In addition to paying a certain amount of money for customer and network exploitation, insurance companies also train bank staff on the products and all related knowledge. There are insurance companies that pay banks up to 50 percent 60 percent of revenue in the first year.
In the middle of May 2020, we went to a bank renew the savings term. The bank staff advised us to save 500 million dong with a term of six months or more and buy insurance package of 15-year term with the fee of the first year of 36 million dong, then we would be awarded three million dong, plus 0.15 percent 0.20 percent interest rate. This is a preferential programme cooperated by the bank and insurance companies, ending on June 30.
Meanwhile, Mai Anh (from District 5, HCM City) came to Bank L. to borrow money for her business after the Covid-19 pandemic, and she was offered a loan of one billion dong by the bank’s staff with a 0.5 percentage point reduction in interest rate and without proof of income. The condition for this offer was that she put collaterals at the bank and bought life insurance packages for 15 years. This employee explained that with this insurance, if the borrower faced health problems and could not pay the debt, the insurance company would pay debts to the bank on behalf of the borrower.
The deputy general director in charge of a bank in HCM City recently admitted that banks were fighting to act as exclusive agents for life insurance companies as a way to increase income in the context that credit activities had been increasingly difficult. Specifically, life insurance companies, in addition to the cost to exploit the number of customers, the network and the human resources of the bank, also have to pay the commission up to 50 percent 60 percent of revenue in the first year. The estimated amount can be up to hundreds of billion dong per year.
The data of bank S. shows that from September 2017 until now, this bank is an exclusive agent for a life insurance company from Japan, total revenue up to two trillion dong. Thus, for nearly three years, bank S. has an additional income of hundreds of billion dong each year.
According to the reporter, at the end of 2019, a multinational life insurance group originating from Hong Kong (China) signed a 15-year exclusive distribution contract with bank V. Accordingly, in the first five years, this insurance group paid $400 million (about nine trillion dong) to the bank.
Currently, many other banks are also preparing to deploy as exclusive agents for foreign insurance companies.
Because of high revenue and commitment to partners, many banks have assigned high insurance targets to employees and managers. Even some banks have issued regulations to only disburse when borrowers agree to buy insurance. Since then, banking employees have to find ways to sell insurance, putting pressure on customers. And borrowers, though not yet or not in need, have been “banked” by the bank to buy insurance.
Le Trung (Phu Nhuan District, HCM City) who used to borrow billions of dong and buy life insurance through banks reflects interest rates as a common tool that bank staff often offer to customers. “They offered a home loan rate of 12 percent per year and then asked me to agree to buy insurance to submit to the superior to lower the interest rate. With the loan of five billion dong, the bank agreed to lower one percent interest rate (equivalent to 50 million dong per year). If I agreed and paid premiums for the first year, I would be disbursed by the bank, at that time, I thought that I benefited from lower interest rates but I did not. When I studied carefully, I realised that the interest rate of housing loan at that bank was set at 11 percent per year “, Trung shared.
Another tactic is that banking employees often look for shortcomings in loan documents, then find ways to help customers complete the procedures and persuade them to buy insurance. Linh, a credit officer of a bank in HCM City, acknowledged a number of banking staff, because of the pressure and attractive commission, up to 10 percent of insurance sales, used many tactics to sell insurance to customers who were not eligible for a loan.
Leaders of banks recognise that cooperating with life insurance companies to sell products not only brings benefits to banks but also helps employees have more income. However, banks have no policy of forcing customers to buy insurance. Because before buying, customers are very carefully counselled. Whether the customer buys or not is voluntary. However, in reality, there are still some cases that are not consistent with the banks’ policy.
Talking to the Nguoi Lao Dong newspaper, Nguyen Van Thuan, University of Finance and Marketing, said that selling life insurance was a form of business cooperation. And in the context of declining credit, collateral and income of customers have not yet met the loan conditions, bank staff often offer borrowers to buy life insurance to ensure loan safety. However, in order for credit relations not to be distorted, banks need to provide customers with all information about loan conditions, the relationship between loans and insurance products. Moreover, borrowers need to calculate the cost when borrowing money to see if the bank’s proposal to buy insurance is reasonable, if not, they should choose another bank to borrow.
