Exploiting bancassurance ‘gold mine’

27-Feb-2019 Intellasia | Doanh nhan Sai Gon | 6:00 AM Print This Post

Distributing life insurance products through banks is considered a golden potential for businesses with its strong growth in the recent time. The typical case is the cooperation of Manulife and Saigon Commercial Joint Stock Bank (SCB). After three years of exclusive partnership, the premium revenue of the business has increased by more than 100 percent compared to the plan.

Similarly, the bancassurance business results of Prudential and Vietnam International Commercial Joint Stock Bank (VIB) in the past three years also rose sharply. The number of new life insurance contracts of VIB in 2018 soared by over 200 percent compared to 2017 and over 260 percent compared to 2016. Particularly, the PRU Flexible investment product, which not only provides financial protection but also offers customers flexibility in choosing investment funds to increase asset accumulation, attracted tens of thousands of contracts in the first 10 months of 2018.

The case of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and AIA is also similar. Only a few months after their cooperation, the revenue from the initial fund under the contract with AIA contributed nearly 900 billion dong into VPBank’s non-interest income in 2017. VNDirect Securities Company said that in the 2018 2020 period, VPBank may earn an addition of 1.445 trillion dong of commission from the sale of insurance products.

Many other banks also attained hundreds of billion dong from the long-term exclusive contracts with insurance partners, such as Vietnam Technological and Commercial Joint Stock Bank (Techcombank) with a 15-year exclusive contract with Manulife, Saigon Hanoi Commercial Joint Stock Bank (SHB) with a 15-year strategic cooperation with Dai-ichi Vietnam, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) with a strategy to cooperate with Dai-ichi to distribute insurance products on a very long term of 20 years.

Data of the Vietnam Insurance Association showed that there are about eight percent of Vietnam’s population currently having life insurance contracts. Meanwhile, in the first six months of 2018 alone, the number of insurance contracts signed via bancassurance grew by 89 percent over the same period of 2017, reaching 856,953 contracts.

Notably, the number of newly exploited contracts via bancassurance increased by 180 percent over the same period of 2017 and the new premium revenue of this channel accounted for 17.8 percent of the total newly exploited revenue of the entire market.

In return, by taking advantage of the widespread network of banks, insurance companies can access to the huge source of data of banks that bancassurance channel brings. By cooperating with insurance companies, the product and service list provided to customers of banks increase without the need to raise investment capital. Moreover, the sale of insurance products sold along with lending help banks reduce the risk of capital loss.

The great potential of the market and the increasing real demand of customers make businesses to expect to grasp this opportunity. After the successful partnership with VPBank, CitiBank, Asia Commercial Joint Stock Bank (ACB), Southeast Asia Commercial Joint Stock Bank (SeABank), etc., AIA Vietnam continued to cooperate with Kien Long Commercial Joint Stock Bank (Kienlongbank) to strengthen bancassurance exploitation.

Sharing at the press conference in December 2018, Ng Keng Hooi Chair cum CEO of AIA Group highly appreciated the golden potential of this distribution channel when Vietnam’s population soon reaches 100 million people and Gross Domestic Product (GDP) growth is higher.

Building trust with SCB partners and customers of bancassurance channel will continue to be the top priority of Manulife Vietnam in the next years of cooperation.

From the perspective of a partner of insurance companies, VPBank has also chosen bancassurance development to be one of the strategic focuses. “Life insurance is an important solution that we provide to individual customers with good financial capacity as well as to small and medium-sized businesses and households so that they can protect their families against the difficulties they can meet in life”, said VPBank’s general director Nguyen Duc Vinh.

As estimated by Swiss Re insurance group, the potential to exploit life insurance products in Vietnam reaches up to 700 billion US dollars, based on the current expected death rate. Vietnam also has factors which stimulate growth that are similar to other developing markets in the Asia with a high GDP growth and the rise of middle segment with a sharp increase in total assets and after-tax income. The ratio of insurance revenue through banks is only six percent of the total premiums, while this rate is 70 percent in the world. Thus, the potential of Vietnam’s market is very large for businesses to exploit.

 


Category: Finance, Vietnam

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