Selling insurance through banks: difficulties and challenges remains

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  • Sep 23, 2014

Mr.Stephen Clark, CEO of Bancassuarance AIA Vietnam stated many difficulties and challenges face insurers before taking off.

In recent years, more and more insurance companies cooperate with banks in product distribution. The so-called Bancassurance has two types: exclusive-cooperation and non-exclusive cooperation. Exclusive cooperation is the form that the bank is committed to only distribute insurance products of one insurance company. Meanwhile, non-exclusive partnership allows banks to distribute products of different insurance companies at the same time. The products which are distributed through these forms of cooperation include the simple protection products, usually being sold bundling with mortgage loans, to complex life insurance products, combining savings and investment.

Both cooperation forms are well developed and popular in the world. In Vietnam, Bancasssurance is not so new and but also not really popular for people.

Legal system will take times to complete, bring about subsequent legal consistency in related areas (banking and credit). Although the Ministry of Finance is consulting related parties to complete the Draft Circular which guidelines bancassurance business but we can not see the immediate of bancassurance these days.

In addition to legal factors, the difficulty of banking sector is also one of the causes for bancassurance obstacle.  Currently, local banking sector is facing liquidity pressure, loan portfolio improvement and capital increasing requirements. So, though partnering with insurance companies to sell insurance products for bank customers is a good way to generate income apart from interest rate revenue, but nothing shows that bancassurance will be the top priority for banks at the moment.

Moreover, the biggest challenge for the banking industry is the short-term vision of customer in savings and investment. In general, customers only choose the term of 3 to 12 months. When combining with relatively high interest rates of short-term capital mobilization, it is easy to understand that why customers confuse as they purchase traditional life insurance products with longer terms and lower interest rates compared to short-term deposit to make the most of current high interest rates.

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