Banks permitted to sell investment-linked insurance products
A ban on commercial banks selling investment-linked insurance products has been lifted.
Commercial banks can continue to sell investment-linked insurance products through the bancassurance channel.
Previously, under the SBV’s draft circular released in late March this year, banks were prohibited from selling the products.
However, the SBV removed the prohibition following feedback from experts and industry insiders.
Therefore, under the newly-issued circular, (34/2024/TT-NHNN) of the State Bank of Vietnam banks can continue selling insurance in accordance with insurance business regulations.
Đậu Anh Tuấn, Deputy General Secretary and Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), said it was necessary to carefully consider impacts if banks were banned from selling investment-linked insurance products through the bancassurance channel as it was still a relatively popular model according to international rules. He said a ban or restriction was just ‘reluctant’ and other solutions should be imposed.
Echoing Tuấn, Trần Nguyên Đán, a lecturer specialising in insurance and financial risk management at the University of HCM City Economics, a ban on banks selling insurance could not be necessary. Banks’ staff could offer valuable insurance products if they made accurate and responsible guidance to customers. Therefore, the Government’s management agencies should focus on the inspection and supervision.
The Ministry of Finance (MoF) has recently also issued specific requirements for investment-linked insurance products. From July 1, companies must provide illustrative charts on their websites so that customers can independently check and understand these products.
For institutional agents, commercial banks must meet several conditions to operate as agents, such as establishing a dedicated department to conduct insurance agency activities and the head of the department must have at least three years of experience in finance, banking, or insurance and hold a university degree or higher in insurance.
The insurance industry recorded double-digit premium revenue growth for ten consecutive years before 2023. However, insurance premium revenue declined in 2023 and the first quarter of 2024 following an insurance crisis, during which consumer trust was said to be at an all-time low after numerous scandals broke out. The crisis has negatively impacted the entire insurance industry and has forced management authorities to take action to rectify the sector.
Since the crisis, regulatory agencies and insurance companies have taken measures to reassess the situation, considering it an opportunity to cleanse and readjust the market after a period of rapid growth. The focus is on developing the market sustainably, transparently and safely.
Solutions have been proposed by the Ministry of Finance’s Insurance Supervisory Authority (ISA) to enhance market transparency and safeguard the rights of insurance participants.
According to the approved plan, the ISA will inspect six insurance companies this year. — VNS
