Bancassurance, also known as cross-selling service between commercial banks and insurance companies, being considered a very potential product.
This form both expands business operations and increases access to customers, contributing to risk limitation for commercial banks and insurance businesses.
According to statistics of the Vietnam Insurance Association (IAV), in the first six months of 2019, the revenue from the sale of life insurance through banks (bancassurance) is estimated at 8.3 trillion dong, accounting for 17.2%. of total life insurance premium revenues.
Sharing about opportunities of bancassurance channel in the near future, Bui Gia Anh, IAV Secretary general said, in developed countries, bancassurance channel had grown strongly, accounting for 50-70 percent of total sales of life insurance premiums and Vietnam is expected to reach this figure soon in the near future. “In previous years, the bancassurance channel only accounted for a modest proportion of less than nine percent of the total market fee revenue, up to ten percent in 2018. However, it increased to 17.2 percent in the first six months of 2019, the strong breakthrough of this channel, “said Bui Gia Anh. (*)
According to IAV, in 2019, the insurance industry aims to maintain the growth momentum with the expected revenue growth of 20 percent compared to 2018. In Vietnam, there are 64 insurance businesses, including 30 non-life, 18 life insurance, 2 reinsurers and 14 insurance brokers.
Bancassurance: “The main character” of the banking service
In fact, revenue from service activities, especially from bancassurance, is on the rise and is considered a “golden egg” of many banks in the near future. According to SSI Research’s forecast, (**) the premium through bancassurance will grow by 30-40 percent and become a popular sales channel with the proportion increased to 14 percent in 2019. Such as MBBank’s insurance business accounts for about 60 percent of the total interest from service activities. Insurance became TPBank’s strongest growth segment in the first quarter of 2019 when it increased five times over the same period… (***)
Similarly, at Sai Gon Joint Stock Commercial Bank (SCB), in the first six months’ profit growth of the bank has a large contribution from non-credit services, especially the bancassurance. Specifically, SCB’s revenue from service activities reached 503 billion dong, up 58 percent over the same period in 2018. SCB earned 249 billion dong in insurance sales in the first six months of the year, doubling the same period last year. In recent years, SCB has impressed in the field of bancassurance in Vietnam with the launch of many unique products with superior features, such as the “comprehensive cancer insuranceTam An 360″ product. At the same time, SCB spent more than 7.9 billion dong to thank Manulife life insurance customers through the programmes “Give LoveFulfil Joy” (until the end of September 30, 2019) and “Peace of MindLifelong for life” (until the end of December 31, 2019).
Bancassurance activities bring many benefits for both banks and insurance companies. On the bank side, bancassurance will enhance competitiveness, increase customer retention and attract more new customers to use the bank’s services. Banks can increase revenue from providing services to customers who buy insurance. In particular, banks can increase non-interest income through banking services (transfer fees, ATMs, credit cards, etc.), transaction space rentals and commissions from insurance sales. The bank can take advantage of customer base, long-term relationship with customers and current distribution system in order to create an advantage compared to other distribution channels in the distribution of insurance products to create stable income. Thereby, the bank strengthens its brand and reputation in the market, and at the same time, creates more innovation capacity, reduces the fluctuation of profit over time due to the profitability of the banking industry as the risk in the banking and insurance is usually not in the same cycle. In addition, bancassurance helps reduce capital according to the bank’s risk.
The provision of insurance products also helps minimise the risk of irrecoverable bank loans. Moreover, this business also helps increase the mobilised capital of the bank from insurance. It can be seen in the cooperation agreements of Vietnam Life Insurance Companies with banks that include agreements to invest money or insurance premiums collected into banks.
However, IAV experts also cited a number of cases where bank employees received great rewards and also actively tried to sell insurance products, so sometimes their main responsibility at the bank is to mobilise deposits, loans and card products. At the same time, banks must be more cautious because their customers will sometimes be bothered by insurers and careless and they will leave the bank.
Cooperation between banksinsurance enterprises is a big relationship. Usually if banks focus on how much money they get from an insurance company and don’t care whether the plan is being implemented, it will lead to the fact that banks and the insurance companies do not benefit customers but make them dissatisfied. Therefore, in the process of selecting insurance partners, banks need to carefully consider the insurance business, because each insurance company and bank has different customer service strategies.
