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.

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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.

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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,

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