How to handle bancassurance

In recent months hundreds of customers have accused Manulife and SCB of purporting insurance policies to be deposits with higher interest rates.

>> Finance ministry unveils wrongdoings of insurance companies

Many National Assembly delegates highlighted defending consumer rights and credit institution operations when discussing a variety of elements in the draft updated Law on Credit Institutions in the National Assembly room.

Pham Van Hoa (Dong Thap National Assembly delegation) proposed adding the regulation "Do not allow credit institutions to associate with insurance companies in order to assign bank staff to mobilize customers to buy insurance," citing the recent Manulife case, which caused customers frustration.

According to delegate Pham Van Hoa, if bancassurance is still permitted, banks must bear joint responsibility when an incident occurs with customers, as happened recently when people came to complain and the bank responded that they did not know and bear responsibility, and the broker was fired by the bank.

NA Delegate Nguyen Hoang Bao Tran (Binh Duong National Assembly delegation) stated: "Recently, there have been many disputes between individuals and organizations that borrow money from banks to deposit savings and use services with credit institutions in general."

According to NA delegate Nguyen Hoang Bao Tran, there is a situation in which consumers, particularly the elderly, come to the bank to deposit funds but are persuaded to purchase insurance contracts or corporate bonds. Commercial banks make loans to clients who have insurance contracts, and this is considered a criterion for loan disbursement.

However, according to NA delegates, there are no clear and precise norms or methods in Article 10 of the draft modified Law on Credit Organizations to protect customers' lawful rights. As a result, a separate chapter is required to safeguard clients in their interactions with credit institutions. Along with it, it must include the following content:

First and foremost, banks must accept full responsibility for all acts taken by their personnel while performing the activities and functions of the bank's operations.

Second, credit and financial service contracts must be standardized in accordance with the terms of the Consumer Protection Law or the State Bank of Vietnam's guideline, which clearly specifies critical topics such as interest rates, fees, and penalties.

Third, professional ethics or conduct in financial service providers must be regulated in accordance with the principles of justice, honesty, and ethics. At the same time, an independent agency is needed to safeguard users of banking and financial services, ensuring the smooth and speedy settlement of any disputes that emerge and avoiding scenarios where consumers file complaints or lawsuits for an extended period of time but are only slowly addressed.

Mr. Pham Van Thinh (Bac Giang National Assembly delegation) stated that banks should be allowed to function as insurance brokers. Because of this issue, there will be a conflict of interests, which has been demonstrated in practice. He considers the reduction of 70-80% for the first two years of premium revenue for life and combination life insurance to be particularly appealing. It is extremely tough for the parties to resist, and controlling their operations is quite difficult...

>> Attention must be paid to improving quality of insurance agents

It can be observed that bancassurance is producing greater dissatisfaction than ever, including the obligation of bank workers advising insurance purchases; what method to safeguard clients buying insurance at banks... In reality, the implications of a recent series of litigation relating to insurance marketed at the bank demonstrate similar issues. This emphasizes the need of correcting, modifying, and monitoring this action.

Following inspections and warnings, the Ministry of Finance has prohibited banks from selling bancassurane contracts 60 days before and after loan disbursement, as required by Circular 67, which governs the Insurance Business Law. Many people worry, however, if this rule truly eradicated compelled insurance purchases. 

It can be observed that bancassurance is producing greater dissatisfaction than ever, including the obligation of bank workers advising insurance purchases; what method to safeguard clients buying insurance at banks... In reality, the implications of a recent series of litigation relating to insurance marketed at the bank demonstrate similar issues. This emphasizes the need of correcting, modifying, and monitoring this action.

Following inspections and warnings, the Ministry of Finance has prohibited banks from selling bancassurane contracts 60 days before and after loan disbursement, as required by Circular 67, which governs the Insurance Business Law. Many people worry, however, if this rule truly eradicated compelled insurance purchases. 

According to financial expert Huynh Trung Minh, the recent period has brought useful, even "painful," experiences to banks and insurance companies; however, this difficult period must be overcome with efforts to improve the quality of service to the Vietnamese people from insurance businesses as well as banks with insurance business contracts.

On the other hand, it should be highlighted that recent issues have mostly arisen from the life insurance and non-life insurance categories, which provide many critical products and services to assist enterprises and individuals in minimizing risks associated with business or life losses. This is also a sector in which banks and insurance firms work together.