IMPROVING COMPETITIVENESS of PETROLIMEX JOINT STOCK INSURANCE COMPANY

vietnam national university, HANOI
school of business
Do Thi Mai
IMPROVING COMPETITIVENESS of
PETROLIMEX JOINT- STOCK INSURANCE COMPANY
Major: Business Administration
Master of business administration thesis
Supervisor: Dr. Tran Phuong Lan
Hanoi - 2011
vi

TABLE OF CONTENT

ACKNOWLEDGMENTS i
ABSTRACT ii
TÓM TẮT iv
TABLE OF CONTENT vi
LIST OF TABLES vii
LIST OF FIGURES ix
LIST OF ABRREVIATION x

INTRODUCTION 1
1. The problem 1
2. Objectives 1
3. Research Questions 1
4. Scope of work 2
5. Methodology and data sources 2
6. Significance and expected results 2
7. Limitations 3
8. Thesis Structure 3
CHAPTER 1: THEORETICAL FOUNDATIONS 4

1.1 Definition of competitiveness 4
1.2 Sources of competitiveness 5
1.3 Models to assess and analyze industrial competitive environment 6
1.4. Models to analyze firm competitiveness 14

CHAPTER 2: RESEARCH AND ANALYSIS APPLICATION OF MODELS TO
ANALYZE PJICO’s COMPETITIVENESS 16
2.1 Overview of non-life insurance industry in general and in Vietnam 16
2.1.1. Non-life insurance industry in recent years 16
2.1.2 Non-life insurance industry in Vietnam 20
2.1.3 Key success factors in non-life insurance industry 25
2.1.4. Factors affecting non-life insurance enterprise’s competitiveness 27
2.2. Overview of PJICO 29
vii

2.2.1. Introduction of PJICO 29
2.2.2. PJICO’s business activities 33
Unit: VND billion 35
2.3. Application of models to analyze PJICO’s competitiveness 39
2.3.1. Application of PEST & Five Forces models to analyze factors affecting
PJICO’s competitiveness 39
2.3.2. Application of Value Chain model to analyze and evaluate PJICO’s
competitiveness 51
2.3.3. PJICO’s competitive position in comparison with its main competitors 76

CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS 80
3.1. Conclusion of PJICO’s Competitiveness 80
3.1.1. Summary from internal analysis and competitiveness comparison 80
3.1.2. Assess to the real PJICO’s strengths & weaknesses – the core
compentencies 85

3.2. Solutions for PJICO to strengthen its competitiveness & to achieve its
objectives 89
3.2.1. PJICO’s strategic vision and objectives 89
3.2.2. Solutions for improving PJICO’s competitiveness until 2017 90
3.3. Recommendations 106
3.3.1. Recommendations to Government 106
3.3.2. Recommendations to Association of Vietnamese Insurers 107
3.3.3. Recommendations to PJICO 108

REFERENCES 109

APPENDICES 111


LIST OF TABLES

Table 1.1: Selected connotations of firm level competitiveness: 5
Table 1.2: The five forces that shape industry competition of Michael Porter 9
INTRODUCTION
1. The problem
Vietnamese non-life insurance market has been experiencing a challenging, struggling
as well as fast-developing stage. Going along with this context, each and every
participant in this market needs to focus more on their real competitiveness to achieve
further growth and sustainability. Therefore, the thesis is born to conduct analyses on
PJICO’s competitiveness and suggest possible solutions to strengthen its
competitiveness in order to stand and develop in Vietnamese non-life insurance
market in the future.
2. Objectives: The objectives of this study can be listed as follows:
 Give the overview on concept of competitiveness
 Provide some analyses on macro and industry environment of insurance

market
 Conduct a thorough study on PJICO’s competitiveness
 Recommend the possible ways to improve the current competitiveness so as
to help PJICO be stable and progressive in the insurance market.
3. Research Questions
 What is competitiveness?
 Method and process to analyze competitiveness of a firm?
 The way to conduct macro and industry environment analysis of insurance
market?
 The way to conduct internal environment analysis of an insurance
company?
 What are suggestive solutions to improve the competitiveness of PJICO to
the year 2017?
4. Scope of work
In terms of theory, the thesis focuses on the concept of competitiveness, macro and
industry environment analysis, and internal environment analysis of an enterprise. In
terms of practice, the thesis focuses on reviewing the current insurance market in
Vietnam, analyzing the external and internal environment of insurance market in order
to assess the competitiveness of PJICO, and giving recommendations on possible
solutions to improve its competitiveness to the year 2017.
5. Methodology and data sources
This study uses the descriptive method for analysis through a specific case study of
PJICO in the context of present Vietnam insurance market.
The data are sourced through two ways:
 Secondary data are collected from research of books, websites, teaching
notes, reports, magazines and newspaper, and other available documents.
 The primary data are collected chiefly through deep interviews with
PJICO’s as well as partners’ and other players’ managers and key staffs.
6. Significance and expected results
By scanning the specific theory on competitiveness and analyzing the impacts of

business environment of non-life insurance market, the study helps PJICO in giving
suggestive solutions to improve its competitiveness to the year 2017.
Therefore, this methodology, information and analysis can be applied for other
companies or other insurance companies or for the PJICO itself in other stages of
development.
7. Limitations
This thesis is conducted in narrowed scope of insurance market and the applications to
PJICO in certain period to the near future until 2017. Thus, it may not wholly express
and reflect the business environment as the whole and in other periods.
8. Thesis Structure: The study includes four parts as below:
 Introduction
 Chapter 1: Literature review and overview of non-life insurance market
 Chapter 2: Research and applications of models to analyze PJICO’s
competitiveness
 Chapter 3: Conclusions and recommendations

CHAPTER 1: THEORETICAL FOUNDATIONS
1.1. Definition of competitiveness
Up till now, there has been no generally accepted definition of competitiveness as well as
no mutually accepted definition to explain it. Competitiveness is a broad concept.
According to Beckley, “A firm is competitive if it can produce and services of superior
quality and lower costs than its domestic and international competitors. “Competitive” is
synonymous with a firm’s long run profit performance and its ability to compensate its
employees and provide superior returns to its owners”. Normally, three competitive levels
are focused: country, industry, and firm level. This study is focused on firm-level
competitiveness.
1.2. Sources of competitiveness
Sources of competitiveness can be mentioned: Brand and reputation, Culture and system,
Human resources, Technology & IT applications, Value creation, Customer satisfaction,
Market share…

1.3. Models to assess and analyze competitiveness
1.3.1. PEST analysis
PEST stands for Political, Economic, Social and Technological factors. However, the
number of PEST analysis is unlimited. Other country-specific factors can be added to
perform macro environment.
1.3.2. Industry analysis
Michael Porter’s five competitive forces include industry rivals, buyers, suppliers,
potential entrants and substitute products. The five competitive forces shall help define an
industry’s structure as form the nature of competitive interaction within an industry.
1.3.3. Internal analysis
According to Michael Porter, value chain indicates the whole production chain from the
input to the output of final product/service by the end-user. There are two kinds of
activities in the value chain. One kind is called supporting activities, which concerns the
stream of production, where firms use its inputs, integrate and process them, then produce
or create its outputs. The other kind is called primary activities, which are activities going
across firms, where the outputs of one step become the inputs of the next step.
Supporting activities include: firm infrastructure (finance, accounting…), human resource
management, technology development, and procurement.
Primary activities include: inbound logistics, production and/or operations, outbound
logistics, marketing and sales, and service.
A crucial analysis on the value created will help companies to identify its internal
capacity or its core competencies, and then figure out the strengths and weaknesses of
PJICO.
1.3.4. Core competencies assess
After extracting the strengths and weaknesses of firm from value chain analysis, table of
identification of sustainable competitive advantages to examine the long-term or short-
term strengths and weaknesses, and then they would lead to the determination of core
competencies for the company. The table is as follow:
Strengths/
Weaknesses

Valuable
Rare
Costly to
imitate
Big gap?
Coincide
with KSF
Marks
1. Factor 1





4/5
2. Factor 2





4/5
3. Factor 3





4/5
*KSF: Key Success Factors

For the core competencies extracting from the sustainable competitive advantages model,
some possible solutions would be given based on improving strengths and enhancing
weaknesses, in order to improving competitiveness of the company.

CHAPTER 2: RESEACH AND ANALYSIS
APPLICATION OF MODELS TO ANALYZE PJICO’S COMPETITIVENESS

2.1. Overview of non-life insurance industry in general and in Vietnam
2.1.1. Non-life insurance industry in recent years
 Non-life growth is still weak in industrialized countries, but strong in Asia
 For non-life insurance in the world: global premiums growing, but only slowly
in the US and Western Europe
 Developing countries: significant growth in many different markets
 For South and East Asia: resilient despite the global financial crisis
 Key concerns and conclusions of world’s non-life insurance: The increase in
interest rate, assets management is still existing problem of insurance industry;
The recovery of insurance companies’ financial states after recession period;
There are some breakthroughs in insurance industry: risk management focus,
bancassurance
2.1.2. Non-life insurance industry in Vietnam
This part mentions some issues as follow:
 Ownership structure of insurance enterprises
 Non-life insurers in Vietnam
 Market share
 Premium income and growth rate
 Market premium and loss
 Non-life insurance premiums by business lines
 Merger and Acquisition: there is a trend of foreign organizations’ participation
as strategic partners into some insurance companies
 Some significant points in non-life insurance market in Vietnam

2.1.3. Success factors in non-life insurance industry
Human resources:
Underwriting skills: For high demanding services from international insurers and specific
services from local insurers, the underwriting factor is of much importance. Underwriting
skills express the local insurers’ profession, readiness, understanding and flexibility. This
factor also combines the local-understanding mind and global-standard mind as it would
bring the core and sustainable value for insurance business. It is also the most significant
part in human resources.
Human resources also express in business culture, numbers of labors, qualification of
labors on the whole…
Reinsurance:
The backbone of insurance activities is reinsurance activities. As risk coverage is larger
and larger everyday, it is impossible for a single insurance company to cover 100% of
their risks. They start to reinsure for the others (other insurance companies and other
reinsurance companies). Reinsurance market is born and develops more and more.
Sales and after sales services:
Sales and after sales services involve timely services, the documentary and procedures for
the services, and services at sites. They also include customer care and services,
especially for the service company.
Products development and Marketing:
Marketing involves brand positioning; branding and promotional regularity levels
(policies, programs, resources…); and future marketing and branding focus, PR…
Premium price
In the context of highly competitive market as non-life insurance industry in Vietnam,
factor of premium price is of much importance. The reasonable premium price, along
with best customer services can bring many contracts and clients to insurance company.
Claims handling
Claim handling is related to underwriting skills (including risks assessment and
management), the better the underwriting is performed, the easier and prompter the claim
is handled. Besides, claim matters also involve the numbers and volumes of claims;

relations with loss-adjusters; volumes and timing of actual compensation payment;
financial capacity, reserves, retention…; and so on.
Information technology support
In order to provide real-time services with good quality, insurance company needs a
stable and thorough IT system. This IT system will help insurance company in all
activities of providing services from the beginning to the end.
Relationships
This means the relationships with customers (large enterprises/corporations, local
authorities…), partners (global reinsurers, insurance brokers, agents, other insurers…),
and others.
The relationship is also with clients: relationships show through elements such as: current
clients, future clients, renewal volume, price discounting…
The relationship is also with reinsurers (both local and global): relationships show
through current relations, their concern, interest, priority and loyalty with specific local
insurer, mutual contacting, future relationships…
There are also relationships with local insurers, with authorities, with brokers and other
partners.
2.1.4. Factors affect a non-life insurance enterprise’s competitiveness
 Economic growth: Along with the economic growth, non-life insurance business
will grow accordingly.
 Natural disasters: Natural disasters have negative impact on non-life insurance.
Every year, there are always typhoons and flooding hitting Vietnam, causing lots
of damages. Due to these attacks, agricultural output and reconstruction efforts
were badly influenced.
 Imports and exports: The extent and pattern of imports in recent years shows that
manufacturers are restocking to meet export orders. Rising inward shipments of
steel, cotton, textile yarn and plastics suggest that inputs are being purchased to
meet new export orders and capital investment purposes.
 Foreign investment: foreign investment has positive effect on non-life insurance.
Due to recession, foreign investment was gray lately. However additional capital

was also registered increasingly.
 Currency: The fluctuation of exchange rate also has much influenced on non-life
insurance, as many of insurance contracts are at foreign currencies. Insurance firms
operating in Vietnam faces risk if the Vietnamese Dong (VND) encounters further
devaluations. The devaluation and the possibility of devaluation is a risk for
government as well as companies which have lots of foreign transactions using
foreign currencies, especially US Dollar.
 Legal framework: Legal framework can cause positive or negative effects on non-
life insurance due to the parallel improvement and development between the two.
 Technology: As well as legal framework, technology also causes adverse
influences on non-life insurance. In Vietnam now, it can be said that technology
causes negative influence, since the development of technology cannot meet the
requirements of insurance market.
 Insurance awareness: Clearer awareness on non-life insurance goes with the
increase in demand. From times to times, with the developing integration of
international business, the awareness on insurance is going increase also.

2.2. Overview of PJICO
2.2.1. Introduction of PJICO
Fields of Business:
 Non-life insurance operation:
- Accidents and Health Care insurance
- Property Damage Insurance
- Inland transit, marine and air cargo
- Hull and P&I Insurance
- Liability Insurance
- Motor Vehicles Insurance
- Fire and Engineering Insurance
- Business Interruption Insurance
- Reinsurance

 Financial investment under the law of insurance dated 09/12/2000
 Other services: Survey, investigation, claim…
2.2.2. PJICO’s business activities
2.2.2.1 Non-life insurance products of PJICO
Since its establishment, PJICO has developed and underwritten almost types of non-life
insurance, which are divided into 4 major groups:
 Marine Insurance
 Fire Insurance
 Engneering Insurance
 Miscelleous Insurance
2.2.2.2 Reinsurance Performance
PJICO has successfully negotiated all 2010 reinsurance treaties for its main type of
insurance: Marine, Fire, Engineering Treaties and new successful arrangements for the
excess of loss reinsurance program in 2010 for Motor Vehicles. In addition, PJICO has
been keeping closed contact with the long term reinsurance partners in the world such as
Caises Central Reassurance (CCR), Munich Re, Korean Re, ACR, Best Re, Malaysian
Re… Reinsurance activity has ensured the company finance in safety in insurance
business.
2.2.2.3 Other activities
Beyond the insurance, reinsurance activities, PJICO also involves in other activities such
as financial investment, Car rescue and repair, car dealer…These activities bring PJICO a
big benefit. The income from financial investment reached VND 91.7 billion.
2.3. Application of models to analyze PJICO’s competitiveness
2.3.1. Application of PEST & Five Forces models to analyze factors affecting PJICO’s
competitiveness
2.3.1.1. Macro environment analysis using PEST model
a. Political factor:
Political factor effecting insurance industry in Vietnam consists of (1) supervisory body,
(2) insurance laws, (3) supervisory requirements, (4) compulsory insurance, and (5)
taxation.

Although legal framework on insurance is paid attention, it cannot chase the development
of insurance itself. Nonetheless, the legal framework is lacking of stability. Sometimes
one change can conflict with the others, causing confusion, misunderstanding, and also
splits for others to do violence. Therefore, political and legal factor is considered a threat
to insurance.
b. Economic factor:
(1) Some significant points of the state in the economy
(2) WTO commitments: Limitations on market access and limitations on national
treatment
In conclusion, economic factor is creating opportunity to the development of insurance, as
a lot of sub-factors (high economic growth rate, foreign investment…) are representing
the development and growth of the economy in general. Although there are still several
sub-factors preventing insurance from its own development (inflation, government
spending, exchange rate…), in the future, insurance can take advantages of economic
factor.
c. Social –cultural factor
(1) Demographic
(2) Lifestyle trend
(3) Consumer attitudes and opinions
In conclusion, social – cultural factor creates chances to the development of non-life
insurance business in general and PJICO in particular.
d. Technology factor
The technology applications for insurance industry can be mentioned in four categories:
general communications (building awareness and image, promotion…), product pricing
(online applications), agent support (available product details and updates, real-time
downloading forms…), and direct sales (real-time underwriting pass/fail tests)…
However, technological development and applications in Vietnam now does not meet the
insurance development. Lack of high-tech applications and human resources for
technology, outdated technology, lack of investment on technology… are main obstacles
to the technological development, therefore, they create threat to insurance.

e. Natural factor
Vietnam has various natural disasters and changeable climate. It causes problems for
insurance as it makes increase risk exposure among different types of insurance. Thus,
natural factor is an obvious threat.
2.3.1.2. Industry environment analysis using Five Forces model
a. Numbers of existing competitors:
There are 28 non-life insurance companies in the market. In which, the three insurance
companies which are considered as main rivals of PJICO are: Bao Viet, Bao Minh, and
PTI. Although the PVI’s market share is high (only runs after Bao Viet), PVI is not
considered as main competitor of PJICO as PVI is specialized on rude oil explorer and oil
drilling projects and its main market share, revenue and profit come from these sources.
b. Potential rivals
(1) Barrier to entry:
 The minimum capital requirement is set at VND300 billions and an additional
VND100 billion for underwriting aviation, petroleum and satellite insurance.
 Insurers are also required to deposit 2% of the legal minimum capital as an
insurance reserve in a local commercial bank. And no new composite license
will be issued.
(2) Market access:
 Joint ventures as well as 100% foreign ownership are allowed and the prerequisites
include: operating for at least 10 years; total assets in the preceding year of USD
2bn or above; and no serious breach of insurance or other laws committed in the
previous 3 years.
 Foreign insurers will be allowed to operate through wholly foreign-owned
branches from 2012 (5 years after accession).
 Several foreign insurers are reportedly awaiting approvals to start up their
operations.
c. Bargaining power of buyers
 Number of non-life insurance companies is huge compared to market and
economic scale. The customers have multiple choices.

 Almost all types of insurance are traditional, simple and easily copied so many
insurance companies sell the same products.
 Switching costs of bargaining power to the customers have been lower and lower.
With the high power of customers in non-life insurance industry, PJICO and other
companies have not only to face up with the threats of reduce price, benefit but also have
to supply much better service for customers.
d. Bargaining power of suppliers
Suppliers to Vietnam non-life insurance market includes 4 major kinds of providers like
local and foreign reinsurers, brokers, agents, loss adjusters and some other suppliers such
as auto garage, hospitals and etc…
 For reinsurers: the bargaining power is tended to be lower.
 For brokers: the power is steadily high.
 For agents: the power is high especially in the fields of retail products.
 For loss adjusters: the power is low.
e. Threat of substitutes
Vietnamese insurance companies could be threatened by in-house insurance, it is a threat
when more and more large corporation, banks, financial companies have their own
insurance companies. Other substitutes may come from self-insurance, un-participation.
These substitutes reduce the profitable ability for PJICO and other companies as well.
Therefore, threats of substitutes are considerably high to insurers.
2.3.1.3. Conclusion from Marco and Industry environment analysis to analyze
factors affecting PJICO’s competitiveness
Table xx: Conclusion of Environment analysis – Chances and Challenges
No
Chances
Challenges
1
Economic factor
Legal framework
2

Social – cultural factor
Technological factor
3
Medium power of suppliers
Natural factor
4

Existing rivalry
5

Potential rivals
6

High power of buyers
7

Threat of substitutes
This macro and industry analysis, combining with internal analysis made by Value chain
model are together give the obvious picture on PJICO’s competitiveness in the context of
current chances and challenges in the market.
2.3.2. Application of Value Chain model to analyze and evaluate PJICO’s
competitiveness
2.3.2.1. Marketing and Distribution Channels
Marketing and distribution of PJICO include criteria: product development, premium,
distribution channels and promotion activities.
 Insurance Products Development:
PJICO has more than 80 insurance products for almost traditional types of non- life
insurance. PJICO has advantages in terms of retail products such as automobile insurance,
motorcycle insurance, health care and personal accident insurance. These are also core
products of PJICO.

However, there are some problems for PJICO’s product development as follows:
- Some insurance products are not paid attention
- Underwriting costs for these products still remain highly above the market average
- Loss ratio is rather high in spite of decreasing over the previous years, especially for
motor vehicle insurance.
 Premium rates
Recently, PJICO and other insurers are facing up with competition pressure for reducing
premium unreasonably, unprincipled. This price war has happened as a result of
competing firms struggling to undercut each other. In some cases, however, to compete
with other insurers, PJICO has to follow unfair premium policy to get services.
 Distribution Channels
 Direct Sales: They are staff, sale force at Head office and 51 branches over the
country.
 Agents: wide network of agents with approximately 5,000 agents and an
authorized agent system to be Gas station system of Petrolimex with more than
1,600 gas stations in all over the country.
 Brokers: The proportion of revenue sold through brokers is very and takes a minor
share in Vietnam non-life insurance market.
 Others: PJICO also use some other channels like car dealers, workshops in the
automotive sector, repair shops, motor vehicle registration divisions,
bancassurance…
In comparison with other insurers, PJICO only runs up to Bao Viet and is pretty equal to
Bao Minh. In some local provinces, PJICO branch is the leader. This is one of core
competencies of PJICO to maintain its position in the top leading non-life insurance in
Vietnam.
However, there are some problems to PJICO’s distribution channels:
- Not set up strategic co-operative relation with insurance brokers in Vietnam
- Direct sales or staffs of PJICO are lacking of profession, specialized skills, and swift
wit…in terms of property, fire, engineering, hull and cargo insurance
- Not much paid attention to some distribution channels that have potentiality in terms of

scale, profession, and high efficiency such as: bancassurance, internet,
 Promotion
Promotion activities of PJICO include branding, public relation, advertising and sales
promotion. Period 2003-2006 was a great landmark that brought PJICO’s image and
branding to customers through a range of promotion activities However, from that time
on, promotion activities has not achieved such a good result as it did although PJICO still
pays for promotion annually, but this source has been used spontaneously, decentralized,
inefficiently. In conclusion, PJICO’s promotion activities have some weaknesses:
 Lack of strategy, plan for building methodical and professional trademark
 Lack of functional department specialized in setting up, implementing marketing
programs that support PJICO’s business activities.
 Promotion activities of PJICO have not connected with the targets of ensuring and
enhancing survey and claims service.
2.3.2.2. Underwriting
PJICO’s underwriting guidelines is described under the process standardized according to
ISO 9001:2008. It includes all activities from marketing and receiving insurance request,
risk assessment, consideration, quotations and negotiation, policy issuance and policy
administration. Each type of insurance products has its own guidelines so that risk
management in insurance business activities is much better.
However, there are still some weaknesses as follows:
- ISO process has not been implemented absolutely through the whole business system of
PJICO, especially for PJICO’s branches in provinces.
- During process of consideration, PJICO’s underwriters do not ask functional
departments’ advice in case of exceeding their levels of authority. Thus, mistakes occurs.
- At the stage of providing quotations and negotiating with big customers such as state-
owned enterprises, contractors… PJICO itself and its staff have not had close relationship
with authorities, investors…therefore PJICO’s ability of winning in bidding big projects
is lower than Bao Viet, Bao Minh or PVI.
2.3.2.3. Reinsurance
Net retention of PJICO’s products is: USD 2,000,000 (Cargo), USD 1,500,000 (Property,

Engineering, and Hull). For policies with higher sum insured will be reinsured under
treaty or facultative contract. And to protect the retention, PJICO buy excess of loss treaty
reinsurance program.
Hence, after issuing insurance policy, the underwriters must announce to reinsurance
department periodically (usually every month). There are some circumstances needed to
notify reinsurance immediately after collecting information about the risk such as: risks
are excluded in reinsurance contract, terms and conditions, which do not follow PJICO’s
wordings or the market practice, and sum insured is higher than fixed amount applied for
each type of insurance.
Besides reinsurance ceding activities, PJICO has assumed insurance from insurers and
reinsurers both in domestic and foreign markets which contributed to increase PJICO’s
turnover. PJICO also has a good reinsurance team with experienced and high skilled
managers. Aside from achievements of reinsurance activities, the reinsurance still has to
deal with some problems, including:
 Not have reinsurance software so that all the works are managed manually. It costs
time so much to do risk profile, loss profile and sometimes data is not accurate.
 Awareness of reinsurance announcement necessity of PJICO’s staff in almost
branches is not really high. Late reinsurance notice is usually happened. This
affects to many reinsurance activities.
2.3.2.4. Survey and Claims handling
In the beginning stage of operation, PJICO did not concentrate much on survey and
claims handling services. The underwriter was in charge of 3 responsibilities together:
underwriting- surveying- claims handling (model 3 in 1). This model has its own
advantage. However, there are some problems to this model. In recent years, PJICO has
started to apply ISO 9001:2008 system for a better claims management. Nevertheless, this
process still has to deal with many problems:
 Professional skill of claimants is not good, lack of technical expertise to evaluate
cause of loss, property damage and loss allocation especially for big and
sophisticated losses.
 Limited experience of PJICO’s underwriters and claimants and lack of initiative

 Survey and claims volumes and cost are higher and higher that caused by rising
costs in renting loss adjusters for increasing number of big and complicated
insurance claims
 Insurance fraud is still high especially in the field of automobile insurance. This
matter scares and greatly influences on profit and business efficiency of non-life
insurers and PJICO as well.
 Claims management in terms of automobile is not good because of statistic
software.
 PJICO are still lacking of Call Center, Service Center, premium payment system
through ATMs and internet, risk management consultant service to serve its
customers, Rescue and Repair Centers for motor vehicle are still limited.
2.3.2.5. Financial investment activities
Financial investment activities are main activities creating major profit for non-life
insurance companies (accounted for 90% net profit) while insurance activities (main
business activities) have not gained much profit, sometimes broken even or lost.
PJICO’s financial investments comprise deposits, loans, stocks, bonds and joint venture,
real-estate. However, investment profit comes from short-term and long term deposits
with credit institutions.
Nonetheless, PJICO’s financial investment activities are coping with some problems:
 Employees working in financial investment activities are thin, and they are lacking
of profession and expertise.
 Organizational structure has stopped at department level that limits flexibility,
ability and pace of investment decisions.
 Lack of a strategic investment decisions, types of financial investment are not
diversified and balanced.
 Not built up sound and professional investment strategy as well as medium and
long term investment portfolio.
2.3.2.6. Corporate Governance
PJICO’s structure is the same as other joint stock companies. PJICO has been trying to
increase its corporate value and culture and develop a sound and transparent corporate

environment. This structure has partly contributed to PJICO’s success during past years.
However, this structure has revealed some problems:
 Shareholder’s meeting has not been organized annually.
 Lack of sound medium and long term strategies leading to vision, mission and
strategy objective of PJICO has not been clearly defined.
 The delegation system is uncompleted and unclear.
 Internal communication on the company’s decisions, commands, and policies is
not well-implemented.
 Not have a good system of regular collection and processing of information,
estimation and evaluation on changes in macro and industry environment.
2.3.2.7. Human Resource Management
Training courses of PJICO are relatively diversified. Number of trainee increases by year.
Besides the advantages, PJICO has still to face up with many problems rising in human
resource management:
 Increasing brain-drain in recent years.
 Still lacks of experts and specialists in different insurance products.
 Training courses have been organized incoherently, lack of profession, number of
internal training course are very few, number of trainees are not large.
 Applying form of job description since 2006 in evaluating working efficiency but
this method has not been implemented comprehensively.
 State-owned spirit still exists in the mind of PJICO’s employee.
 Recruitment has not been properly cared.
2.3.2.8. Financial and Accounting System
Some improvements of PJICO’s financial and accounting systems:
 PJICO’s financial capacity has been improved significantly after increasing to
VND 710 billion in the end of 2010.
 PJICO has a high growth rate with an average growth around 21%
 Underwriting reserves are large enough to meet up with the request of law and
safety in non-life insurance business.
 Loss ratio has significantly decreased compared to previous years

 Business efficiency from insurance activities has been positive for past 5 years in
spite of low profit.
 PJICO’s founding shareholders are huge state-owned, which are not only solid
sheet-anchors in terms of finance, but also are PJICO’s big and potential customers
bringing large profit with low costs.
However, there are a few problems in PJICO’s financial and accounting system:
 Provision for doubtful debt has a trend of increasing.
 Business efficiency is not really high.
 PJICO has an accounting software system over the whole network but has not been
connected online, has been still decentralized.
 There has not been clear and obvious separation in functions and responsibility of
financial system and accounting system.
 Financial duties are not paid enough attention.
 Fines on financial errors and violence are still slow and not strict.
2.3.2.9. Technology Development
PJICO has not built the general and comprehensive underwriting management software
that support for all processes from underwriting to reinsurance, survey and claims
settlement. A shortage of this software resulted in some major matters such as:
 Works related to statistic, reporting are repeated in many functional departments
from branches to underwriting departments, reinsurance department, finance
department.
 There is no accurate statistic of loss occurrences, number of losses, location of
losses, loss amount so that records for accumulation of loss are not available.
 Website is still very poor, unprofessional, lack of much necessary information
delivering to customers.
2.3.2.10. Document and Records Management
PJICO’s management of documents and records has been implemented according to ISO
process and 5S program “Sorting – Sweeping – Simplifying – Standardization – Self-
improvement”. This enables PJICO to manage document and records better, to improve
quality working environment.

From a value chain analysis applied to PJICO, it can be realized the linkages among value
activities across the firm, its strengths and weaknesses so that evaluation of PJICO’s
competitiveness is much more easy.
2.3.3. PJICO’s competitive position in comparison with its main competitors
Table xx: Competitiveness Comparison
Criteria
PJICO
Competitors
Bao Viet
Bao Minh
PTI
Product Development




Number of insurance products
8
10
9
7
Development of new products
8
9
10
7
Insurance products for mass market
9
10
7

8
Insurance products for corporate market
8
10
9
7
In-house business
10
8
7
9
Premium price
9
7
8
10
Distribution Channels




Direct Sales
9
10
8
7
Agents
10
9
8

7
Brokers
7
9
10
8
Other channels
8
10
9
7
Promotion




Branding
8
10
9
7
Public relation
7
9
10
8
Advertising
8
9
10

7
Sales promotion
7
8
9
10
Underwriting




Underwriting process under ISO 9001:2008
9
10
8
7
Underwriting ability
8
10
9
7
Reinsurance




Reinsurance capacity
9
10
8

7
Efficiency of reinsurance contracts
10
8
7
9
Inward Reinsurance
9
10
8
7
Reinsurance software
7
9
10
8
Survey and Claims Handling




Standardized Survey Process and Claims Handling
Process under ISO 9001:2008
9
10
8
7
Survey & claims volumes
9
8

7
10
Skills of claimants
7
10
9
8
Fraud in compensation
7
9
8
10
Claims Management
7
10
8
9
Extra Services
8
9
10
7
Financial investment activities




Ensuring Safety and liquidity of capital
10
9

7
8
Efficiency
8
9
10
7
Variety of investment portfolio
8
10
9
7
Sound & professional investment strategy
8
10
9
7
Corporate Governance




Organizational Structure
8
10
9
7
Efficiency of Board of Directors, Board of
Supervisors and Management Team
7

10
8
9
Sound long-term strategy
7
10
9
8
Corporate culture
10
8
7
9
Human Resource Management




Number of labors
8
10
9
7
Young workforce
10
7
8
9
Qualification of workforce
8

10
9
7
Training
8
10
9
7
Fidelity and dedication of employees (brain-drain)
8
7
10
9
Job description
8
10
7
9
Professional Recruitment Process
7
10
9
8
Financial and Accounting System




Chartered Capital
8

10
9
7
Underwriting Reserves
8
10
9
7
Premium income/Market share
8
10
9
7
Growth rate
9
8
7
10
Contribution of retail insurance products
10
8
7
9
Provision for bad debts
8
9
10
7
Loss Ratio
9

8
7
10
Business efficiency from insurance activities
10
7
8
9
Business efficiency from investment activities
8
10
9
7
Technology Development




General and comprehensive underwriting
management software
7
8
10
9
Website
8
7
10
9
Documents and Records Management

Management of documents and records according
to ISO process and "5S" program
10
9
8
7

CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS
3.1. Conclusion of PJICO’s Competitiveness
3.1.1. Summary from internal analysis and competitiveness comparison
3.1.2. Access to the real PJICO’s strengths and weaknesses – the core compentencies
Table xx: The real PJICO’s strengths and weaknesses – Core competencies
No
Strengths
Weaknesses
1
- Agents: having a multi distribution
channels with a large number of
salesperson, a wide network of agents,
especially, a monopolistic agent system
(Gas Station System of Petrolimex) with
over 2000 gas stations across the country.
- Premium price: building up flexible and
suitable premium adjustment structure
based on the premium tariff issued by
Ministry of Finance and competition

situation in the market
2
- Corporate culture: having created friendly,
opening working environment and peculiar
corporate culture.
- Lack of thorough and comprehensive
information technology system
3
- Contribution of retail insurance products
- New insurance product design
4
- Having a solid financial sheet-anchor
thanks to its huge founding shareholders
who bring large profit with low costs.
- Weak Corporate Governance & internal
controlling and supervising system
5
- Underwriting potentiality of insurance
from founding shareholders (or in-house
business)
- Weak training system and learning maps
6
- Business efficiency from insurance
- Brain-drain of human resources
management
7
- Historical branding of Petrolimex
- New distribution channels
(bancassurance, internet…)
8

- On-site services throughout Vietnam
- Not enough attention on marketing and
branding
9
- Efficient and suitable reinsurance
program
- Skills of underwriters and claimants are
not good

3.2. Solutions for PJICO to strengthen its competitiveness and to achieve its
objectives
3.2.1. PJICO’s strategic vision and objectives
3.2.1.1. PJICO’s vision
“PJICO’s vision to 2017 is to be a top insurance and financial corporation in terms of
efficiency and service quality, providing the best benefit to its shareholders, its customers
and its employees.
3.2.1.2 PJICO’s strategic objectives
 Providing comprehensive, various and high-quality insurance products and
services.
 Gross premium income grows by 22-25% per annum; growth rate of revenue
from financial investment activities represents 20-30% per annum during the
period of 2012-2017
 Steadily increasing market share to 10-15% and ranks the third position in
2015, having at least two leading insurance products in the market.
 Chartered capital increases by VND 1000 billion in 2013.
 Profit after tax/equity reaches 13-15% in the period 2012-2015 and 15-20% in
the period 2015-2017.
 Insurance business activities contribute to profit before tax 10-15% annually.
 Developing PJICO’s brand to be one of the most famous and strong trademarks
in Vietnam non-life insurance market.

 Making PJICO’s stock to become the top favorable stock among stocks of
insurance companies listed in the stock-exchange.
 Creating a dynamic, transparent, opening and friendly business environment
together with professional, ethical, innovative corporate governance system that
help PJICO’s employees develop their abilities and creativities; build up
entrepreneurial spirit and corporate culture in order to get the growth target of
PJICO being stable, safe, efficient and sustainable.
 Improving earnings per capita to the highest level in the finance – insurance -
banking services industry.
 These strategic objectives are set up to concretize and to be suitable with the
vision.
PJICO’s motto: “Profession for prestige, speed for differentiation”
3.2.2. Solutions for improving PJICO’s competitiveness in coming years
3.2.2.1. Concentrating and enhancing development of retail insurance products
Table xx: Possible solutions and actions
No.
Solutions
Actions
1
Developing retail
products based on
discovering potential
network of founding
shareholders, especially
Petrolimex (with over
2000 gas stations and a
range of subsidiaries
companies such as
PGBank) and
- Signing comprehensive co-operating agreement with

Petrolimex, Vietcombank, in terms of authorized agents
providing PJICO’s retail insurance products at Petrolimex’s
gas stations and Vietcombank’s branches across the country.
- Organizing training courses for labors of gas stations to
increase effectiveness and skills of selling retail products
- Investing in banners and other facilities for gas stations to
create convenient in attracting and selling insurance
- Building suitable commission and profit guideline for gas
stations and banks.
Vietcombank.
- Negotiate and sign contract supplying health care and
personal accident insurance for all staffs of Petrolimex and its
subsidiaries (not only for managers)
2
Developing distribution
channels through internet
and bancassurance
- Upgrading PJICO’s website and technology infrastructure
- Building up e-commerce selling and payment process
- Besides Vietcombank and some branches of Techcombank,
enhancing co-operation with other banks especially PGBank
because the largest founding shareholder of PGBank is
Petrolimex.
+ Selling motor insurance through PGBank’s branches
+ Supplying health care and personal accident for PGBank’s
customers in its promotion activities
+ Supplying children care insurance for parents having
deposits in PGBank
3
Developing personal

insurance for pupils and
students
- Contact with authorities of schools and universities to
negotiate and sign comprehensive personal insurance for
pupils and students
- Developing and implementing promotion programs when
new school year is coming
4
Developing motorbike
insurance to remain top 1
position in the market
- Launching annual program like: “PJICO’s Youth- Action
for traffic safety” within three months.
- Motivating all youth of PJICO (encouraging every
employee) to sell motorbike insurance with at least 1
motorbike/per day and 90 motorbikes per program.
- Closing the program and giving awards for excellent
salesperson.
5
Setting up more owned
car rescue and repair
centers
- Investing in some big branches firstly such as HCM, Ha Noi,
Hai Phong, Quang Ninh, Da Nang where automobiles are
huge.
6
Applying comprehensive
IT system in insurance
management due to a
necessity of good statistic

software for retail
insurance products
- Organizing usual meetings with presence of functional
departments to gather their ideas and contributions to build up
drafts of inputs, outputs to mix up with IT software.
- Co-operating with foreign reinsurers and ask for their
support in choosing the most suitable general and
comprehensive underwriting management software

3.2.2.2. Improving customer services
The path to improving customer services lies in these activities as below:
 Establishing Marketing Department to implement its functions with an eye to bring
the best quality to client services
 Conducting annual survey in big scale to research customer demands and get their
feedbacks in order to implement suitable customer service strategy. This process
includes (1) determine objectives, (2) choose survey method, (3) designing survey
form, and (4) collect results and summarize
 Benchmarking quality standard of customer services of professional insurers such
as Liberty, Chartis, AIG, Prudential in order to determine and promulgate service
quality standard with appropriation and possibility in the whole net work. Some
criteria for benchmarking are included in underwriting process and claims
settlement process.
 Investing and providing a range of extra services for retail insurance products and
other products as well.
 Implementing a thorough revolution in claims process.

3.2.2.3. Underwriting potentiality of insurance from founding shareholders (in-house
business)
Solutions and actions:
No.

Solutions
Actions
1
Specializing the process of
providing insurance
services for founding
shareholder as well as
management and customer
care.
- Set up a particular division such as Shareholder insurance
department in Head-Office that is responsible for
underwriting, caring, supplying and developing insurance
products for the founding shareholders.
2
Carrying out survey and
investigating demand &
potentiality of insurance of
the shareholders again,
especially Petrolimex,
VCB, VSC.
- Draw up survey and questionnaires to investigate insurance
demand and do risk survey report.
- Organize meetings with CEO and Directors Team of
Petrolimex, VCB, VSC in order to have their strong co-
operation and support by sending written instructions to their
units and assign employees and departments to collect survey
reports on insurance needs and situation of the industry’s
risk.
- Summarize and evaluate
3

Based on survey results,
building comprehensive
and suitable insurance
program for each
shareholder.
Work with assigned employees of the shareholders and
specialist of the leading reinsurers to establish
comprehensive insurance program for each shareholder,
includes:
- Listing product portfolio needed to provide: available
products that shareholders have not bought and new products
such as:
+ Oil pollution insurance, pipeline insurance, D & O
insurance, Health Care insurance at high level (Petrolimex)
+ Banker Blanket Bond (VCB)
+ Comprehensive insurance agreement (VSC)
- Calculating reinsurance capacity and placing reinsurance
- Estimating and setting premium price index
- Designing risk management process for each shareholder.
- Draft insurance agreement, contract or insurance open
cover.
4
Presenting insurance
program and signing
insurance agreement or
insurance open cover
contract
- Meeting and working with each shareholder, presenting
insurance program
- Signing insurance open cover contract/ Principle insurance

agreement
5
Holding media events and
implement valid insurance
programs effectively.
- Sending official correspondence, insurance contract and
agreement, guidelines on implementation to the shareholders’
units (insists of 100% shareholder-owned enterprises, joint-
stock companies, joint-venture or projects which have capital
of the shareholders)
- Holding seminar to attract attention of the shareholders and
its units as well as other customers.
- Working face-to-face with some big and importance units
of the founding shareholders such as PLC, Gas Petrolimex,
B12, to popularize clearly insurance program
6
Reporting and evaluating
the results periodically
Collecting and summarizing reports as records for the next
renewal year.

3.2.2.4. Improving and developing human resources
To improve human resources quality and achieve above objectives, PJICO should take
into consideration of some solutions:
 Expanding the role of human resources management
 Establishing short and medium strategies for training in the period 2012-2017
 Building training programs (learning map) with support from internal and external
leading experts to implement training strategies successfully.
 Enhancing co-operation with Vietnamese insurance organizations, other partners
and reinsurers and take advantages of their support

 Using skills and knowledge of employees most efficiently. Arranging, organizing,
planning and appointing employee should be referred to the results of participation
in training programs.
 Building professional recruitment program to choose excellent candidates meeting
up with working requirements.