The life insurance market is boiling again because the most expected cooperation between a bank and one of the largest insurance company in Vietnam was likely to fail in the last minutes, with fairly thorny behind the scenes story.
Information from the Bloomberg recently said that the FWD has paid a placed a higher price than other rivals in the deal with Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank).
A part of the deal is that FWD will acquire Vietcombank Cardif Life Insurance joint venture.
If successful with any partner, this will be the largest bancassurance deal in Vietnam ever with an initially negotiated value of about 400 million US dollars.
So far, no official information on the deal has been announced, but financial experts assessed that the cooperation between Vietcombank and FWD could have significant impacts on the bancassurance market.
The deal that most life insurance companies have long-awaited not only creates a new cost ground, much higher in the bancassurance market in Vietnam, but also can change the size of growth as well as make changes in human resources.
“There may be a shift of bancassurance personnel from insurance companies that have developed this model to those which are starting to promote this model,” said a representative of a life insurance company.
It is no coincidence that Vietcombank’ sale of its bancassurance channel has received special attention of all insurance companies over the time.
Certainly, the first reason is that Vietcombank is a big bank with a nationwide network, high and stable growth. The next reason is that the insurance company that wins in this deal will have an additional number of customers from Vietcombank’s joint venture.
Vietcombank is the only lucrative pie for insurance companies as most of other large banks have their own partners. A source from the insurance industry said that the insurance companies participated in the bidding were very fierce but not all of them did that at any costs.
“We participated in the preliminary round and decided to withdraw as soon as we know the price of the deal,” said a senior leader of a life insurance company.
Bancassurance revenue has been growing fast from 10 percent in 2018 to more than 17 percent in the first six months of 2019.
According to statistics of the Vietnam Insurance Association, in the first half of 2019, the bancassurance revenue was estimated at over eight trillion dong. However, if compared to the bancassurance growth of other markets such as Thailand or Singapore, this is still a modest number.
“Vietnam is in an interesting development stage of bancassurance services, because more and more banks are putting bancassurance into their development strategies because they see this as a safe source of income which helps diversify financial services for customers,” said the head of bancassurance division of a large private insurance company.
However, along with concerns about personnel fluctuations as new insurance companies start to expand market share, or the costs of banking cooperation deals is increasing, the hot growth to achieve revenue target may result in a consequence in which the contract may be cancelled within the next insurance premium payment year and the quality consultancy may be decline. These are what insurance companies need to pay attention to.
Although there are different views about the method of calculating insurance cancellation rates through bancassurance channel of insurance companies, the current situation of this issue must also be looked at more objectively and comprehensively.
