Author: TNTP LAW

Recently, Bancassurance activities have been causing public concern due to various issues. It all started with the sharing and online discussions of insurance buyers, leading to a series of groups of policyholders submitting requests to the authorities, particularly the police, to address criminal activities in the insurance sector. Bancassurance operations in Vietnam have experienced different forms of distortion that infringe upon the legitimate rights and interests of participating customers. In this article, TNTP’s lawyers will present the main causes of distortion in Bancassurance operations in Vietnam.

1. Inadequate insurance advisory quality through banks

Bancassurance activities in Vietnam are often provided by banks offering insurance services from partner insurance companies. In such cases, bank employees act as direct insurance sales advisors to customers. However, these bank employees receive insufficient and informal training in insurance services, lacking comprehensive knowledge of the insurance products they advise customers on. Moreover, the pressure to meet insurance sales targets coupled with lucrative remuneration has led a significant number of bank employees to deliberately distort concepts and provide incomplete information about insurance packages, leading to customer misunderstandings and contract agreements.

In pursuit of substantial benefits, many bank employees are willing to employ any means necessary to secure insurance contracts with customers. This not only contradicts the principles of fair buying and selling but also harbors the potential to constitute criminal offenses of abuse of trust and misappropriation of assets.

Currently, according to some sources, many savings account holders in banks have been advised by sales staff to purchase the “Investment Confidence” package, which is a linked product between the bank and the insurance company. The bank staff advises that this is an “investment savings” package with high-interest rates and “inclusive life insurance,” allowing customers to withdraw the principal and interest after 5-6 years. Trusting the enticing advice of bank employees, customers proceed to enter into contracts and deposit hundreds of millions of Vietnamese dong as instructed. However, customers later discover that the funds they deposited for investment were used to pay life insurance premiums, and they are unable to withdraw the full amount until fulfilling the insurance obligation (from several years to several decades). Furthermore, bank employees did not provide any documentation indicating the fees customers needed to pay or the relevant details of life insurance contracts, only presenting customers with selected sections for signing.

It can be seen in this case that bank employees intentionally provided misleading advice, distorting the concepts of “savings” and “life insurance,” leading to customer misunderstandings. Additionally, they deliberately concealed documents that would reveal the nature of the civil transaction, leaving customers completely unaware of the contract’s essence. According to the provisions of the law, such behavior can constitute the offense of Fraudulent Misappropriation of Property under Article 175 of the Criminal Code, and the punishment imposed on the perpetrators depends on the severity of the violation, ranging from six months to twenty years of imprisonment.

2. Legal provisions need to ensure consistency

With the effective date of the Insurance Business Law 2022 from January 1, 2023, many specific regulations regarding the sale of linked insurance products by banks have been established, tightening the responsibilities of insurance business parties. Furthermore, the law also supplements provisions on prohibited behaviors in insurance activities, such as fraud in insurance operations, forgery of documents, intentional distortion of information in files, coercion, and threats in contract agreements. These changes have contributed to building a healthier operating environment for Bancassurance.

However, these changes are only brought about by the Insurance Business Law. Regarding the responsibilities of banks, the current Law on Credit Institutions still lacks specific provisions regarding the bank’s responsibility in Bancassurance activities. The new law only regulates the scope of insurance activities that banks are permitted to provide, without any provisions related to the bank’s responsibility and the requirements for qualifications and competence that bank employees need to meet when advising on insurance sales to customers. Therefore, the draft Law on Credit Institutions, which is currently under development and amendment, will need to supplement additional regulations to bind the bank’s responsibilities in Bancassurance activities, ensuring consistency in the system of legal norms and creating a healthy business environment in insurance operations within the banking system. This will contribute to protecting legitimate rights and interests, and building and strengthening trust within the community and society towards these activities.

Above is the article on the topic “Causes of distortion in Bancassurance operations in Vietnam” by TNTP lawyers. We hoped that this article provides useful information to readers.

Best Regard,

Bancassurance activities in Vietnam are currently experiencing rapid growth and have become the main source of revenue for many large banks in the country. However, in recent times, Bancassurance activities have been raising several issues that cause harm to insurance buyers, specifically through the practices of insurance salespeople who engage in coercion and provide incomplete information to gain the trust of customers for contract signing. Is Bancassurance in Vietnam undergoing negative transformations? Let’s explore this issue with TNTP’s lawyer in the following article.

1. What is Bancassurance?

Bancassurance is a term combining “Banking” and “Assurance.” It is a business collaboration between an insurance company and a bank to create a distribution channel for shared products and services between insurance and banking for customers. Currently, in Vietnam, instead of solely providing traditional banking products and services such as savings, credit, and asset management, banks participating in Bancassurance also offer insurance products such as life insurance, health insurance, car insurance, and various other types of insurance provided by their partner insurance companies.

2. The Nature of Bancassurance

Bancassurance brings benefits to both banks and insurance companies. For banks, this service provides a relatively large source of revenue and attracts new customers through insurance services. At the same time, it enhances the relationship between the bank and its existing customers as the bank can simultaneously provide financial services along with diverse insurance services. As for insurance companies, Bancassurance expands their customer reach and helps increase insurance sales, while also enabling insurance companies to access the bank’s customer base, penetrate the market, and provide insurance products to bank customers.

The value of Bancassurance for customers with service needs cannot be overlooked. Customers can easily access both banking and insurance services in one place, saving time and effort in researching and purchasing various financial products. More importantly, customers can receive special benefits when using Bancassurance services between affiliated banks and insurance companies.

Therefore, the nature of Bancassurance is not inherently bad. However, currently, there are emerging distortions in Bancassurance that have caused dissatisfaction and even outrage among customers.

3. Distortions in Bancassurance Activities in Vietnam

a) Advisors disregarding customers to secure contract signing

Due to the pressure of meeting insurance sales targets and the high commission levels, insurance salespeople often disregard any means or methods to “tempt” customers into signing contracts. In many cases, advisors only provide favorable information, and attractive policies, and are willing to overlook payment terms or unilateral termination clauses that may be disadvantageous. Moreover, insurance contracts contain a vast amount of content that can extend to hundreds of pages, making it difficult for customers to review all the details and instead have to rely on the advice of insurance agents. This further exposes customers to risks if the advisors are not acting in their best interest.

b) Bank savings being converted into life insurance

In recent months, there have been numerous cases where customers who deposited money into bank savings accounts were later advised to purchase a product that is a combination of a bank and insurance company offers. Bank employees advised customers that this is a high-interest investment savings package that also includes life insurance. Customers trusted the advice and believed that the life insurance package was included as an additional service alongside their primary savings account. However, after signing the contract, customers discovered that the nature of the contract was completely different from what was advised, and it contained several highly unfavorable terms and conditions.

Specifically, bank employees provided misleading advice and misrepresented the concept, leading customers to misunderstand the service they were entering into. Customers thought they were making savings deposits, but in reality, they were participating in an insurance policy. If customers decide to terminate the contract and stop paying premiums, they would lose the entire amount they had “deposited” previously. However, the period of time that customers have to continue participating in the insurance can extend from a few years to several decades, depending on the contract terms.

According to legal regulations, intentionally providing false information to deceive customers into entering contracts can be subject to criminal liability for the offense of misappropriation of assets through abuse of trust, as stipulated in the Penal Code. Therefore, depending on the severity of the violation, individuals involved in such actions can face penalties ranging from six months to 20 years of imprisonment.

The above is an article by TNTP lawyers on the topic of ” Distortion in Bancassurance practices in Vietnam”. We hoped that this article will bring value to readers.

Sincerely,

Recently, a series of incidents related to the distribution of insurance through banks (Bancassurance) involving customer coercion and deception in purchasing life insurance has increasingly caught the attention of the media and government agencies with jurisdiction. In this article, a lawyer from TNTP will provide their perspective on the limitations of Bancassurance operations in Vietnam today.

1. What is Bancassurance?

Bancassurance is a combination of the terms “banking” and “assurance.” It is business cooperation between an insurance company and a bank aimed at creating a distribution channel for the two services to offer their products and services to customers. Currently, in Vietnam, Bancassurance is understood simply as the practice of banks selling insurance products to customers alongside their usual deposit and loan services.

2. Bancassurance Operations in Vietnam

Bancassurance has been present in Vietnam since the early 1990s. Currently, the life insurance market in Vietnam is very dynamic with large brands such as Bao Viet Nhan Tho, Prudential, Manulife, AIA, etc. generating tens of trillions of Vietnamese dong in revenue each year.
Although the current life insurance operations bring significant revenue to the state budget and meet the needs of society, Bancassurance has recently experienced many limitations that affect social order and the trust of customers in insurance services. Specifically:

a) Bank employees coerce customers into buying life insurance

Currently, many customers come to banks for loans, but when they apply, bank employees create difficulties and force them to choose to buy life insurance to be approved, or if they buy insurance, they will receive a lower interest rate.

In addition, when the bank coerces customers to purchase insurance if the customer cancels it, they will be subject to penalties or increased interest rates, which can affect their benefits. This makes many customers reluctantly continue to pay insurance premiums annually, even if they may not really understand or need insurance but only to facilitate their loan application.

b) Insurance advisory banks that lack transparency to build trust for customers to sign insurance contracts

In many cases, customers who borrow money are presented with enticing information by insurance advisory banks, such as higher insurance interest rates compared to bank interest rates, to persuade them to purchase unnecessary or unsuitable insurance packages. Some bank employees even intentionally provide misleading advice to customers about the nature of insurance activities, leading them to believe that they are investing through the purchase of life insurance policies.

As a result, after a period of time, bank employees commit to making a profit or being eligible to withdraw “insurance profits,” but customers later discover that the bank does not have such policies or that the terms and conditions of the commitments require additional conditions to be met before customers can receive the “profits.” Buyers then realize they have been tricked into signing insurance contracts with a series of obligations that cannot be easily terminated. Even if customers insist on terminating the insurance contract, they will not be able to recover the insurance premiums they have paid. On the contrary, customers may be penalized for unilaterally terminating the contract before its expiration date.

It can be seen that with a series of incidents related to Bancassurance, many customers have gradually lost their trust in this activity. However, state agencies with jurisdiction such as the State Bank of Vietnam, Inspection Departments of Ministries, Departments, and Finance Ministry have taken necessary measures to inspect and handle violations to ensure social order and the current operation of the banking and insurance industries.

The above is an article by TNTP on “Problem from Bancassurance activities in Vietnam today”. It is hoped that this article is useful to readers.

Best regards,

Life insurance is a service that provides many values, ensuring the health, life, and well-being of participants, partially mitigating risks, and also serving as a means of accumulating assets for the future. However, currently, many types of insurance services are causing issues that can lead to unforeseen debts for customers. In the following analysis, TNTP lawyers will examine the risks of bad debt that customers may encounter when entering into life insurance contracts.

1. Lack of understanding of the entire contract content by the policyholder

When insurance agents advise on insurance packages, policyholders often choose packages based on the agents’ recommendations without thoroughly examining the contract’s content. In doing so, policyholders put themselves at risk because they easily sign a contract without fully understanding its content, including binding terms and penalty clauses in case they wish to terminate the contract.
In reality, life insurance contracts often contain a large amount of content, ranging from tens to hundreds of pages, making it impossible for customers to have enough time and patience to read every clause and provision. This lack of understanding about the contract’s content can lead to various risks in the future, especially when customers rely solely on the advice of insurance agents when choosing a policy.

2. Insurance sales staff causing customer misunderstandings

Due to the lengthy nature of insurance contracts, customers can only rely on insurance agents, who are professionally trained and can accurately determine their requirements to select the most suitable insurance package. However, in Bancassurance (insurance distribution through banks) operations, many bank employees have limited expertise as they only receive rapid training through a few courses when introducing insurance packages. As a result, they may provide incomplete advice, leading to customer misunderstandings about the benefits they receive and the monthly insurance premiums. This can result in customers entering into inappropriate insurance contracts with unnecessary provisions that incur significant costs. Overall, this situation puts customers at a disadvantage, unexpectedly burdening them with high insurance fees compared to the contents they were advised by the staff.

Furthermore, in reality, due to increasing pressure to meet insurance sales targets, many bank employees involved in Bancassurance activities only present terms and content that are beneficial to customers while intentionally concealing unfavorable information and risks associated with the contracts. The purpose is to induce customers to enter into agreements. In such cases, customers become the most vulnerable to the risks of the advised recommendations of insurance sales staff. This erodes the trust of customers in both banks and insurance companies, significantly reducing their confidence.

3. Customers no longer can participate in insurance premium payments

Due to various reasons, during their participation in life insurance, customers may no longer have the financial capacity to pay insurance premiums. This leads to customers becoming debtors and potentially facing penalties or interest charges under the insurance contract. When customers fall into a situation of bad insurance debt, the insurance company will take measures to recover the debt, significantly impacting the customer’s quality of life.

However, according to the new provisions in Article 26 and Article 27 of the Insurance Business Law 2022, effective from January 1, 2023, in cases where customers no longer have the ability to pay insurance premiums, they can unilaterally terminate the insurance contract. In such cases, the life insurance company is responsible for reimbursing the insurance money to the customer before the unilateral termination of the insurance contract and has the right to deduct the insurance premiums up to the point of termination. Therefore, these regulations have limited the risks for customers in cases where they can no longer participate in insurance premium payments. However, if the customer’s insurance contract was entered into before the effective date of the Insurance Business Law 2022, they still need to fulfill the payment obligations as previously committed.

The above is an article by TNTP’s lawyer on the topic: “Risk of bad debt of customers when entering into life insurance contract” We hoped that this article provides value to readers.

Best Regrad.