Bancassurance is the selling of insurance (assurance) products by a bank. In Vietnam, this business model remains quite new but is seen a potential service to bring enormous added values for banks, insurance companies and users. On the sideline of the first Europe-Asia bancassurance conference, reporter of the Vietnam Business Forum Magazine was given an exclusive talk with Ms Laura Piatti, Head of Insurance and Pensions Unit at Intesa Sanpaolo Bank, on practical benefits as well as development possibilities of this business model in the future.
As known, bancassurance benefits all participants: bank, insurer and users. What are benefits for specific participant?
For a bank, selling insurance products will create a new source of income and enables it to expand its product list. This is a sustainable source of non-interest income - insurance commission. Bancassurance enables the bank to increase revenues from providing banking services for insurance buyers. This is a non-interest income earned through collecting banking service charges (transfer fee, ATM fee, credit card fee, etc), leasing transaction locations or receiving insurance commission. In return, the bank can popularise its trademark on banners, advertisement boards as well as distribution channels of insurance companies; thus enlarging its brand value. Besides, the bank can update customer information and data, advance “selling culture”, enhance customer relations and attract more new customers.
For an insurer, bancassurance is an instrument to expand the market share, increase sales, cut selling exposes and reducing distribution costs. Bancassurance also creates a new source of customers and the opportunity for the insurer to sell products. The insurer can approach and use a very large customer data source of its partnering banks to diversify its distribution channels, enhance its competitiveness in times of market saturation, and reduce profit fluctuation.
For the customers, they can use “package” financial services with lower costs and more conveniences, and manage risks and asset planning more effectively. Besides, they can benefit added services and tax preferences of the State. When they buy insurance policies at a bank, they will have more confidence because they have “another person” to guarantee their insurance.
Could you brief bancassurance activities in Asia in recent years?
Bancassurance is very successful in Asia and this model is developing very quickly although it has been restricted by irrational policies. However, after restrictions are adjusted, banks and insurers have introduced sound strategies to develop their joint bancassurance. The link with banks to sell insurance products is a new channel in addition to traditional distribution channel. The new model enables insurers to maximally exploit the market and enhance efficiency of premium collection. Especially, Bancassurance will help reduce reliance on agent and broker systems.
Newcomers in Asia are also ready to empower their bancassurance forces to compete with local rivals. Remarkably, foreign insurance companies, with their rich experience, have joined hands with banks to develop bancassurance in Asia as well as other distribution channels.
To successfully develop bancassurance model as in Europe, researchers tabulated comparisons of business environment and decisive factors to this business model in both regions (Asia and Europe) to give an overview on rich bancassurance potentialities of Asian markets like Hong Kong and Singapore. These markets with stable economy, good legal and infrastructural systems and developed technologies have as good bancassurance activities as in Europe. Notably, China has continuously proved its rich business opportunities and the Chinese Government adopted suitable reforms to advance the development of bancassurance. According to experts, China can become one of five largest bancassurance in the world in terms of life insurance.
As a senior researcher of bancassurance model in many nations in the world, including Vietnam, what do you say about the development of this combined model in Vietnam?
Bancassurance activities in Vietnam consist of three fields: life insurance, nonlife insurance and insurance brokerage, but the life insurance is the most popular. To date, many insurers in Vietnam used bancassurance to expand their potential customer networks and diversify insurance products for their customers. Banks, to a certain extent, see bancassurance as one of their products and services. Some banks have launched marketing and advertisement programmes for this joint activity. However, bancassurance activities in Vietnam are slowly being developed and limited to simple forms because both insurers and banks lack concentration on this joint channel. As a result, bancassurance results in Vietnam are not matched with actual potentialities.
Bancassurance activities in Vietnam are not very successful because they encounter many difficulties in expanding the model and the biggest difficulty is banks do not get accustomed to dealing with insurance risks. Besides, the bancassurance model is still quite new in Vietnam; thus, banks and insurers are not fully aware of benefits from this service, lack strong mutual commitments and lack experience in selecting suitable implementing methods. Although the Vietnamese banking system has been growing at high speed, it is still much inferior to regional and international systems. Thus, banks lack necessary infrastructures and resources for bancassurance activities, especially human resources. Vietnamese banks and insurers have not solved necessary matters to for bancassurance activities like training selling workforce, payroll and customer approach. Banks in Vietnam mainly focus on corporate customers while making light of individual customers. More importantly, customers seem not to be very “loyal” to Vietnamese banks; thus, the number of potential insurance buyers is seen limited. Into the bargain, customers know little about the bancassurance and they are unfamiliar with the fact that banks sell insurance policies. Moreover, legal documents on bancassurance activities in Vietnam remain unsuitable, making banks and insurers confused. If all shortcomings are solved, bancassurance activities in Vietnam will reach a new high as in European nations.
My Chau
Vietnamese
