Before ACB, many banks have signed exclusive bancassurance deals

21-Nov-2020 Intellasia | NDH | 6:02 AM Print This Post

Asia Commercial Joint Stock Bank (ACB) has recently signed an exclusive contract of insurance distribution with Sun Life Vietnam for 15 years the bank’s first exclusive insurance cross-selling partnership. Before that, the bank was partner of AIA, Manulife and FWD.

The wave of banks signing exclusive bancassurance deals with insurers arose many years ago. In 2017, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Manulife Vietnam signed a 15-year exclusive insurance contract. This cooperation is expected to bring about 10 trillion dong of insurance premium to the bank in five years. In the same year, AIA and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also signed a 15-year exclusive insurance distribution cooperation agreement. There was also an exclusive contract signed between Dai-ichi Vietnam and Saigon Hanoi Commercial Joint Stock Bank (SHB) for distributing insurance in 15 years. Dai-ichi Vietnam also signed a five-year contract with Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) and a 20-year contract with SHB.

In 2018, National Citizen Commercial Joint Stock Bank (NCB) and Prevoir Vietnam Life Insurance Company Limited also signed exclusive contract for distributing life insurance products in 15 years.

By the end of 2019, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) signed an exclusive insurance distribution agreement with FWD Vietnam in 15 years. The value of the deal was not revealed.

In mid-June this year, the Bloomberg once mentioned that Manulife Financial Corporation is the leading candidate to become an insurer which distributes insurance products via Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), through an agreement with Aviva. After VietinBank sold the entire remaining stake in VietinBank Aviva to Aviva Vietnam, the insurer signed an exclusive cooperation deal with Vietcombank in distributing life insurance products in April 2017. “This contract could be valued at several hundred million dollars,” said the source of Bloomberg.

For banks, insurance commissions are considered as one of the growth drivers of service income. Viet Dragon Securities Company (VDSC) said that the bancassurance fees are expected to further rise thanks to the increasing number of customers and the improving proportion of bancassurance channel in the total insurance premium income (particularly for life insurance segment).

Techcombank, Vietnam International Commercial Joint Stock Bank (VIB) and Military Commercial Joint Stock Bank (MB) respectively take the lead in life insurance premium revenue in the industry. However, VDSC predicted that the market share will continue to be reallocated when banks with reputation and large customer base will participate more actively in this channel.

The uptrend of growth is currently seen in VIB, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), ACB and VPBank. Particularly, Vietcombank and ACB are expected to strongly expand their bancassurance market share thanks to the newly signed insurance deals, supported by the large and loyal customer file.

Observing the recent exclusive bancassurance deals, we can see that the bancassurance fee of each customer ranges from 20 to 35 US dollars. The Analysis centre of Saigon Securities Incorporation (SSI Research) assumed that the exclusive bancassurance fee for the case of ACB could reach about 2.5 to three trillion dong, facilitating the bank to increase equity in 2021.

Potential shortcomings

The cooperation with insurance companies is forecasted to bring banks a source of income, but it also shows many potential shortcomings. In recent time, many customers of banks complained about being “forced” to purchase insurance in many forms such as being offered more preferences or simpler borrowing procedures to the loan package which comes with an attached insurance product.

In early March 2020, the State Bank of Vietnam (SBV) Ba Ria Vung Tau branch once responded to an individual’s information that ACB Rach Dua branch in Vung Tau province wanted the customer to buy a life insurance contract worth 13 million dong per year when borrowing a mortgage loan. If so, the prepayment penalty would also be lower. After that, ACB Rach Dua branch reported to the SBV the working results with the customer and confirmed that all activities are normal and in accordance with regulations.

In early November, the SBV issued a written document requesting banks to strictly abide by the regulations on insurance business. The SBV emphasized that banks are not allowed to associate compulsory insurance purchase with the credit granting, in other words, they should not “force” the customer to buy insurance in order to get a loan.

In addition, the offer and the explanation of terms and conditions of the insurance products to customers buying insurance at banks must also comply with the law, in order to help customers correctly and fully understand their rights, and the terms and conditions of insurance payment.

For bank staff, the SBV requires banks to propagate and disseminate the law on insurance business, and pay attention to violations of the insurance law.

According to a survey by Navigos Search, banks increased the recruitment of sales staff to serve the need of cross-selling insurance, although the industry is still in the period of reviewing operating costs under the direction of the SBV’s Governor. From the second quarter of 2020, the segment of employees and specialists saw a trend to recruit large number of sales positions to cross-sell life insurance products.


Category: Finance, Vietnam

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