Bancassurance: The driving force to improve bank revenues

Recognized at the annual general meeting of shareholders of many banks, bancassurance is one of the issues receiving much attention from shareholders. In Vietnam, bancassurance activities have been formed and strongly developed over the past years and are gradually becoming a major insurance distribution channel, creating a relatively stable source of non-interest income for banks. Assoc.Prof.Dr. Dinh Trong Thinh, Finance Specialist shares some opinions on this business.

– How do you view the bancassurance market recently?

– To be frank, revenue from services over the past several years has shown an increasing number of positive changes and a relatively important position in banking operations. As of 2020, the proportion of income from non-credit services to the total income of commercial banks (commercial banks) has reached 11.05%. In fact, the fact that banks combine with insurance companies to carry out the distribution of insurance via banks is also necessary, this is also one of the forms that is attracting a lot of attention from Commercial banks. Bancassurance is also a relatively stable source of income compared to other types of services, less risky. Maybe the profit is not really too high but the risk is low, compensating for each other is reasonable. Therefore, the insurance activity that is more interested in banks also has its reasons.

The bancassurance operating model in Vietnam is relatively diverse, including the distribution agreement (exclusive or non-exclusive) is the model most implemented by banks and insurers due to its simplicity, ease of cooperation and ease of implementation. Recently, as we see, monopoly bancassurance trades are increasingly, of greater value. As the exclusive insurance distribution cooperation between Vietcombank and FWD is recorded as a record-size transaction, with about 400 million USD; or ACB has a contract with SunLife also up to 370 million USD.

Bancassurance: The driving force to improve bank revenues Bancassurance can bring stable income for banks. Photo: B.L.

– So can bancassurance be one of the motivations to increase profits for the bank?

– In banking operations, one of the core points to note is the diversification of banking goods and services, or in other words, diversification of revenue sources. There is no denying that bancassurance is an activity that contributes to a more diversified banking service, from which it is easy to bring benefits to the bank, and of course the banks also clearly see the benefits that bancassurance brings.

When a bank is linked with an insurance company, it can increase income without much capital allocation, the rate of return on equity also has the opportunity to increase very quickly. In addition, insurance companies are having a relatively stable footing, banks are relatively reassured because insurance businesses themselves have professional operations.

– What are your comments on the Bancassurance market in the coming time?

– I think that insurance activities in general and bancassurance in particular will continue to develop in conditions of developing economy and improving people’s lives. This is for sure because insurance in other countries has developed in a very strong way, not confined to any limitation. Banks themselves also see that the insurance market is too wide, with great potential, so there will inevitably be many cooperation deals between banks and insurance companies to deploy bancassurance services in the coming time.

In addition, digitalization is a mandatory demand in the current era with banking business. This is one of the strengths for the banking business to develop in the coming time. With a market with almost a lot of vacant land, it is clear that the Banking industry has many opportunities to grow and develop if digitalized quickly and well, thereby diversifying banking products and services on digital channels.

Currently, along with the development of society, banking products and services are relatively diverse, but compared to the world, it is only a corner, we still have a lot of land to exploit. The trend of digitizing bancassurance activities to integrate with the supply channel of banking products and services will become more and more powerful, and the technological foundation will surely be a lever for bancassurance to have a rapid and strong breakthrough. than.

– In your opinion, what challenges do banks face when implementing bancassurance?

– There’s a lot of challenges, but I just want to talk about two points. Firstly, currently, the products sold through bancassurance channel are mainly only stopped at fairly simple products, available products of the insurer, but not separate products, specific to the bancassurance channel is limited. In the coming time, I have to invest, create, design more real and separate connected products, this activity is a true combination.

The second point I want to talk about is human resources. We find that most banks are making use of the human resources of insurers and the human resources they have available through short-term training for this insurance activity. Obviously, if it is just short-term training, many bank staff cannot grasp the conditions, purposes and requirements to deploy bancassurance. This is a limited weakness. It is thought that bank staff only need to take a short-term course to do this insurance activity, but not, banks need to have more professional training, from which bancassurance activities go into order and have higher efficiency.

Source: – Translated by

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