It is strictly forbidden to acts of "forcing" customers to buy insurance in any form. Photo: internet

An effective distribution channel for three parties

Total insurance premium revenue in the first quarter of 2023 was estimated at VND54,186 billion, up 11.2% year-on-year. Total asset of insurance companies was estimated at VND729,096 billion, up 21.3% year-on-year; the investment of insurance companies in the economy was estimated at VND596,163 billion, up 20.9% year-on-year, reported by the Ministry of Finance.

An effective insurance distribution channel is bancassurance (selling insurance through banks). According to experts, this is a convenient distribution channel, bringing benefits to both customers, insurers and banks. Statistics from the audited financial statements in 2022, many banks collected thousands of billions of dong from insurance business and services.

For example, MB has two insurance companies; MIC and MB Ageas Life. In 2022, this bank earned more than VND10,180 billion from insurance business and services, increasing 21% year-on-year, accounting for 72% of the total service revenue.

Manulife Vietnam and signed a cooperation agreement with Techcombank for many years and help this bank earn VND1,750 billion from sale of insurance in 2022. The exclusive cooperation with AIA Vietnam insurance also helped VPBank reap more than VND 3,350 billion from insurance business and services, up 42% year-on-year.

For the whole market, according to the Vietnam Insurance Association, total insurance premium revenue through banks accounts for about 39% of total revenue and accounts for 37% of total fee income of listed banks on the stock exchange.

However, insurance is a particular business field with many strict problems in the contract, making it difficult for the buyer, even the consultant, to understand it properly and clearly. In addition, the story that banks "force" borrowers to buy insurance is also a concern for regulatory agencies.

Transparency in contracts and advice

The insurance market is considered one of the medium and long-term capital channels for the economy. However, the insurance industry in Vietnam still has many prejudices, not only with the distribution channel through banks but also with the direct distribution channel due to many "controversial" cases that have been happening. The insurance story that actress Ngoc Lan reflects is an example.

According to Lawyer Tran Minh Hai, Hanoi Bar Association, the current law on insurance is quite clear, the fault is not in insurance products and insurance contracts. However, because the contract signing lacks transparency. Insurance is a complex financial product; many disputes show that customers' decisions to buy insurance stem from their trust in attractive offers from some bankers rather than their understanding of the insurance products.

Only when encountering sanctions or other adverse factors, customers complain about problems that have mistaken or even been deceived.

The Ministry of Finance and the State Bank have continuously issued instructions on strengthening the inspection and examination of insurance distribution activities through banks; and notified sanctions for violations. However, experts say that it is necessary to complete the legal framework on the mechanism of cooperation between the banking system and insurance companies.

Mr Ngo Trung Dung, Deputy General Secretary of the Vietnam Insurance Association said that the association has requested member insurance companies to intensify training and improving insurance professional knowledge for bank staffing charge of selling insurance.

Insurance companies must have specific requirements for banks in inspecting and monitoring the quality of insurance advice of their employees and taking disciplinary actions for those who commit violations.

Mr. Ngo Trung said, in the cooperation agreement signed with the bank, it is necessary to include the criterion of the 2nd year contract retention rate. This is an important criterion to evaluate the quality of advice because if the customer does not have the need to buy insurance, or is "forced" to buy insurance, he or she will tend to cancel the contract after buying it.

In addition, insurance companies also need to proactively take measures to check and supervise the bancassurance.

The Law on Insurance Business 2022 takes effect from January 1, 2022. The draft decree guiding the implementation of the Law on Insurance Business 2022 stipulates that insurers have to record the process of consulting investment-linked insurance products and save the record for five years so that the relevant parties have as a basis for assessment and supervision of insurance consulting activities.

To avoid confusion between insurance products and banking, the draft decree also stipulates that there must be a separate counter to sell insurance at the bank's transaction office. Enterprises expect the decree and circular guiding the Law on Insurance Business 2022 issued because the above regulations will bring effective measures to make the insurance consulting process transparent and protect the interests of customers.