|VietinBank is seeking over 50 per cent growth in the life insurance segment this year |
Alongside an August assessment by the Ministry of Finance (MoF) that highlighted various irregularities in the cross-selling of insurance through banking channels, financial reports for the second quarter of 2023 indicated that, among the eight banks providing detailed revenue breakdowns from insurance activities, seven experienced a reduction in their insurance earnings.
MB recorded the largest reduction in absolute terms, with an almost $38 million decrease in revenue.
KienlongBank, SeABank, Techcombank, TPBank, and VIB saw substantial decreases ranging from 46 to 93 per cent.
Although the total income derived from insurance services by these eight banks fell by almost one-third compared to the same period last year, it still amounted to approximately $272 million, with MB alone realising nearly $177 million in insurance revenue during the first half of this year.
These figures exclude the significant prepayment fees from exclusive distribution agreements that banks have engaged in with partners over recent years.
The crisis had led to a marginal 1.6 per cent decline in total premium revenue in the first half of this year compared to the same period last year. The primary reason for the decline lies in a loss of consumer confidence.
Economist Can Van Luc identified three contributing factors to the current bancassurance crisis.
“First is the consumers’ subjective and insufficiently informed decisions, driven partly by greed and the allure of high-interest rates. Moreover, the quality and transparency of insurance product consultancy needs improvement. Finally, external factors, including the 2022 stock market situation, caused investment insurance products to incur losses, prompting contract cancellations and legal disputes,” Luc said.
While the financial statements of life insurance enterprises are not publicly available, non-life insurance enterprises reported commendable growth in the second quarter of 2023 compared to the same period in 2022.
Bao Viet achieved a 15.7 per cent increase in consolidated after-tax profit for the first six months. VietinBank Insurance witnessed a 38 per cent rise in pre-tax profit during the first half of this year. BIDV Insurance reported a 61 per cent growth in total consolidated pre-tax profit during the first half. Likewise, PVI Insurance realised a pre-tax profit reflecting a 32.2 per cent increase over the same period last year.
Nguyen Hoang Dung, deputy general director at VietinBank, said that the bank had an ambitious growth target for the insurance segment in 2023, aiming for a 30 per cent increase, with a 51 per cent boost in the life insurance segment through Manulife.
“Given VietinBank’s current insurance penetration rate of only 0.25 per cent, there’s considerable growth potential through the right strategies and solutions. I believe that the bancassurance segment could offer substantial added value to VietinBank,” he said.
The current size of the national insurance market in relation to GDP remains modest, with just over 10 per cent of the population participating in life insurance. As part of the Development Strategy for Vietnam’s Insurance Market by 2030, the goal is to increase this participation to 15 per cent by 2025 and to 18 per cent by 2030.
The ongoing adjustments and oversight of the insurance market in Vietnam were also deemed essential by experts. The 2022 Law on Insurance Business, enacted at the beginning of 2023, has created a more favourable environment for insurance companies while safeguarding the interests of policyholders, with both insurance companies and banks actively working to rectify their advisory practices to restore consumer trust.
Luc suggested that to revive the bancassurance channel, insurance providers must review their products comprehensively, addressing services, processes, and regulations.
“Insurance agents should define their responsibilities clearly. Moreover, financial literacy needs to be enhanced to convey that insurance is a complex investment product, not merely a savings deposit,” he said.
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