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Bancassurance changes in the name of sustainability

Invest Global 09:25 29/02/2024

Le Hoai An, a banking consultant and trainer at Integrated Financial Solutions, talked with VIR’s Hong Dung about the new regulations on bancassurance operations in Vietnam.

Both the Ministry of Finance and the State Bank of Vietnam (SBV) have introduced new regulations on bancassurance. What is your assessment?

Bancassurance changes in the name of sustainability Le Hoai An, a banking consultant and trainer at Integrated Financial Solutions

Financial products, like all the rules of life, need time to develop sustainably. Life insurance products are inherently a product that means financial protection for families, that is, the person who buys life insurance products must first feel the need for it after receiving the consultancy.

When it goes against the rules, there will inevitably be conflict and need to be adjusted, but the loss of confidence in the market is not a cheap price.

Bancassurance is not an innovation from commercial banks in Vietnam, it has long been an integral part of the global system. Banks that offer traditional products therefore have a much higher level of penetration than life insurance products or fund certificates. That’s why the new financial products that need to be introduced will have to be distributed through the bank’s extensive network.

Moreover, a bank that holds data on the financial transactions of individuals will be perfectly capable of assessing the financial capabilities and needs of families in the product consulting process.

What are the biggest shortcomings in the implementation of bancassurance in Vietnam?

The most unreasonable thing about implementing bancassurance in Vietnam is that the bank hasn’t prepared an appropriate infrastructure. Unlike other traditional banking products, insurance products need a consultation to thoroughly assess their suitability to customers.

Therefore, customer understanding and the expertise of the authorised staff play an important role in determining product quality. That’s not to mention the fact that when providing life insurance products, employees have to be with customers throughout their life cycle, to help resolve their claims.

The original product design consultant for the customer should also be a lifecycle service support, with a high level of expertise to ensure support and maintain the best customer experience.

Bank staff who are providing life insurance products are still mainly in charge of carrying out the business of raising capital and lending. They are merely producing profile and product information rather than being trained as a professional insurance consultant in advising on appropriate financial solutions.

It’s the precise training, coupled with the massive index pressure, that has led many bankers to focus on selling products rather than consulting and designing solutions for customers. The bank’s infrastructure has constraints that make the data insufficient to assist bank employees in assessing the suitability of existing client files, rather than focusing on extracting new borrowers for sale.

In addition, the infrastructure of banks and affiliated insurance companies is not effectively integrated, but there are many overlaps, thereby affecting the customer experience with the bancassurance channel.

Can the new regulations solve the problems of discontent that you just mentioned?

An SBV circular from last November not only emphasises the prohibition of life insurance products being supplied with loans, but also sets specific requirements for banking infrastructure and human resources that banks need to prepare for when distributing life insurance.

Building a complete infrastructure for bancassurance is a key element in improving customer awareness and full consultancy. This not only requires a strong investment in IT and data management, but also requires an in-depth understanding of insurance products.

A modern infrastructure significantly improves the ability to analyse and propose financial solutions tailored to the specific needs of each welder. This investment not only demonstrates commitment to providing quality services, but is also a decisive factor in creating a competitive advantage in the increasingly intense bancassurance market.

Standardising the employee capability in the bancassurance sector is an important step towards building a professional sales team, capable of delivering insurance solutions tailored to the real needs of customers. The November circular clearly stipulates that the insurance salespersons need to be specially trained and operate independently of the traditional bank product sales force.

This ensures professionalism and avoids conflicts of interest, thereby enhancing the quality of consulting and customer satisfaction. The sale of insurance products, especially investment-linked insurance, needs to be thoroughly assessed and advised by consultants to ensure that the product is suitable and that the customer can complete the insurance contract.

I appreciate the changes. However, it will also require a change in perception of cross-selling products from bank management.

An insurance product consultant at the bank must be trained and positioned as a product consultant and aimed at exploiting customer financial needs rather than exploiting existing customer base for sale enhancement.

Insurance products offered by bankers should meet clients’ diversified financial protection needs, rather than merely seeking high commissions from distribution. Then, the consulting and financial planning role of the staff will be restored to the right position, promoting the real strengths of the bancassurance channel.

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