Solving the risks of bancassurance

VCN - Bancassurance has achieved success in the world, as well as in Vietnam market. However, it also has many risks and shortcomings that should be solved in the near future. That is the information that was given at the 2022 Online Economic - Financial Forum: "Bancassurance: Potentials and Challenges", jointly held by the Vietnam Financial Times on the afternoon of July 27.
Central bank to keep watch on bancassurance activities Central bank to keep watch on bancassurance activities
Local banks earn high profits from bancassurance activities Local banks earn high profits from bancassurance activities
Bancassurance activity in Vietnam has been growing strongly
Bancassurance activity in Vietnam has been growing strongly
Bancassurance activity in Vietnam has been growing strongly

Deputy Director of the Insurance Supervision and Management Department (Ministry of Finance) Pham Thu Phuong said that since 2000, the legal system of insurance has been issued fully and consistently based on the Law on Insurance Business, to the system of decrees and circulars. This is an important legal basis for insurance businesses to develop and actively do business, including association with banks. The Law on Credit Institutions 2004 and 2010 allowed banks to set up independent insurance companies, so the link between insurance and banks has a legal basis for development and more forms of cooperation.

Bancassurance is widely developed in advanced countries around the world, bringing in over 60% of life insurance premiums in each country.

Speaking at the forum, Dr. Can Van Luc, Economist, Member of the National Monetary and Financial Policy Advisory Council, said that bancassurance is a "predestined relationship" for the mutual benefits of three parties, especially in the context of the Covid-19 pandemic.

For banks, it brings a significant source of non-interest income and improves the income structure; helps diversify business activities; reduces credit risk; raises the bank's mobilized capital from insurance partners; and increases operational productivity of bank staff.

For insurance companies, they can use the existing and wide distribution system of banks, which helps them save the cost of building their own network; have the opportunity to approach the bank’s customers; take advantages of the prestige, brand, and trust of customers towards the bank; increase market share, revenue.

For customers, they can meet increasingly diverse needs, especially in the context of increasing income and increasing risks - uncertainties.

In Vietnam, bancassurance activities in Vietnam have grown strongly. According to statistics of the Insurance Association, both revenue and income proportion from bancassurance of insurers are increasing, from VND65 trillion (accounting for 7.8% revenue from insurance premium) in 2017, to VND130 trillion (accounting for 18.9%) in 2020. By 2021, premium revenue through bancassurance channels has accounted for about 39% of total new revenue. In the first six months of 2022, the bancassurance market grew by 23%, as reported by the Ministry of Finance.

From the banks' side, bancassurance activities contributed trillions of dong to the profit in 2021, of which VIB collected nearly VND1,700 billion of insurance service fees in 2021, accounting for more than 11% of total revenue thanks to the cooperation deal with Prudential; TCB collected VND1,600 billion, up 88.4% compared to 2020 thanks to cooperation with Manulife; and ACB achieved VND1,300 billion through cooperation with Sunlife.

Pham Thu Phuong said that the introduction of the bancassurance channel has increased development ability and create many customer segments that insurers had not previously been able to access due to network limitations such as in remote areas and sparsely populated areas.

Raise awareness for customers

At the forum, besides the benefits, Mr. Can Van Luc also pointed out some risks and inadequacies of bancassurance. The first is quality of consulting; many consultants do not fully understand the complex technical characteristics of insurance products as well as different job priorities.

The second is professional ethical risk, and the third is the risk of contagion (systematic), that is, the occurrence of a risk at an insurance company can affect the commercial bank as an agent or as a partner or as a strategic shareholder or parent company, and vice versa.

The fourth is the lack of information and data, while regulations on allowing information and data sharing, and recognition of appraisal results are not available.

Pham Thu Phuong also said that bancassurance channel has surged. Many bank officers do not provide adequate advice, causing customers to misunderstand insurance products.

Regarding the management, there are now separate regulations for bancassurance, such as on the legitimate rights and interests of the insured on a voluntary basis, in accordance with their needs and abuse of powers and responsibilities to induce or force someone to participate in insurance. Credit institutions also have a responsibility to fully explain insurance products. In particular, according to current regulations, insurance businesses must also take full responsibility for products sold by agents and organizations, including banks.

Mr. Can Van Luc suggested that to limit inadequacies and risks for customers, it is necessary to continue to improve the legal framework, especially bancassurance business (in both life and non-life insurance fields), clearly stipulate rights, obligations and responsibilities of the parties involved. At the same time, regulations allowing mechanisms to share information and data, recognize appraisal results and e-KYC, as well as regulations on confidentiality, security of customer information and data.

Along with that, commercial banks and insurance companies need to invest more in training staff in professional ethics, communication skills and persuasion to avoid misunderstandings, making customers feel unsatisfied or feel forced to buy insurance products. It is also necessary to organize training courses to improve the insurance business for bank staff and to pay attention to the security of customer information.

Commercial banks should coordinate with insurance companies to develop specialized insurance products, suitable for the sales channel through banks, to avoid competition between banks and insurance businesses and meet the needs of both the bank and the customer (for example, insurance products used as collateral for customers when borrowing capital at a bank)

It is especially important to promote the financial education component in a comprehensive financial plan, so that customers are aware of the need for insurance products and understand about insurance products.

Tighten regulations on insurance contracts Tighten regulations on insurance contracts

VCN - The Law on Insurance Business is amended and supplemented towards transparency in contracts to minimize ...

In Vietnam, bancassurance has been around for a long time, but only when the Ministry of Finance and the State Bank of Vietnam issued Joint Circular 86/2014 dated July 2, 2014 guiding the operation of insurance agents of credit institutions, foreign bank branches for life insurance enterprises, this distribution type of insurance products has been protected and facilitated by law for development.

By Thuy Linh/ Huyen Trang

Related News

Without resolving three significant bottlenecks, real estate market

Without resolving three significant bottlenecks, real estate market's revival will face numerous challenges

VCN - Economic expert Vu Dinh Anh shares insights on the real estate market's recovery trajectory in 2024.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Wood processing enterprises strive to increase the proportion of individually designed goods

Wood processing enterprises strive to increase the proportion of individually designed goods

VCN - Many wood and furniture processing enterprises are promoting investment in design activities, helping to increase the proportion of individually designed products (ODM) in exports, thereby affirming the industry's capacity Vietnamese wood in segments with higher added value.

Latest News

Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.

More News

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Vietnamese securities companies race to boost capital amid high market demand

Vietnamese securities companies race to boost capital amid high market demand

These companies understand the importance of boosting their capital to remain competitive and avoid falling behind their peers.
Central bank required to take urgent measures to stabilise gold market

Central bank required to take urgent measures to stabilise gold market

The Government has directed the State Bank of Vietnam (SBV) to urgently inspect and supervise to stabilise the gold market.
Revenue from casino contributes about VND9,000 billion to the State budget

Revenue from casino contributes about VND9,000 billion to the State budget

VCN - The management of lottery and casino business activities is one of contents asked by National Assembly delegates to Minister of Finance at the question and answer session took place on the morning of March 18, within the framework of the 31st session of the National Assembly Standing Committee.
Read More

Your care

Latest Most read
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - Sharing at the conference "Consumer goods and distribution industry: M&A trends and investment strategies to raise capital for Vietnamese enterprises", organized by the Business Association of High Quality Vietnamese Goods and the Leading Business C
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
Mobile Version