Some insurance companies and commercial banks said they were continuing to negotiate to sign strategic cooperation agreements to jointly exploit and utilise this new potential sector.
Bancassurance, a channel offering insurance products or benefits to the bank’s customers, can contribute up to 50 percent of the life insurance industry’s revenue in the next three years. This prospect coupled with the tendency of credit tightening made banks focus more on risk-free life insurance products.
Credit customers are invited to buy insurance
In need of a housing loan, Nga (residing in District 9, HCM City) passed by a branch of a joint stock bank in District 1 asking for interest rates and loan procedures. The counsellor said that with a loan of about 400 million dong, mortgaging by the house to buy, the required interest rate was about 12.5 percent per annum, floating according to the market. However, if she agreed to buy an additional life insurance product costing about 8 million dong in the first year, she would enjoy preferential interest rate of only 11.5 percent per year, more beneficial than not buying insurance.
This counsellor added that selling insurance through banks was being promoted, so customers would be given preferential loans if they borrowed money in combination with buying insurance. Due to the race to gain market share in the bancassurance segment, many commercial banks put the target of selling life insurance to employees’ credit targets. Both insurance companies and commercial banks recognised that bancassurance was booming, contributing more and more to sales and profits of both sides.
Prudential Insurance Company representative said that his company had been significant cooperation with the banks such as Vietnam Bank for Agriculture and Rural Development (Agribank), Maritime Joint Stock Commercial Bank (MSB), Vietnam Public Joint Stock Commercial Bank (PVCombank), Standard Chartered Bank (Vietnam) Limited, Vietnam Thuong Tin Joint Stock Commercial Bank (Vietbank), United Overseas Bank (UOB) to jointly exploit this new sales channel. Prudential did not disclose the growth of bancassurance but Prudential said that this customer group was growing relatively fast. In 2017, the number of new customers through bancassurance accounted for more than 20 percent of Prudential Vietnam’s total revenue.
“With this sales channel, banks are insurance agents and most of their customers have financial knowledge so insurance companies often design some specific products. Banks also encourage us to focus on group of linked investment products”- Prudential representative shared.
Manulife Vietnam Insurance Company is also cooperating with three banks including Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Saigon Joint Stock Commercial Bank (SCB) and Tien Phong Joint Stock Commercial Bank (TPBank). Bancassurance channel contributed about 30 percent of Manulife Vietnam’s revenue by the end of 2018. According to Manulife Vietnam representative, life insurance products distributed via bancassurance channel bring maximum benefits to customers through the convenience of one-stop financial transactions, combining the resources of partner banks and insurance companies to serve the high-end customer segment.
Hanwha Life Insurance Vietnam Co., Ltd also cooperates with Woori Bank and Shinhan Bank to sell insurance products via banks. Hanwha Life Vietnam leader said that in countries with developed insurance sector, this channel takes high proportion of new insurance premium, while in Vietnam, and it had just developed recently so there was still a lot of potential for exploitation.
As for commercial banks, some of them continuously recruit hundreds of employees to provide insurance consultation and to sell services after shaking hands with insurance companies. In the context of tightening credit growth, the banks focus more on life insurance products, considering it as one of the key products, especially when bancassurance brings a risk-free income source and attractive discount fee.
According to an incomplete statistics, bancassurance currently accounts for about 21 percent of the entire life insurance industry’s revenue. This is a significant increase compared to the growth of this channel in the first days of launching.
In 2015, the contribution was only 10 percent and doubled in the past three years. The potential of bancassurance is believed to be able to reach 50 percent of the industry’s contribution in the next three years.
In many countries, the purchase of life insurance has become very familiar. In Vietnam, according to the Vietnam Insurance Association, only eight percent of the Vietnamese population currently participates in life insurance. Therefore, the market balance is still very large when more and more people are interested in risk prevention, finding ways to protect themselves and their families by combining financial investment through life insurance products. This is a huge opportunity for both insurance companies and commercial banks.
