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

Expected to catch up with the recovery of wood and furniture exports from trade promotion activities

Expected to catch up with the recovery of wood and furniture exports from trade promotion activities

VCN - With great interest from manufacturing businesses as well as international buyers, VIFA EXPO 2024 is expected to open opportunities for businesses to capture the ongoing recovery in the wooden furniture market, world furniture.
Binh Duong export growth hopes to bounce back

Binh Duong export growth hopes to bounce back

VCN - Thanks to positive signals from the recovery of export orders, Binh Duong is expected to regain growth momentum in 2024.
Create a fair "playing field" for the gold market

Create a fair "playing field" for the gold market

VCN - Commenting that the goal of stabilizing the gold market is still the right direction, economic expert Associate Professor, PhD. Ngo Tri Long (photo), former Director of the Price Market Research Institute (Ministry of Finance), said that it is necessary to be aware of the constant movement and demands of the economy to have flexible management policies, create healthy, equitable development and in accordance with international practices.
Adapt and proactively respond to opportunities to expand exports

Adapt and proactively respond to opportunities to expand exports

VCN - According to Dr. Nguyen Manh Hung (photo), Senior Head of the Department of Supply Chain Management and Logistics, RMIT University, facing the export situation forecast still have many difficulties, Vietnamese businesses need to improve their proactiveness with support from management agencies to expand markets and take advantage of opportunities for more effective export.

Latest News

Tax sector implements solutions on revenue management to achieve “dual goals”

Tax sector implements solutions on revenue management to achieve “dual goals”

VCN – Sharing direction of ta management in 2024, Mr. Mai Son, Deputy Director General of Taxation said that the Tax sector has implemented solutions to achieve “dual goals” of completing the revenue target while supporting enterprises in operation and economic growth.
Securities attractive investment channel

Securities attractive investment channel

VCN - According to experts, with recent developments in the stock market, it can be seen that securities are currently an attractive investment channel.
Public investment - Expectations from key transportation projects

Public investment - Expectations from key transportation projects

VCN - As one of the three main growth engines of the economy, in recent times, public investment has played an important role, leading and activating all social resources for development investment. This important driving force continues to have very positive signals with disbursement results reaching 2.58%, higher than the same period. 2024 strives to achieve a disbursement rate of at least 95%.
More policy rate cuts forecast in 2024 to support economic growth

More policy rate cuts forecast in 2024 to support economic growth

There is still room for the State Bank of Vietnam (SBV) to make another policy interest rate cut in 2024 to boost economic growth, analysts believed.

More News

Urgently complete Decree on application of Global Minimum Tax inline with roadmap

Urgently complete Decree on application of Global Minimum Tax inline with roadmap

VCN – Regarding the development of Decree on the application of Additional corporate income tax (Global Minimum Tax), Deputy Director General of the General Department of Taxation Dang Ngoc Minh has requested units developing the Decree to closely cooperate and give opinion in line with actual operations of corporations that are affected by Resolution 107/2023/QH15 to effectively facilitate taxpayers during the implementation of the Decree.
Strengthen the applications of coercive measures to collect tax debt

Strengthen the applications of coercive measures to collect tax debt

VCN - The General Department of Taxation requests tax departments to fully implement measures to urge, enforce and disclose information under the provisions of the Law on Tax Administration to recover tax debt.
PM orders SOEs to improve production, business efficiency

PM orders SOEs to improve production, business efficiency

Prime Minister Phạm Minh Chính has requested State-owned enterprises (SOEs) to reform governance, improve production and business efficiency, and strongly promote development investment.
Vietnam acts to combat money laundering, terrorist financing

Vietnam acts to combat money laundering, terrorist financing

Deputy Prime Minister Le Minh Khai on February 23 signed a decision promulgating the national action plan to implement the Government's commitment to prevent and combat money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction.
Banks ask central bank to extend June 30 payment deadline

Banks ask central bank to extend June 30 payment deadline

Industry experts said the current challenging economic situation and difficulties faced by businesses severely affect their ability to meet debt obligations. As there are no shortcuts to resolving old bad debts, a significant number of newly classified bad debts, which should be expected on June 30 this year, will put tremendous pressure on the country’s financial sector, as well as businesses.
Efforts to remove obstacles to upgrade the stock market

Efforts to remove obstacles to upgrade the stock market

VCN - According to the sharing of Ms. Vu Thi Chan Phuong, Chairwoman of the State Securities Commission (SSC), in addition to completing the main criteria of international rating organizations in upgrading the stock market (TTCK), the State Securities Commission (SSC) continues to improve domestic regulations on the basis of researching international regulations and practices to promote Vietnam's stock market to develop in a sustainable direction, creating a favorable environment to attract international investors and foreign indirect investment capital flows.
The State Treasury implements nine key tasks in 2024

The State Treasury implements nine key tasks in 2024

VCN - The deployment of key tasks plan in 2024 (refer to the Plan) of State Treasury was issued to focus resources on completing tasks during the year and following the proposed strategies.
SBV injects large amount of money to support capital for banks

SBV injects large amount of money to support capital for banks

The State Bank of Vietnam (SBV) on February 20 net injected more than 5 trillion VND (nearly 204 million USD) into the banking system through the open market operation (OMO) channel to support capital for commercial banks.
Vietnam Stock Exchange’s revenue down nearly 44% in 2023

Vietnam Stock Exchange’s revenue down nearly 44% in 2023

The Vietnam Stock Exchange (VNX) reported revenue of over 1.92 trillion VND (78.26 million USD) in 2023, down nearly 44% compared to the previous year.
Read More

Your care

Latest Most read
Tax sector implements solutions on revenue management to achieve “dual goals”

Tax sector implements solutions on revenue management to achieve “dual goals”

VCN - 2023 is the year that the domestic economy faces many difficulties and challenges and is negatively impacted by the world economy, causing great pressure in the revenue collection of the Tax sector.
Securities attractive investment channel

Securities attractive investment channel

VCN - According to experts, with recent developments in the stock market, it can be seen that securities are currently an attractive investment channel.
Public investment - Expectations from key transportation projects

Public investment - Expectations from key transportation projects

VCN - For 12 component projects in the 2021-2025 period, although the first implementation years still had many problems for land and construction materials, investors and contractors had made efforts to organize construction and closely follow progress p
More policy rate cuts forecast in 2024 to support economic growth

More policy rate cuts forecast in 2024 to support economic growth

There is still room for the State Bank of Vietnam (SBV) to make another policy interest rate cut in 2024 to boost economic growth, analysts believed.
Urgently complete Decree on application of Global Minimum Tax inline with roadmap

Urgently complete Decree on application of Global Minimum Tax inline with roadmap

VCN - On November 29, 2023, the National Assembly approved Resolution No. 107/2023/QH15 on the application of additional corporate income tax under Global Anti-Base Erosion Rules. The Resolution takes effect from January 1, 2024, and is applied from fisca
Mobile Version