Expansions emerging in bancassurance services

Vietnam’s banks are taking advantage of the increasing demand of high-quality insurance services, which in turn bring vast potential to their future income, while both local and foreign insurers are proactively expanding their bancassurance network.

Expansions emerging in bancassurance services
Expansions emerging in bancassurance services, source: pgbank.com.vn

On April 28, Bao Viet Life Insurance Corporation and PGBank – the banking arm of Petrolimex – inked a comprehensive agreement to provide exclusive bancassurance services. Bao Viet Life and PGBank will gear up their activities with a major focus on providing Bao Viet insurance products through PGBank’s channels, payment, and collection services, diversifying banking products.

Nguyen Phi Hung, general director of PGBank, said that bancassurance is one of the most appealing distribution channels of insurance services nationwide.

“The strategic cooperation between banks and insurance is an inevitable trend, thus opening up new opportunities for both sides. We are very honoured to be a trusted partner of Bao Viet Life Insurance to provide seamless, best-in-class insurance products to our customers,” Hung added.

Bao Viet Life Corporation, meanwhile, is deemed as one of the market leaders with nearly 22 per cent market share of life insurance premium revenue in 2020. Currently, Bao Viet Life boasts a strong network of 76 affiliates expanding in 63 provinces, with more than 360 transaction offices and 170,000 consultants.

In March, MSB also signed a monopoly bancassurance agreement with Prudential, the same partner which has had an exclusive partnership with the bank over the past three years in southern Vietnam similar to the Dai-ichi Life deal in the north. The 15-year partnership has brought an estimated upfront fee between $80-90 million for MSB, according to SSI Securities.

Meanwhile, Vietcombank Securities said that the cooperation since 2013 brings the partnership between the two sides to a new level in the form of distribution, at the same time proactively providing optimal products and services of Prudential to MSB’s customers through existing channels as well as new channels, focusing on digital platforms.

“Regarding profit accounting from prepayment fees, we believe that MSB is likely to choose the reducing balance method instead of straight-line accounting approach within the next 3-5 years to avoid a sudden and major impact on the bank’s equity and business plans,” Vietcombank Securities noted.

Vietcombank Securities estimated that a 15-year exclusive insurance contract with Prudential insurance company could bring MSB VND3.5 trillion ($152.2 million) in upfront fees. By the end of 2020, MSB’s insurance sales were in the top 10 of the bancassurance market.

The tie-up is estimated by Vietcombank Securities to be worth $370 million, one of the most remarkable monopoly deals in Vietnam’s insurance market last year.

Earlier last year, Prudential Vietnam also created a tie-up with SeABank to form a 20-year exclusive bancassurance partnership to offer investment-linked and life insurance products. And in December, VietinBank and Manulife entered an agreement to establish an exclusive 16-year bancassurance partnership to better meet the growing financial and insurance needs of Vietnamese people; while Sun Life Vietnam formed a 15-year exclusive bancassurance partnership with ACB.

Back at Vietcombank, just last month the lender and pan-Asian insurer FWD Vietnam Life Insurance officially launched an exclusive 15-year bancassurance partnership.

In the first quarter of this year, Vietcombank’s insurance commission revenue increased to VND390 billion ($17 million), much higher than the same period last year.

According to the plan, in addition to VND1.7 trillion ($74 million) of upfront fees, it also plans to collect VND1.11 trillion ($47.8 million) of insurance commissions in 2021. If the initial plan is successfully completed, the total amount for Vietcombank will be VND2.8 trillion ($121.7 million) in 2021 from exclusive bancassurance with FWD.

General director of Sacombank Nguyen Duc Thach Diem also said that in the first four months of this year, revenue from bancassurance agreement with Dai-ichi Life Vietnam reached more than VND400 billion ($17.4 million).

Elsewhere, Ho Chi Minh City-based lender HDBank has not yet decided to team up with any particular suitors in the bancassurance competition. “Many international life insurance companies have offered to cooperate with HDBank, but the negotiation has not been completed due to the pandemic,” said the bank’s vice chairwoman Nguyen Thi Phuong Thao at its general shareholders meeting last month. “We are not under any pressure to sign an exclusive bancassurance at the moment, because the contract value in 2021 or next year would be much significant.”

Pham Quoc Thanh, general director of HDBank, said that since the last quarter of 2020 the bank has reinforced insurance cross-selling initiatives, with many positive performances in return. The bank sets a target this year to collect VND1 trillion ($43.5 million) of insurance service fees.

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