Bancassurance market heats up with deals worth trillions of dong
Bancassurance market heats up with deals worth trillions of dong
The Vietnamese bancassurance market is heating up with a notable exclusive bancassurance agreement signed between LienVietPostBank and Dai-ichi Life Insurance Company of Vietnam (Dai-ichi Life Vietnam).
The LienVietPostBank and Dai-ichi Life Vietnam 15-year deal was particularly noticed by the market as it was a combination of two well-known brands in the banking and insurance sectors, and also saw the involvement of strong international consulting institutions.
Specifically, J.P. Morgan - the world's leading financial institution – was the exclusive financial advisor, while Linklaters was the legal consultant and Milliman was the valuation consultant for LienVietPostBank. Linklaters is the world’s leading law firm and currently provides legal consulting services in over 100 countries and participates in legal advice for many bancassurance transactions in Asia. Meanwhile, Milliman is also the world’s leader in consulting life insurance valuation and did many consulting contracts for bancassurance cooperation transactions in Asia.
The deal value has not yet been disclosed. However, with the brand value of LienVietPostBank and Dai-ichi Life as well as the list of the deal’s consulting and valuation institutions, it can be seen that this is definitely a huge deal worth an estimated trillions of Vietnamese dong.
LienVietPostBank is a rare name remaining in the Vietnamese banking system that has not signed an exclusive bancassurance contract. The bank's profit in the first three quarters of 2022 increased by 72 per cent over the same period last year and met the target for the whole year, thanks to a large contribution from the service segment (up 43 per cent).
Being healthy with a quality retail customer file, a large branch network and a thriving digital banking system, LienVietPostBank is a bank that many insurers keep an eye on, including Dai-ichi Life Vietnam - one of the largest life insurance companies in Viet Nam.
The agreement is expected to bring great benefits to both LienVietPostBank and Dai-ichi Life. In fact, before signing the exclusive bancassurance contract, the strategic partnership between LienVietPostBank and Dai-ichiLife Vietnam started in November 2016. After six years of cooperation, LienVietPostBank and Dai-ichi Life Vietnam have provided financial services to nearly 180,000 customers with total premiums collected that far exceeded the initial targets.
LienVietPostBank was also listed among the top nine banks with the largest bancassurance premium revenue in the domestic banking system.
The signing between LienVietPostBank and Dai-ichi Life Vietnam has made the local bancassurance market more exciting. By 2021, 61 bancassurance agreement contracts were signed in the country, of which 40 were exclusive agreements and 21 were non-exclusive. This year, before the LienVietPostBank and Dai-ichi Life Vietnam deal, the market continued to witness more handshakes between banks and insurers such as Agribank and FWD Vietnam, and Shinhan Life Vietnam and Shinhan Vietnam.
According to banking expert Can Van Luc, with the advantages of networks, skilled staff and digital development, banks are effective distributors of insurance products. Therefore, bancassurance has been booming. This cooperation brings benefits to both banks and insurers as well as helps provide more diverse services for customers.
Experts believe the growth potential of bancassurance is still very large.
Pham Thu Phuong, deputy director of the Ministry of Finance’s Insurance Supervision Authority, said bancassurance activities in Viet Nam have developed strongly. In the first half of 2022 alone, premium revenue through the bancassurance channel accounted for 41 per cent of the insurance industry’s total new premium revenue.
Insurance sales through banking channels have helped the insurance industry maintain a stable growth rate, Phuong said.
Luc said many banks have actively implemented bancassurance activities in recent years. In the first half of 2022 alone, the bancassurance market grew by 23 per cent. Fee revenue from bancassurance currently accounts for about 5-10 per cent of the banks’ total operating income.
According to Luc, Viet Nam's bancassurance market still has a lot of positive growth potential because the country’s economic growth will increase by an average of 6.5-7 per cent per year until 2025. Viet Nam's insurance coverage rate is still low at 2.7 per cent and the Government wants to raise the rate to 3.5 per cent by 2025. In particular, life insurance coverage in Viet Nam is still very low, with only about 10 per cent of the Vietnamese population buying life insurance, against 50 per cent in Malaysia and 80 per cent in Singapore.
Currently, the percentage of customers, who bought insurance at banks, is also very low, accounting for only 5-8 per cent of the banks' customers so the room for banks to accelerate in the segment is large. With an increasingly improved digital platform, banks can easily expand their insurance distribution channels through their existing customer files.
With the positive growth since the beginning of 2022, the bancassurance market is forecast to surge by more than 30 per cent this year.
