Bancassurance: new tendency in insurance sector

During recent years, competitiveness in the insurance market has become fiercer and insurers are seeking new strategies for garnering business.

One of product that is attracting insurers’ attention is the linking between insurance and banking sector or bancassurance in both non-life insurance and life insurance markets.

According to statistic from Insurance Supervision Department under the finance ministry, the country’s insurance market has been developing rapidly. In 1995, Vietnam had only one insurer; now the country has 50 insurers including 11 life insurers and 28 non-life insurers, 10 insurance brokers and one reinsurer. Total premium of insurance sector during 2003-2010 increased from 11.376 trillion dong to 26.121 trillion dong, averaging 18 percent growth a year, much higher than GDP growth. Of which, revenue from premium saw a rise of from 10.39 trillion dong to 21.195 trillion dong (increasing 15.33 percent) and revenue from investment activities jumped from 985 billion dong to 4.926 trillion dong, increasing 37.95 percent.

Notably, total compensation paid by insurers during 2003-2009 reached 40.5 trillion dong, averaging 5.786 trillion dong. Insurers’ total investments to the economy soared from 14.602 trillion dong in 2003 to 66.913 trillion dong in 2009, reaching the average growth of 30 percent. The insurance sector has also created jobs for over 150,000 workers including 123,000 insurance agents.

However, Vietnam’s premium accounts for only 1.75 percent of GDP whereas it is 8-10 percent in regional developed countries and 8 percent in the world.

The country’s insurance market mainly focuses on big cities while population in rural and mountainous areas accounts for up to 80 percent. Additionally, insurance products have not met demands of customers yet. Insurers still ignore others sectors such as credit insurance, agriculture insurance and responsibility insurance.

In order to develop, insurers have diversified their products and services and improved the service quality and upgraded information technology system, of which many are actively carrying out bancassurance product model.

According to Trinh Thanh Hoan, head of Insurance Supervision Department, this model is developing strongly all over the world. Of which, the number of banks launching bancassurance in the US accounts for 20 percent and it is 70-90 percent in the Europe. The Asian market, this form is becoming more popular. In Vietnam, the bancassuarnce form is still new.

The market witnessed the cooperation between Saigon Commercial Joint Stock Bank (SCB) and Bao Viet Life Insurance Co. This new product is the combination between Bao Viet’s An Nghiep Thanh Cong insurance product and SCB’s Tiet Kiem Nhan Van product. Following is the cooperation between Eastern Asia Commercial Joint Stock Bank (EAB) and Bao Viet Life.

Most recently, Mekong Delta Housing Development Commercial Joint Stock Bank (MHB) and Bao Viet Group (Bao Viet) signed a strategic cooperation agreement to jointly develop the Bancassurance product including both life insurance and non-life insurance.

Anyway, Bancassurance has not become popular in the market yet due to mainly technology platform and limited professional ability of banks and insurers.

In the future, Bancassurance will be accelerated through products such as payment services via cards, cash collection and spending service and remote cash payment services.

Cong thuong

Tags: Vietnam Bancassurance, Vietnam insurance, Vietnam insurance industry, Vietnam insurance market