The cooperation between banks and insurance companies is growing, bringing many benefits to both banks, insurance companies and customers. According to experts, bancassurance channel will develop stronger in the near future. The consolidated financial statement in the second quarter (Q2) of 2019 of some commercial banks showed a sharp increase in revenue from their insurance business and services. Typically, Military Commercial Joint Stock Bank (MB) announced 1.043 trillion dong of net profit from insurance business and services, up by 2.5 times compared to the same period of last year, accounting for more than 57 percent of the total net profit from service activities. Vietnam International Commercial Joint Stock Bank (VIB) said that its revenue from insurance commission fees reached 436 billion dong, up by more than five times compared to the same period of 2018. Meanwhile, the revenue from business and insurance services of Tien Phong Commercial Joint Stock Bank (TPBank) was 249 billion dong, accounting for 51 percent of the total net profit from service activities from the beginning of the year to the end of Q2.
According to experts, the potential of Vietnam’s insurance market is very huge and the current development is not commensurate. Although banks’ income still mainly comes from credit activities, in the future, income from service activities will increase. Therefore, the banking insurance cooperation still has a lot of room to develop. Recently, bancassurance channel in Vietnam has recorded many new “handshakes” between banks and insurance companies such as Kien Long Commercial Joint Stock Bank (Kienlongbank) and AIA Vietnam Life Insurance company, VIB and Prudential, etc.
Since the bancassurance cooperation is to exploit each other’s strengths to bring benefits to both banks and insurance companies, both parties expect long-term commitment. Dai-ichi Life and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) expect to have up to 20 years of cooperation. For some other bancassurance deals, the signed contracts are for up to 15 years, such as the deal between Prudential and VIB, Manulife and Vietnam Technological and Commercial Joint Stock Bank (Techcombank), AIA and Vietnam Prosperity Commercial Joint Stock Bank (VPBank), etc.
For insurance companies, bancassurance is an important distribution channel to help insurance sector access larger customer segments with the opportunities to dominate the insurance market in Vietnam. In addition to cross-selling products, insurance companies can cooperate with banks in using idle money in the most efficient way. An important factor which makes bancassurance channel grow is that it does not only bring benefits to banks, insurance companies and also customers.
The integration of banking services and insurance helps customers ensure financial security while it is also a form of long-term investment. Customers who buy insurance at banks will enjoy many incentives attached to banks’ service packages. Typically, the savings product called “Tich luy tai tam” of Techcombank offers customers a reasonable interest rate and a free insurance and many other benefits and services with the total maximum insurance amount reaching up to 2.4 billion dong.
For MBAL An Phat insurance product of MB, customers can borrow unsecured loans and enjoy insurance benefits corresponding to their real outstanding loans, in which the periodic insurance premium is integrated into the lending interest. For An tam tin dung product of Sacombank, during the insurance period, when a customer has insurance event (except for the cases under the exclusion of liability clauses), Dai-ichi Life Vietnam will pay the credit balance and the interest arising from the latest periodic premium payment or the latest extension date of the insurance contract to the date of the insurance event, etc.
The cooperation between banks and insurance companies, according to experts, will continue to develop stronger. According to Dr Vu Dinh Anh, banks are in higher position thanks to their available advantages, because banks has a huge customer base, infrastructure, technology and many attractive products and services. Therefore, insurance companies need banks more.
However, Dr Anh also made a recommendation that “after the competition period among banks, the market will start to see big insurance companies and even companies owned by foreign investors. At that time, the position of banks and insurance companies will certainly change. Therefore, in this period, banks need to make good use of their advantages to choose reputable and reliable partners, aiming for long-term benefits instead of immediate ones.
Talking about the development trend of the cooperation between banks and insurance companies in the near future, an expert said that the two sides do not need to merge into subsidiaries because banks and insurance companies have their own function, so they should only be linked more closely.
