Local banks earn high profits from bancassurance activities

Local banks earn high profits from bancassurance activities

Many banks have unveiled their first-quarter financial reports with soaring profits in the last months, even compared to pre-COVID-19 times. Soaring profits not only come from escalating interest income but also a jump in earnings from bancassurance.

CEO of Vietcombank Nghiem Xuan Thanh said in the first quarter this year, his bank recorded more than VND8.6 trillion ($373.9 million) in pre-tax profit during the period, a 70 per cent jump on-year. Of this figure, VND390 billion came from the revenue of the bancassurance activities (bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base. This partnership arrangement can be profitable for both companies).

During the bank’s annual general shareholder meeting, the bank’s board of directors said the exclusive insurance partnership between Vietcombank and FWD Group (a multinational insurance company based in Hong Kong) was the biggest transaction in Viet Nam. Last year, Vietcombank ranked 13th in life insurance distribution channels. It took 8th place in the first quarter of 2021.

Nguyen Duc Thach Diem, CEO of Sacombank, said that in the first four months of this year, profits from bancassurance reached more than VND400 billion. Sacombank and Japanese-owned Dai-ichi Life Insurance Company of Viet Nam signed an exclusive 20-year bancassurance partnership agreement in 2017.

Under the agreement, Dai-ichi Life Vietnam would be the sole insurer selling life insurance products through Sacombank’s network.

Nguyen Thi Phuong Thao, HDBank's standing vice chairman, said that HDBank's profits to be gained from bancassurance activities were expected to reach VND1 trillion in 2021.

HDBank and Dai-ichi Life Vietnam signed a long-term exclusive bancassurance partnership agreement in 2015. However, the bank has just restarted its bancassurance activities from the end of the fourth quarter of 2020.

According to industry insiders, four years ago, the value of bancassurance partnership agreements fluctuated around $100 million for 15-year cooperation. After many local banks joined this lucrative segment, the value of bancassurance partnership agreements has sharply increased.

Earlier last year, Vietcombank and FWD made a deal of about $400 million, while ACB Bank signed a $370 million partnership agreement with Canadian insurer SunLife.

SSI Securities Corporation of Vietnam reports that two major exclusive bancassurance partnership agreements signed between ACB and SunLife Vietnam and VietinBank and Manulife Vietnam will create many changes in life insurance market share.

Pham Doan, standing vice chairman of the Board of Directors and General Director of LienVietPostBank, said his bank was also among the top commercial banks with the highest insurance sales in the market.

LienVietPostBank signed an exclusive partnership agreement with Dai-ichi Life Vietnam for 5 years and the agreement will finish in 2022. The bank will negotiate to sign exclusive partnership agreements with other partners. This year, the bank sets a target of earning revenue of VND700 billion from bancassurance activities. Last year, the bank posted VND451 billion.

In another development, after receiving complaints from clients who are forced by credit institutions to buy compulsory insurance products in order to get bank loans, the Ministry of Finance states that it asked insurers to strengthen supervision on their insurance agents at credit institutions and commercial banks.

Authorised agencies also required insurance companies to work with commercial banks to uncover and strictly handle any insurance agents forcing clients to buy insurance products.

The Ministry of Finance also said that to make the insurance distribution channels at banks more effective and not cause inconvenience to insurance buyers, the ministry will continue working with the State Bank of Vietnam to improve policies and strengthen their management and supervision activities as well.

Any insurance companies or agents found violating the law will be strictly handled by authorised agencies.

The State Bank of Vietnam (SBV) issued Document No.7928/NHNN-TTGSNH on October 30, 2020 providing guidelines on insurance operations by credit institutions and foreign bank branches for insurance business.

SBV highlighted that banks are not allowed to associate compulsory insurance purchase with credit granting to customers – in short, “forcing” customers to buy insurance in order to get bank loans is not permitted.

bizhub