Cross-selling insurance pushes banks into a spiral of seeking profits
At the National Assembly Hall on the afternoon of January 15, Delegate Pham Van Thinh, Bac Giang Provincial National Assembly Delegation shared the story that prompted him to give opinions related to regulations on banks massively selling insurance.
“The story is about a woman who has debt to pay, has to go to the bank to mortgage her red book, has to go to the bank to borrow 300 million VND, but has to buy insurance for 20 million VND. Stepping out of the bank, tears flowed from her eyes. long, sobbing, a story I accidentally encountered at a commercial store, prompted me to mention this issue,” Mr. Thinh said.
Delegate Pham Van Thinh, Bac Giang Provincial National Assembly Delegation – Photo: QH.VN
According to Mr. Thinh, the maximum discount an insurance company can give to a bank insurance agent with popular life insurance products is 4% for the first year. In addition, at commercial banks affiliated with life insurance agents, there is a phenomenon suggesting that borrowers are forced to buy life insurance with a one-year premium of between 2% and 4%. loan value.
In addition, commercial banks and bank employees are assigned targets for the number of insurance contracts and targets for life insurance premium revenue.
Delegate Pham Van Thinh informed that, according to the inspection conclusions of the Ministry of Finance in July 2023 for 4 life insurance enterprises providing insurance products to customers through commercial banking channels, the rate of Cancellation of the customer’s contract after the first year is up to 70%. If you cancel the first year, the customer will lose the paid fee.
Just one insurance company selling through commercial banks has the amount of insurance premiums that customers paid in the first year amounted to 2,000 billion VND. Many banks also suggest that loan customers pay fees for the first 2 years. In the first 2 years, the amount of additional loan customers have to spend is up to 4 to 8% of the loan value.
“The real interest rate of capital released to the economy due to having to buy additional life insurance can increase up to 50 to 100% in the first 2 years compared to the interest rate on the credit contract,” Mr. Thinh said.
According to Delegate Bac Giang, the prepayment costs of the first year for the exclusive cooperation contract that the insurance company paid to the commercial bank were made public upon signing, accounting for a large proportion of the bank’s pre-tax income. commerce.
For example, in 2020, Vietcombank had pre-tax profit of 23,000 billion VND, prepaid fees for exclusive contracts to sell life insurance reached more than 9,200 billion VND; ACB’s profit is 9,596 billion VND, the bank’s prepayment fee is 8,400 billion VND… not including the agent commissions received.
Pham Van Thinh, Bac Giang Provincial National Assembly Delegation
Mr. Thinh detailed that in the period from 2018 to 2022, income from working as a life insurance agent for commercial banks accounts for a very large proportion of the profits of commercial banks.
According to Mr. Thinh, in the period 2018 – 2022, income from being an insurance agent has accounted for a large portion of the profits of banks.
Banks make it difficult for employees and reduce income if they cannot sell insurance
With such great practice and benefits, delegate Pham Van Thinh said that if the draft Law were only adopted in the direction of adding Clause 2, Article 113: Commercial banks can carry out insurance agency activities according to regulations. of the law on insurance business, in accordance with the scope of insurance agency activities according to the regulations of the Governor of the State Bank, there will be no guarantee to suppress customers who borrow capital to buy insurance. or take advantage of the ignorance of customers with savings deposits to buy life insurance products like in the past.
Delegate Pham Van Hoa, National Assembly delegation of Dong Thap province – Photo: QH.VN
“Cross-selling of insurance has caused banks and insurance companies to ignore professional boundaries and enter the spiral of seeking profits,” said Delegate Thinh.
Mr. Thinh proposed that the Government should be assigned to issue documents regulating the business of insurance products with commercial banks and credit institutions acting as agents to ensure publicity, transparency, and protect the rights of customers. loans and savings at banks.
Also related to the situation of affiliated banks selling insurance, Delegate Pham Van Hoa, Dong Thap province’s National Assembly Delegation said: It is necessary to regulate banks not to sell insurance because now the consequences have occurred. already, there is still a lingering dispute between customers and banks and insurance companies.
According to Mr. Hoa, for an insurance company to set up a headquarters and pay quickly, it must have an address, but the current status is that most of them cooperate and link with banks.
“In the Mekong Delta, there are cases where people who buy insurance have complaints but the bank points them to other provinces, which is very difficult,” Mr. Hoa said.
Mr. Hoa said that when combining banks to sell insurance, the bank is paid high commissions, such high commissions, the insurance company collects money from customers and then returns the insurance profit.
“For banks, when they have such high profits, forcing bank employees to persuade customers to buy insurance, making it difficult for employees, even reducing salaries,” Delegate Hoa raised the issue.
Delegates emphasized the regulation that insurance companies need to have their own facilities, branches, and agents separate from banks, and banks should not be allowed to sell insurance links.
