Bancassurance sales plummet following allegations of scams

By Quynh Trang   August 28, 2023 | 06:00 am PT
Bancassurance sales plummet following allegations of scams
A cash transaction is seen at a bank in Hanoi. Photo by VnExpress/Giang Huy
Many banks with strong bancassurance portfolios saw their commissions decline by at least 50% in the first half of this year following allegations of scams by customers.

But the quality of the service is improving after a period when many of them focused completely on sales targets, leading to complaints by many customers they were misled into buying insurance by staff who claimed it was some kind of deposit or investment.

In the second quarter, some private banks switched to overall targets for their staff, including home and car loans, reducing pressure to sell insurance.

Phuong Tien Minh, general director of insurer Prudential Vietnam, said insurance companies and banks have learned a "massive amount of lessons" in the past seven years.

During that period of hot growth, most banks sought to sell insurance at any cost with an eye on commissions rather than contract retention rates, or the period for which insurance buyers continue to pay premiums.

Some banks have recently committed to contract retention plans. Many banks had retention rates of 60-70% at the end of last year.

In May, VIB and Prudential committed to a minimum contract retention rate, and extended their tie-up to 2036.

They also agreed to establish a committee to manage standards of customer conduct, helping the insurer and the bank have the same set of standards in the event of a claim.

The head of a top five insurer, who asked not to be named, told VnExpress their company would definitely seek a contract retention rate from its bank partner when their contract comes up for renewal.

In July, the government issued a decree guiding implementation of the Law on Insurance Business with new regulations for better bancassurance services.

In the last few years customers perforce had to buy life insurance if they wanted bank loans. So many would pay the premium for the first year and stop thereafter.

The central bank has repeatedly warned banks not to make buying life insurance a precondition for loans.

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