the
features, processes, prices, and targets such as:
+ According to the International Association of State Management Agencies
on Insurance Business (IAIS), Micro Insurance is a type of insurance for lowincome people provided by many organizations but complying with the general
principles of insurance.
+ According to Craig Churchill (2006, 2013) “Micro insurance is a type of
insurance that protects low-income people from changing risks in return they have
to pay a fee for each type of risk that they take part in”.
+ Like Chuchill, insurance company ALLIANZ AG, GTZ and UNDP (2006)
points out that “micro insurance is specifically designed to protect low-income
people, with suitable insurance products to help them cope and protected from
common risks”.

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According to the synthesis of the IAIS (International Association of Insurance
Supervisories), micro insurance has the same financial and professional regulations
with ordinary insurance. However, micro-insurance is created to support individuals
or households with small amounts of savings and low income, so the products of
this type of insurance are designed with low-value assets and protect the insured
against risks such as illness, injury, or death so it will still have the following

distinct properties:
The contract is simple, easy to understand (rules and terms of insurance must
be simple, easy to understand, with almost no exclusion of insurance, automatic
acceptance (no appraisal).
 Simple, narrow coverage.
 The premium payment period is regulated to meet customer needs.
 The insurance period depends on the loan period or by year.
 Small amount insured, low premium. It does not depend on the insured
person's age, gender or occupation.
 Small target market, limited financial capacity, almost no access to
insurance services.
 In addition, as a micro insurance distribution partner for insurance
businesses, microfinance institutions, credit unions, cooperatives, and community
organizations, it is not necessary to be an insurance agent.
Basically, to be considered as "micro insurance", an insurance product must
meet 4 characteristics:
 Products must serve groups of people, industries, and vulnerable and
vulnerable areas;
 Low cost;
 Convenient and simple insurance payment procedure;
 The interest rate on the product is relatively low, in line with the cost
spent.

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1.1.2. The role of micro insurance
The value of the benefits of microfinance activities is beyond argument.
However, one of the modes of operation of the microfinance model is microinsurance is still a new concept that many people do not know about because of the
common ways of thinking like “they do not need demand for insurance”; "Unable to
provide commercial insurance to the poor because they are too poor to pay for
insurance"; "Do not want to spend a sum of money to buy something that has not
necessarily happened" ...Because of these thoughts, micro insurance is still not the
option of poverty alleviation that the poor seek.
In general, micro-insurance has the same basic roles as other insurance
products.
First, we discuss the economic role that micro-insurance offers:
 Micro insurance contributes to financial stability of individual person and
households participating in insurance.
Insurance companies in the market offer insurance services to meet the need to
ensure financial safety and stability when insurance events occur. This service aims
to create financial resources for individual person and households bought insurance
to stabilize their business and life when they encounter risks.
In fact, the compensation or insurance payment has helped socio-economic
organizations to preserve their assets and capital sources; individual person and
families have overcome financial difficulties, do not fall into material and spiritual
exhaustion. Thereby, insurance has contributed to ensuring the stable development
of the economy.
 Micro insurance acts as a financial intermediary, mobilizing capital and
meeting capital needs for the economy.
Insurance enterprises attract and concentrate idle capital, convert capital and
invest capital.
Insurance regulates the capital supply and demand for the economy. Insurance
complies with the "reverse business" cycle. Characteristics of insurance business is

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that the premium collected first, the compensation, the insurance payout arises later,
so the monetary fund formed from the insurance premiums is mostly temporarily
idle. Therefore, insurance companies can use that idle capital to invest and meet
capital needs for the economy.
 Share losses
Insurance is used to share the financial losses of a few to a large number of
people. This is a very important effect of insurance. When most people participate
in insurance, not all participants are exposed to the risk of loss, only a few of them
are unfortunately at risk. Therefore, through a small contribution, the insured is not
only protected against financial losses (if any) but also contributes to support and
help other unfortunate people. This effect clearly demonstrates the principle of
taking the majority to compensate the singular and the principle of reciprocity.
 Micro insurance contributes to stabilize the State budget
By virtue of the insurance services provided by the insurance market, the State
budget has significantly reduced budget amounts such as subsidies due to natural
disasters and unexpected accidents.
At the same time, the state budget is enhanced due to contributions from such
amounts as value added tax, corporate income tax of insurance companies ...
Following are the prominent social role of micro-insurance as follows:
 Micro insurance contributes to avoid risks, limit losses, ensure safety for
the socio-economy.
The insurance profession requires insurance organizations to be responsible
for researching risks, making statistics on accidents and losses, identifying causes,
setting out and coordinating with relevant industries to implement control measures,

prevent risks, minimize losses.
Every year, insurance companies spend a certain amount of money to carry
out prevention work to limit losses.
 Micro insurance creates a life of savings and brings a state of mental safety
to society.

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The micro insurance market with diversified types of insurance products,
especially the life insurance sector in the micro insurance field will create a flexible
form of savings, affecting the thinking of individuals, households. They have to
think, calculate and gradually develop a sense and habit of spending a portion of
their income to pay premiums with the aim of having a safer future.
In addition, beyond the meaning of money, insurance in general and micro
insurance bring a state of mental safety, reducing anxiety about risks and
uncertainties for the insured. Future risks are something that we humans cannot
foresee. Natural risks such as storms, floods, droughts, tsunamis, epidemics ... are
becoming very complicated. Even the risks caused by the people themselves such as
war, terrorism, ... can happen at any time. Therefore, participating in micro
insurance, the insured has transferred his risk to the insurance company, so he has
released fears and worries about possible losses, contributing to positive psychology
in thought, peace of mind to work, and live. That is the humanistic meaning of
insurance in modern society and shows a good image of the insurers before the
public.
Not only that, but the special roles also that have the characteristics of micro

insurance that other insurers cannot have are:
 Micro insurance provides the poor and low-income households the means
to protect themselves against the effects of risk.
 As a tool to expand social security and contribute to poverty reduction. The
experience of the world shows that implementation of insurance is one of the core
policies in the policies to improve and enhance the lives of low-income people.
 Micro insurance plays a significant part in strengthening microfinance
institutions. The provision of micro-insurance products enhances the image of the
organization; making members feel that this is a reliable organization, always
protecting members against any possibility of loss, attracting more new members ...
Micro-insurance also brings valuable opportunities for the private insurance

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company aims to support a large portion of customers who are not well served but
still generate profits.
1.2. Micro insurance products and deployment model
1.2.1. Products of micro insurance
The nature of micro insurance is to provide insurance for individuals who do
not have retirement savings or for adults in low-income households who are
disadvantaged in society. As a result, micro-insurance products are designed to
compensate for illness, injury or death, and lower value assets. Micro-insurance,
like any other type of insurance, was created to cover a wide range of risks. These
include health risks (illness, injury, and death) and property risk (damage or loss).
Micro insurance products include crop and pet / livestock insurance, theft or fire

insurance, health insurance, term life insurance, and term life insurance, disability
insurance and natural disaster insurance. More specifically, according to the
statistics of the IAIS, the main micro-insurance products in the world today include:
- Micro term insurance: mainly term insurance associated with credit loans of
the poor. In some cases, micro-mixed insurance products are also offered.
- Micro-health insurance: mainly insurance products that cover hospitalization
benefits, medical examination benefits, sickness benefits, and maternity benefits.
- Micro-injury insurance: death insurance due to accident with bodily injury
benefit.
- Microfinance insurance: property insurance for households, but also rarely
implemented.
- Agricultural insurance micro: seasonal insurance according to weather index.
- Micro-catastrophic insurance: pay when natural disasters occur.
- Micro package insurance: combine life insurance, health insurance and
property insurance in one micro insurance policy.
Specially, micro-insurance is present in the following types:
 Life micro insurance products

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Micro insurance's life insurance products are mainly traditional and simple life
insurance products. According to Micro Insurance Center Micro Insurance's 100
poorest countries global coverage, life insurance products are most offered in micro
insurance and focus on credit life insurance. Credit Life Insurance covers the
outstanding (possibly plus lost interest) of the loan in the event of a borrower's

death. This type of insurance reduces some of the risks for the creditors, but the
value for the living depend on it is minimal. In essence, this product protects
microfinance institutions and credit institutions. Currently this product line accounts
for 60% of micro-life insurance products in poor countries.
Term insurance (term life insurance): is a simple and very popular life
insurance product in micro insurance. Insurance products for the event of death of
one or more household members. This product is simple in terms of pricing and risk
management, but the biggest challenge for product development is the delivery and
minimization of costs.
Long-term life insurance products: including mixed life insurance, pension
insurance (old - age pension) and life insurance. These are products that are rarely
distributed but there are still a few organizations or insurance businesses combined
with organizations trying to grow. The challenge to the development of this product
line lies in the distribution channel, unstable macroeconomic conditions and high
inflation in poor countries, and low income for the target group of micro insurance.
In addition, a few additional terms are also designed to increase the scope and
scale of protection for major insurance products such as:
- Extra benefit insurance: A type of term life insurance that is available to the
borrower and corresponds to the term of the loan. If the borrower dies during the
loan term, the beneficiary will receive a fixed payment to cover funeral costs and
other expenses. The term “extra benefit” is used because it is sold with credit life
and credit disability insurance.

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- Additional life insurance: Always sold with a "supplemental benefit"
product. This type of term life policy further covers some other family members.
The insurance term also corresponds to the loan term.
- Continuation insurance: This type of policy with a term and monthly renewal
is a continuation of an additional benefit policy. Clients of a microfinance
institution can purchase this product at the end of the loan term if they wish to be
insured and do not want to borrow another loan.
 Medical and health expense insurance
Medical and wellness cost insurance is the category in greatest demand in
micro insurance services. Health risks are one of the keys to poverty. Health
problems are often the cause of income loss due to treatment costs and a shortage of
breadwinner in the family.
Medical and health cost insurance products include many types:
- Insurance to support medical expenses for the poor
Health insurance has several specific features based on which it is possible to
distinguish health insurance from some other types of insurance such as life
insurance and property insurance. Health insurance in micro-insurance basically
provides limited protection when the insured uses medical services (Insurers only
support a certain amount and usually limits the number of times paid for one year of
coverage).
Injury Insurance: The sum insured is paid in accordance with the set amount
when the risks occur, including medical expenses, injury, or death.
- Accident and incapacity insurance: Payment amount depends on the case of
temporary or long-term incapacity. This product is often associated with
microcredit and mainly protects creditors. Overall this product is still a new product
compared to the currently deployed micro insurance products.
Products that support a portion of the costs incurred or pay a set amount for
each risky event. The most difficult issue for health and cost insurance lies in the

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size of the number of people insured. If the number of insured is too low, effective
loss distribution cannot be ensured.
 Property insurance products
- Agricultural insurance:
An insurance product for crop and livestock productivity that farmers or
fishermen can use to protect their crops from natural disasters, epidemics, pests ...
This is the type of product Micro insurance faces the most difficulties in product
design as well as risk management measures due to cumulative and widespread
risks and complex technical foundations.
- Household insurance product package
This is a comprehensive insurance product for households that includes health
insurance and property insurance. This package is designed with affordable price
and be cheaper than other single insurance products. When the poor use this
package, they will not have to worry about the risks happening to their health and
possessions. The insurance products in this insurance package include injury or
death due to accident, illness; insurance for all property risks for the house ...
According to the Micro Insurance Center's investigation on micro-insurance in
developing countries, micro-insurance products are being deployed in countries
with a focus on design towards some of the priority risks:
- Urganda: insurance for risks of illness, death, incapacity, loss of property,
risks of loans.
- Malawi: insurance for death risk (especially related to HIV/AIDS), crop
failure, illness, education.
- Philippines: insurance for death, old age, sickness.

- Vietnam: insurance for risks of illness, natural disasters, accidents, illness /
death of livestock.
- Indonesia: insurance for sickness risks, children's education expenses, crop
failure.
- Laos provides insurance for sickness, disease of livestock, risk of death.

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1.2.2. Micro insurance distribution
Providing and distributing micro insurance is challenging business.
Distribution channels are very important in bringing insurance products to
customers. Micro insurance distribution channels are basically the same as
conventional insurance distribution channels, including direct distribution channels,
intermediary channels such as agents or brokers.
However, the distribution of micro-insurance will face more difficulties when
distributing ordinary insurance because the target market of micro-insurance is lowincome customers, having financial difficulties, and less knowledge and the ability
to receive information from distributors is also very limited. Say nothing of the
distribution of micro-insurance must also ensure the cost factor at the lowest
possible level because the premium of micro-insurance is much lower than normal
insurance.
Direct distribution channel: employees of insurance providers directly
distribute products to customers. This distribution channel is usually in place when
distributing property insurance products such as agricultural (crop and livestock)
insurance.
Affiliate distribution channel: this is the most common channel in micro

insurance. Agents are usually individuals or entities that have direct relationships
with low-income client groups, for example professional associations (farmers'
associations, women's unions), financial institutions, credit agents.
These agents are trained by the supplier on product and product propaganda
skills. The fact proves that in countries such as Urgranda, Indonesia, India, ...
distribution channels including microfinance institutions, association organizations
with interests associated with low-income associations are the distribution is very
efficient.
Bancassurance distribution channel: This is a distribution channel applied by
many insurers to take advantage of the lenders. However, only a few insurers can

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effectively apply this distribution channel when distributing micro-insurance, which
is derived from the characteristics of the bank's customers themselves.
Other distribution channels: other traditional forms of distribution applied by
ordinary insurers such as network distribution, mail distribution, ... These forms are
not recommended for micro-insurance due to limited access to technology from
customers.
1.2.3. Micro insurance implementation models
Micro-insurance is an area that is still not really popular in Vietnam. Microinsurance providers focus primarily on non-governmental organizations.
In Vietnam, the micro-insurance distribution model focuses on two models:
 Partner-agent model: For this model, associations will sign a partnership or
agent contract with an insurance enterprise and an insurance company providing
services, co-insurance for association members;

 Mutual association model: Under this model, the association directly
provides services and implements insurance for its members.
1.3. Factors affecting the micro insurance market
 Regulatory environment:
The operation of the micro insurance market cannot be outside the legal
framework of each country. It is not simply a matter of the insurance company in
the market having to comply with the law. Establish a fair and coherent insurance
business environment to ensure a healthy competitive environment for other
insurance companies. But also, to ensure benefits policies for the insured, or also
known as customers. Since then, there is a foundation to promote the development
of the insurance market.
 Economic, cultural, and social environment
A country whose economy is on the rise means industry is getting a boost.
Specifically, the development of production and service industries. Of course, the
need for insurance will arise from the desire to be guaranteed for stability.
 Competence of insurance enterprises

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