Vietnam Bancassurance Increased Scrutiny

Vietnam law pertaining to the distribution and purchase of insurance products through the bancassurance channel is expected to constrain sales growth over the near term, more so for life side products than the non-life side of the business.

Increased Scrutiny - Increased Regulatory Scrutiny of Bancassurance to Impact Vietnam Insurance Industry. The amendments to Vietnam’s Law on Credit Institutions is geared toward improving financial conduct and restoring consumer confidence in the country’s bancassurance channel.

The new law takes effect in July and focuses primarily on credit institutions operating in Vietnam, such as banks, foreign bank branches and leasing companies; however, it includes a restriction prohibiting credit institutions from bundling the sale of non-compulsory insurance products alongside any financial services. The amended law is expected to benefit consumers by giving policyholders the ability to choose only products they require at competitive prices. The regulatory shift will generate near-term headwinds for Vietnam’s insurers.

Bancassurance Channel -  This is an important distribution channel, especially for the life segment, accounting for approximately 20% of total life insurance premiums and 14% of total non-life insurance revenue in 2022. Some insurers derive a higher proportion of premiums from bancassurance due to strategic partnerships or corporate affiliations with banking groups.

Business acquired through Vietnam’s bancassurance channel has grown considerably in the run-up to 2023, owing to rising insurance demand, economic growth and increased tie-ups between banks and insurance companies. However, following complaints from the clients of banks and insurance companies related to unfair sales practices and the subsequent regulatory scrutiny, revenue sourced through bancassurance may have peaked. Many banks reported double-digit declines in revenue from insurance services in the first three quarters of 2023 from the prior year period.

The fallout has had a material impact on the broader insurance industry, resulting in an 8.3% decline in insurance premiums to VND 227 trillion (USD 9.2 billion) in 2023, the first fall in a decade after years of double-digit growth, according to the report. The contraction was attributable mainly to a year-over-year decline of 12.5% in life insurance premiums.