How Cars in Vietnam are Poorly Insured
Car insurance is a relatively new concept in Vietnam, and the system often falls short of meeting the needs and expectations of car owners and users. In this article, we delve into the dynamics between the sales agent, the car owner, and the buyers, shedding light on the deficiencies of car insurance in Vietnam.
The car salesman and the car owner
The salesman, often a family member or friend, assumes the role of the car insurer agent. Their primary objective is to secure a signature on the insurance contract, promising that everything is refundable within the buyer’s budget. While their intention may seem benevolent, their focus is solely on closing the deal, regardless of the user’s requirements. This dynamic arises from the Vietnamese tradition of introducing friends or family members to potential buyers to earn a commission, which is sometimes shared with the buyer.
The car owner, on the other hand, is primarily concerned with ensuring the value of their vehicle. Their main motivation is to legally drive their car by purchasing compulsory third-party indemnity insurance at a cost that guarantees reimbursement of the car’s property value. They want to protect their investment and ensure they can recover the value of their vehicle if an unfortunate incident occurs.
However, the interests of the sales agent and the car owner often clash. The agent aims to please the buyer by tailoring the insurance policy to their budget, often opting for the highest premium the buyer can afford. This approach disregards the specific needs of the user, especially in cases where the buyer is an expat in Vietnam renting the car. Instead of focusing on comprehensive coverage that safeguards the user’s well-being, the emphasis is placed on financial gain.
Furthermore, there are three distinct types of buyers with different interests when it comes to insurance coverage. First, the car owner who rents their vehicle to an expat seeks to comply with the law by purchasing compulsory insurance. Additionally, they desire insurance that covers at least the replacement value of their car.
Secondly, corporate drivers or accountants, who often purchase insurance on behalf of their employers, prioritize avoiding trouble with traffic police fines. They ensure they meet the requirements of compulsory insurance, and some may even pay a higher premium to receive a portion of the sales agent’s commission as an “introduction” fee. However, the benefits and concerns of the actual passengers or users of the car are secondary or unknown to them.
Lastly, we have the expat or local user, who is often unaware of the intricacies of their insurance coverage. They assume that the car owner, driver, or accountant has protected themselves adequately and that the compulsory third-party coverage is sufficient. Unfortunately, they rarely consider if they, as passengers or drivers, are insured in the event of an accident, hospitalization, disability, or death. This lack of awareness leaves them vulnerable to potential financial burdens and emotional distress.
What does the overall insurance landscape in Vietnam look like
The insurance landscape in Vietnam has specific characteristics that differentiate it from other countries. Research the different carriers thoroughly. You can begin with our selected insurance partners.
There is a significant lack of trust in local insurers among the Vietnamese population. This distrust contributes to the prevailing mindset that insurance is an unnecessary expense. Additionally, since many car owners employ drivers, they often remain oblivious to the traffic laws and the importance of purchasing compulsory insurance.
Moreover, voluntary insurance top-ups are seldom purchased as an additional cost. Car owners tend to opt for minimal contracts to save on their budgets, often neglecting valuable add-on options that would provide comprehensive protection. This narrow focus on cost-saving compromises the overall quality of car insurance in Vietnam.
Regarding the coverage itself, there are significant gaps in the protection provided. For property car insurance, options such as new replacement value, amortized value, and ‘thuy kich’ engine flood cover are rarely included in standard contracts. This means that in the event of specific damages or accidents, the car owner may not receive adequate compensation.
In terms of third-party insurance, the minimum limit for bodily injury and property damage to a third party is set at VND 100 million (equivalent to approximately $4,500). This limit falls significantly short of providing substantial indemnity for victims. In cases of death or disability resulting from a car accident, the base compensation is limited to 30-month salary or a pension for the disabled. This restricted coverage fails to address the potential financial and emotional toll on the affected individuals and their families.
Furthermore, if any additional options were purchased, they usually only cover death and disability insurance. Hospital costs are not typically covered, emphasizing the need for separate health insurance coverage. Additionally, it is crucial to consider disability and life insurance to ensure comprehensive protection against the potential consequences of a car accident.
The car insurance landscape in Vietnam faces various challenges that undermine the effectiveness of coverage. The misalignment between the interests of sales agents, car owners, and buyers, coupled with the limited understanding and awareness of insurance among users, contribute to the inadequate protection provided. Efforts should be made to improve trust in local insurers, educate car owners and users on the importance of comprehensive coverage, and expand the range of options available to ensure the well-being of all parties involved in car accidents and damages.