Overcoming the crisis, insurance companies must enhance their quality

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This is also an opportunity for insurance companies to introspect and come up with solutions to improve their quality and regain customers’ trust.

The cancellation rate of insurance policies purchased through banks is up to 70%

According to the inspection and examination conclusions on insurance sales through banks at four insurance companies: Prudential, MB Ageas Life, Sun Life, and BIDV Metlife, conducted by the Insurance Supervisory Authority (Ministry of Finance), there were still many wrongdoings in selling insurance through the agency channel of banks, especially in the advisory process of bank employees and brokers.

Specific misconducts have been identified, such as non-compliance with procedures and management regulations for agents, lack of coordination and reconciliation among departments regarding information feedback and complaints, allowing others (individual agents, bank employees) to use iPads and agent codes to assist customers in entering information, and failure to implement approved insurance premium rates by the Ministry of Finance.

In particular, the inspection and examination results also revealed a significant concern regarding the high contract cancellation rate for insurance policies purchased through banks in the first year. In 2021, BIDV Metlife issued 21,123 new insurance contracts through the bank channel, but the cancellation rate after the first year was 39.4%. Similarly, Prudential (Vietnam) issued 94,431 new insurance contracts through the bank channel, with a first-year cancellation rate of 41%. Sun Life Vietnam recorded the issuance of 80,117 new contracts, with cancellation and termination rates (after the first-year consideration period) for contracts issued through TPBank at 73% and through ACB at 39%. MB Ageas Life had the lowest cancellation rate of nearly 6% out of 66,757 newly issued insurance contracts in 2021.

According to the data from the Vietnam Insurance Association, in 2021, life insurance premium revenue reached nearly VND160 trillion, an increase of 22% compared to the same period in 2020. Although these are the inspection and examination results of 2021, the actual situation may still reflect a similar trend. In recent times, there have been continuous incidents of customers being pressured to purchase insurance when borrowing money (otherwise, loans will not be disbursed or with higher interest rates, etc.), or bank employees transferring savings deposits to insurance investments, causing the regulatory authorities to intervene for resolution.

Insurance companies and banks need to reevaluate their approach

Until now, the issue of insurance-banking partnerships remains unresolved, prompting regulatory and inspection agencies of the Ministry of Finance and the State Bank of Vietnam to emphasize the need for corrective measures and sanctions. Even Resolution 101/2023/QH15 on the 5th Session of the 15th National Assembly requested the Government to coordinate with agencies to comprehensively inspect the life insurance market, focusing on investment-linked insurance products.

Regarding this matter, Lawyer Truong Thanh Duc, Director of ANVI Law Firm, shared that the practice of "forced bundling" during loan applications occurs in many banks but is challenging to prove. Therefore, this issue needs to be addressed. Firstly, banks need to reevaluate their practices and determine a proper approach since prolonging this situation will lead to a negative perception of insurance products and banking operations because the insurance industry relies on trust and reputation. Insurance companies also need to reconsider their sales practices to ensure fairness and protect the rights of customers. If customers do not continue to pay premiums, the insurance products will lose their value, causing damage to both the banks and the insurance companies.

Recognizing this issue, insurance companies have also issued statements committing to rectifying their operations. For example, MB Ageas Life stated that inspection results have helped businesses comply with legal regulations and ensure the rights and interests of contract participants, especially customers. For MB Ageas Life, the identified deficiencies have contributed to improvements in their management and business administration activities, enhancing the quality of customer service.

The Vietnam Insurance Association stated that 100% of insurance companies have conducted a review and control of the activities of insurance agencies, with particular attention to the conditions for insurance agencies to have staff directly engaged in insurance agency activities that meet the prescribed criteria. Simultaneously, companies have also examined and monitored the implementation of insurance agency contracts, evaluating the quality of advice and the introduction of insurance products.

On July 1, the government issued Decree No. 46/2023/ND-CP providing detailed regulations on the implementation of certain provisions of the Insurance Business Law. This is considered a timely policy to provide insurance companies with a legal basis for operating with better quality, while also enabling regulatory authorities to impose sanctions on insurance companies and protect insurance participants. Importantly, this decree has added several requirements for credit institutions acting as insurance agencies, such as the obligation to establish a dedicated department to carry out insurance agency activities, with the head of the department having a minimum of three years of relevant work experience, suitable information technology systems, and quality control and monitoring processes.