In the past three years, the insurance market recorded a boom of bancassurance channel. However, it is followed by difficulties that need to be dealt with, especially for non-life insurance.
According to insurance companies, revenue from this channel currently accounted for approximately 20 percent of the total revenue of new exploitation in the whole market. When banks become a potential distribution channel, not only life insurance businesses, but non-life insurance businesses are also competing aggressively to be included in the shortlist of banks.
According to some non-life insurance enterprises, in order to enter the bank’s shortlist, in addition to maintaining a deposit at the bank, insurance enterprises must develop more preferential insurance policies for their customers, along with other cooperation mechanisms such as sales care cost for bank staffs, etc.
Meanwhile, to deploy bancassurance channel, besides investment in human resources, technology, etc. insurance enterprises also need promote emulation programmes, promote sales activities for employees of the sales department. Otherwise, this important force may turn to selling insurance to rival businesses.
“Non-life insurance businesses have to spend a lot of money to sell products through banks. In particular, the mechanism of cooperation and promotion of selling products accounted for almost all business costs”, said a non-life insurance enterprise representative.
Unlike life insurance businesses that can diversify products sold through banks, the majority of the non-life insurance’s banking revenue is in the category of motor vehicle insurance products, which are not highly effective.
“Centralised payment cooperation mechanism for banks is at a high level, while being bound by the Ministry of Finance’s regulatory framework for commissions, support mechanisms, etc. This forces non-life insurance enterprises to sign service contracts if they want to develop bancassurance. In addition, not many bank employees involved in the sales process lacked insurance agent certificates, affecting the quality of consulting”, said a non-life insurance enterprise representative.
Talking to reporters, Chief Executive Officer (CEO) of a non-life insurance business, said that the bancassurance channel had been increasing, which had led to higher costs to increase competitiveness. In order not to affect the interests of customers, state management agencies needed to closely monitor, as well as reasonable policies for that model of operation.
In fact, in some developed markets such as Korea, banks and insurance enterprises are under the same management by a regulatory agency. This helps to have a general regulation on revenue coming from banking channel, while paying the monopoly fee to banks is also strictly controlled to avoid unfair competition, affecting the financial situation of consumers.
At the recent meeting of the non-life insurance business, some insurance enterprises have proposed authorities to comment on insurance business mechanism in the direction of forcing related parties to comply with current regulations, strengthen inspection to handle violations, increase punishment for deterrence, etc.
“Regarding the business mechanism (commissions, commendations, agent support, etc.), although the insurance law has specified the payment as well as the sanctions for handling violations, the actual number of expenditures is much higher, especially through bancacassurance channel. Therefore, regulatory agencies should consider loosening regulations on business mechanisms so that insurance enterprises can balance their business performance, avoiding the situation that the mechanism has been implemented but still cannot avoid the risk”, said a leader of an insurance enterprise.
