Selling insurance products through banks (bancassurance) not only contributes to increase the revenue of insurance companies, it also helps banks and customers achieve certain benefits goals.
Benefits of bancassurance
Bancassurance model is a cooperation between banks and insurance companies with the aim to distribute life and non-life insurance products and services. In particular, life insurance companies have the advantages of long-standing products with diverse benefits, while banks have the advantage of potential customers, available human resources and network coverage.
In the last few years, the development of technology with the professionalism of banks has been bringing convenience to customers with optimal one-stop services. Thus, insurance companies and banks are actively cooperating to exploit and promote each other’s strength.
In the bancassurance model, banks act as intermediaries to sell insurance products of insurance companies. Banks gain income from customer exploitation activities based on the premium revenue.
Experts believe that with the clear gradual shift towards increasing revenue from service fees and improving efficiency in business, the cooperation between banks and insurance companies is an inevitable trend. Accordingly, insurance companies linking with banks to provide insurance services to different groups of customers, such as launching investment products, associated products to offer “insurance banking” product package to customers, connecting with banks to improve the quality of after-sale services, etc.
Great potential
According to data from the Insurance Association of Vietnam, in 2016, bancassurance accounted for about 10 percent of the revenue of insurance companies. This number rose to 20 percent in 2018 and is forecasted to reach 50 percent in the next three years.
The convenience and growth of bancassurance channel have led to exclusive agreements on long terms from 10 to 20 years. The most typical cases are the cooperation of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Dai-ichi Life in providing insurance services in up to 20 years, the deal between Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Manulife in 15 years, the contract between Nam A Commercial Joint Stock Bank (NamABank) and FWD in 15 years, etc.
On October 19th 2019, generali Vietnam and Orient Commercial Joint Stock Bank (OCB) signed a strategic cooperation agreement with a term of 15 years. With this cooperation, OCB will exclusively distribute life insurance products of generali Vietnam such as Vita Live Confidently, Vita Live Optimistically, Vita Live Prosperously, Vita Golden Shield, etc.
According to Dai-ichi Life, after two years shaking hands with Sacombank, by the end of August 2019, the revenue from bancassurance channel reached nearly 1.2 trillion dong with more than 300,000 contracts issued, far exceeding the plan. It is thanks to the smooth cooperation of the two parties in fulfilling the commitment of investing in resources, providing superior products and improving service quality.
Meanwhile, according to representative of Asia Commercial Joint Stock Bank (ACB), in the first six months of 2019 alone, the bancassurance revenue of ACB grew by up to 250%, reaching the Top 5 bancassurance of the market. The revenue this year is expected at 600 billion dong. At the same time, ACB also sets to expand the income from this channel by three times compared to the previous year and achieve a ratio of insurance contract retention of over 90%.
However, in developed market around the world, revenue from bancassurance may account for 70 percent of the premium revenue of insurance companies. To achieve this goal, many experts said that it is important for insurance companies to invest in agents, customer care and train bank staff so that they can be professional financial advisors.
