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.