Giving opinions on the revised Law on Credit Institutions at the 5th extraordinary session of the National Assembly on the afternoon of January 15, many delegates were concerned about the story of customers depositing savings or borrowing money from banks having to buy life insurance.
Mortgage red book to borrow 300 million but have to buy 20 million life insurance
Delegate Pham Van Thinh (Bac Giang) began his speech with a story about a woman who, due to debt, had to go to a commercial bank to mortgage her red book to borrow 300 million VND, but had to buy life insurance for 20 million VND, leaving only 280 million VND.
“Walking out of the bank with tears streaming down my face and the sobbing I heard by chance when I went to the commercial bank urged me to speak out again on this issue,” delegate Thinh shared.
He said that at the first session, when discussing in the hall, delegates presented 3 pieces of information.
First, the maximum discount for life insurance agents with two popular life insurance products, term insurance and mixed insurance, is 40% of the first year's premium.
Second, at commercial banks that have links to act as life insurance agents, there is a phenomenon of suggesting and forcing loan customers to buy life insurance with a one-year payment equal to 2-4% of the loan value.
Third, at commercial banks, bank employees are assigned targets for the number of insurance contracts and life insurance premium revenue.
The Bac Giang provincial delegate added official data from the Ministry of Finance's July 2023 inspection conclusion on four life insurance companies providing insurance products to customers through commercial banking channels, showing that the rate of contract cancellation after the first year of customers is up to 70%. If customers cancel in the first year, they will lose all the premiums they have paid.
Just one life insurance company selling through a commercial bank had about 2,000 billion VND in insurance premiums that customers canceled after the first year.
Many banks also suggest that if the borrower pays fees for the first two years, the loan amount must be paid an additional 4-8% of the loan value. The real interest rate of the capital released into the economy due to the purchase of additional life insurance can increase by 50-100% in the first two years compared to the interest rate on the credit contract.
In addition, the delegate also cited 2020 data of some banks, such as Vietcombank with pre-tax profit of VND 23,050 billion, the prepayment fee for the exclusive cooperation contract to sell life insurance was VND 9,200 billion; ACB was VND 9,596 billion, the prepayment fee the bank received was VND 8,400 billion; not including agent commission on the insurance premium received according to regulations...
"Thus, it can be said that from 2018 to 2022, income from life insurance agents of commercial banks accounts for a very large proportion of banks' profits," Mr. Thinh concluded.
From there, delegate Thinh said that if the draft law only accepts the direction that commercial banks are allowed to conduct insurance agency activities according to the provisions of law, there will be no guarantee that it will limit the situation of forcing customers to borrow money to buy insurance or taking advantage of the lack of knowledge of people with savings deposits to buy life insurance as recently.
According to the delegate, the easy cross-selling of life insurance through banks has forced commercial banks and life insurance companies to ignore professional boundaries, erase accumulated reputations and enter the profit-seeking spiral.
Therefore, the delegate of Bac Giang province suggested that if the ban on cross-selling life insurance through commercial banks is not implemented, the draft Law should add a clause "assigning the Government to issue documents regulating the trading of insurance products for which commercial banks and credit institutions act as agents" to ensure publicity, transparency, and protect the rights of customers borrowing capital as well as depositing savings at banks.
This will be good for both the image of commercial banks and especially the life insurance business, a profession that requires more ethics and humanity than many other professions.
Joint venture banks and joint ventures should not be allowed to sell insurance.
Agreeing, delegate Pham Van Hoa (Dong Thap) said that joint venture banks and insurance sales associations are very important issues.
This is the third time delegate Pham Van Hoa has defended the view that "joint-stock commercial banks should not be allowed to sell insurance to insurance companies" because of the consequences that have occurred.
The delegate pointed out that the persistent reality is that customers are very skeptical about the insurance sales of some companies. To establish an insurance company, it is necessary to have a headquarters, but in reality, many companies do not have one.
For example, 13 provinces in the Mekong Delta have only 2 insurance headquarters, customers buying insurance in Dong Thap must go to Long Xuyen and Can Tho to file complaints and lawsuits.
Regarding the fact that banks are associated with insurance companies and banks are paid very high commissions, Mr. Hoa wondered: "I say it a bit strangely, but only by stealing from others can one make a profit, there is no way to make such high profits."
According to Mr. Hoa, when banks have agreed to cooperate with insurance, employees must use all means to persuade customers to borrow money and buy insurance, otherwise they will face many difficulties and even have their competition targets reduced.
Delegate Duong Khac Mai (Dak Nong) said that in order to protect customers' rights, it is necessary to study and legislate to have sanctions to prevent and strictly handle violations by employees of credit institutions.
For example, inadequate consulting practices cause some customers to confuse insurance products with banking products, or require the purchase of insurance associated with loans when they need to borrow from banks, as the media has reported recently.
Chairman of the Economic Committee Vu Hong Thanh acknowledged the opinions on whether credit institutions can act as insurance agents or not and said that he would coordinate to receive, revise, and report to the National Assembly Standing Committee, and if qualified, report to the National Assembly on the morning of January 18.
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