Bancassurance activities will have to strictly comply with the provisions of the Law on Insurance Business, according to the State Bank of Vietnam (SBV).
|A bank employee introduces insurance products to a customer. - Photo cafef.vn |
Under a newly-issued directive, the SBV has required banks, which provide bancassurance products, to strengthen their inspection and supervision on bancassurance activities to strictly handle violations.
The move was made after it was reported that despite unwillingness, some customers were forced to buy insurance products introduced by bank staff to get bank loans as the purchase was allegedly made mandatory in a few banks as part of the conditions of their loans.
The SBV’s direction, therefore, is aimed to stop the insurance cross-selling mechanisms.
According to the SBV, it will strengthen the management and supervision of insurance sale activities of banks’ agents to ensure compliance with the law.
The SBV required banks not to forcefully sell insurance to their customers. Any actions related to compulsory insurance in order to get loans will be strictly handled.
Earlier, the SBV also issued a document, requiring bankers to thoroughly explain the terms and conditions of insurance products to customers, and help customers fully understand their rights and benefits. It also asked banks to disseminate the prevailing regulations on insurance business to their employees to avoid violations.
Among many activities that became popular service income sources for banks, bancassurance - an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base - has become a crucial growth driver.
In the context of closer control on credit growth and more limited room to expand net income margins, many banks have been trying to boost service income from bancassurance activities. Bancassurance has become a strategic focus of many banks, especially under the retail banking strategy. This is not only to serve individual customers’ comprehensive financial needs but also to diversify banks’ service income sources.
Bancassurance activities in Vieht Nam have increased significantly, with both local and foreign insurers proactively expanding their bancassurance network by initiating tie-ups with lenders. Some typical bancassurance deals included VietinBank and Manulife, ACB and Sun Life, and Vietcombank with FWD.
According to the Vietnam Insurance Association, new insurance premium revenues through the bancassurance channel in 2019 accounted for 29 per cent of total new premium revenues, increasing from 10 per cent in 2016. In 2020, premium revenue from this channel continued to grow and accounted for more than 30 per cent of the total new premium revenue.