Insurers to face penalties for wrongdoing in bancassurance sales

July 03, 2023 | 09:47
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The Ministry of Finance (MoF) inspection reveals regulatory violations by Prudential, MB Ageas Life, Sun Life, and BIDV Metlife in their bancassurance sales practices, leading to impending penalties and increased scrutiny in the Vietnamese insurance market.
Insurers to face penalties for wrongdoing in bancassurance sales

Prudential, MB Ageas Life, Sun Life, and BIDV Metlife have been found in violation of regulations by the MoF recent inspection of their bancassurance sales practices released on June 30.

The MoF’s investigation revealed that all four companies engaged in misconduct while cross-selling insurance through bank channels, particularly in the advisory role played by their sales agents and brokers.

The most notable transgressions included instances where employees failed to provide direct advice to customers or neglected to guide them through the requisite procedures and documentation. Furthermore, the quality of advice provided by insurance companies was called into question, leading to a lack of clarity among customers regarding the products they were purchasing.

The MoF also identified cases where insurance company staff provided bank agents or employees with agency codes to assist customers in inputting their information. Additionally, the companies in question failed to adhere to the approved insurance premium rates.

"The MoF affirms that these violations will be subject to strict administrative penalties, ensuring both severity and deterrence in the market," an MoF said.

Furthermore, the ministry emphasised its commitment to transparency by announcing its intention to publicly disclose the penalty decisions.

The insurance market, particularly the burgeoning bancassurance sector, has witnessed significant growth in recent years. However, it has also been marred by unethical practices, including instances of banks pressuring customers to acquire loans concurrently with insurance policies, as well as the misrepresentation of insurance as a form of savings.

Investment-linked insurance products have been marketed by insurers as offering risk protection and profitable investment returns. However, in practice, a considerable portion of the insurance premiums paid by customers is deducted to cover various costs before being allocated to the investment-linked fund.

Based on the findings of the inspection, the MoF has called upon the four insurance companies to bolster their overall management and undertake comprehensive reforms within their bancassurance channels. Particular emphasis has been placed on the need to rectify training practices, enhance quality control mechanisms, and strengthen the supervision of insurance agents.

The measures aim to promptly detect any violations committed by agents or individuals associated with insurance agencies.

Insurance companies have also been directed to conduct thorough reviews of the operational costs associated with their agency activities, ensuring that these expenses are strictly aligned with insurance business purposes and supported by comprehensive documentation and evidence.

During the recent fifth session of the National Assembly, the government was tasked with conducting a complete review of the life insurance market, with a particular focus on investment-linked products. The objective is to address deficiencies in intermediaries and mitigate concerns related to the cross-selling of life insurance.

The MoF has also indicated that, in addition to the four companies, it will conduct specialised inspections of bancassurance practices in 10 other insurance companies throughout the year. Any violations will be dealt with rigorously in accordance with the established regulations and protocols.

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By Tri Lam

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