Customers at a branch of the Prudential insurance company in Hanoi (Photo thebank.vn) Hanoi (VNS/VNA) - Touting it as a win-win deal for everyone, banks and insurance companies in Vietnamare promoting the “bancassurance” model to exploit a market with huge untappedpotential.
Globally, the co-operationbetween commercial banks and insurance companies to supply banks’ clients withinsurance policies is already an established trend. It is seen as creating aprofessional, convenient and reliable sales channel for insurance policies.
A number of large banks in Vietnamhave been entering deals with insurance companies, offering insurance productsor insurance benefits to the banks’ customers, with both sides taking theirshare of commissions.
With such a partnership,insurance companies can take advantage of commercial banks’ large number ofclients and nationwide networks, while customers only need to visit a singlepoint of sale and contact at their preferred banks to gain access to a fullrange of insurance services.
For the majority ofVietnamese banks and insurance companies engaging in bancassurance, the averageservice charge for banks is 20 to 30 percent of the value of an insurancepolicy.
Normally, both sides signexclusive distribution agreements for five to 15 or 20 years, rather thanshorter, non-exclusive co-operation deals.
For example, the Sai GonThuong Tin Commercial Joint Stock Bank (Sacombank) and the Dai-ichi LifeInsurance Company Limited (Dai-ichi life) signed a 20-year co-operationagreement early September, while the Vietnam Technological and Commercial JointStock Bank (Techcombank) and Manufacturers Life Insurance Company (Manulife)signed a 15-year bancassurance deal later the same month.
Bank representativesexplained the exclusive collaborations saying they needed more cohesiveco-operation in order to focus on development, while insurance companies saidthey were confident the partnership will prove beneficial.
Nguyen Le Quoc Anh,Techcombank’s general director, said that in 2016 alone, the total amount ofinsurance premiums paid via the bank’s accounts was roughly 520 billion VND (23.1million USD), but by co-operating exclusively with Manulife, Techcombank plans toincrease this figure to 10 trillion VND (445.4 million USD) in just five years.
He added that by signingthe agreement with Manulife, the bank aimed to double its bancassurance growthto about 40 percent.
Manulife’s insuranceproducts of will be sold through Techcombank’s distribution channel of 300branch offices, making them the two largest shareholders of the bancassurancemarket in Vietnam.
While representatives fromSacombank did not mention the specific number of insurance policies they hopeto secure in future, the bank expects income from their share in insurancepremiums to account for 15 to 20 percent of its services, helping create asolid, long-term financial foundation and support for a more favourablepost-merger restructuring plan.
In August 2017, the VietnamJoint Stock Commercial Bank for Industry and Trade (VietinBank) also enteredinto a co-operation deal with Aviva Vietnam Life Insurance Company Limited (Aviva),while both Vietnam Maritime Commercial Joint Stock Bank (Maritime Bank) andVietnam International Commercial Joint Stock Bank (VIB) arecross-selling exclusive insurance products for Prudential Financial Inc(Prudential).
Both newly established andwell known banks are signing long-term and exclusive agreements with insurancecompanies as an important part of their retail operations.
Seeing strong growthopportunities, insurance companies are stepping up investments and capitalisationto increase their financial capacity, develop new distribution channels, andenhance technology adoption in customer service towards increasing their marketshare.
There are about 50 insurersin Vietnam, offering a wide variety of products ranging from asset protectionto life insurance. However, only 0.7 percent of the total population isreported to have bought any form of life insurance policies, and thebancassurance sector accounts for just 6 percent of the market.
Nevertheless, as generalincomes, living standards and education levels increase, especially among theurban middle class, customers are likely to be more interested in the benefitsthat insurance companies bring to the table.
Chung Ba Phuong,Techcombank’s head of Insurance Division, said that in the first sixmonths of 2017, the life insurance payouts in Vietnam topped 7.2 trillion VND (320 million USD), showing that the insurance sector is thriving.
As of this year’s thirdquarter, the life insurance market has continued to maintain a high and stablegrowth rate, with revenues increasing by nearly 34 percent over the same periodin 2016, he said.
In 2016, Manulife increasedits capital from 975 billion VND to 1.82 trillion VND (43.4 million USD to 81million USD), while Dai-ichi went from 1.14 trillion VND to 1.76 trillion VND (50.7 million USD to 78.3 million USD).
Paul Nguyen, generaldirector of Manulife in Vietnam, said bancassurance is among the most valuablemarket in the region.
He said bancassuranceaccounts for over 40 percent of the insurance business in Indonesia andThailand, and even up to 70 percent in more developed countries, becoming themain insurance distribution channel. Meanwhile, in Vietnam, the correspondingcontribution was just 10 percent at the end of 2016.
Therefore, Paul Nguyen said, hebelieves that the insurance market in Vietnam will continue to grow strongly inthe next few years; and exclusive cooperation with the banking network wouldhelp insurers significantly improve their profitability from the servicesector.-VNA
VNA
