Concerns when commercial banks act as insurance agents

Continuing the program of the 5th Extraordinary Session, on the afternoon of January 15, the National Assembly discussed the draft Law on Credit Institutions (amended).

Expressing his opinion, delegate Pham Van Thinh (Bac Giang delegation) said that the regulation on commercial banks acting as life insurance agents still has many concerns.

Mr. Thinh stated that the maximum discount for life insurance agents for two popular life insurance products, term life insurance and mixed insurance, is 4% for the first year's premium. Commercial banks that are affiliated with life insurance agents suggest forcing borrowers to buy life insurance with a one-year payment equal to 2% - 4% of the loan value.

Finance - Banking - Concerns when commercial banks act as insurance agents — National Assembly Deputy Pham Van Thinh expressed his opinion.

At commercial banks, bank employees are assigned targets for the number of insurance contracts and life insurance premium revenue targets.

The delegate cited that according to the inspection conclusion of the Ministry of Finance in July 2023 on 4 life insurance companies providing insurance products to customers through commercial banking channels, 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.

Citing data from some banks, according to delegate Pham Van Thinh, from 2018 to 2022, income from life insurance agents of commercial banks accounts for a very large proportion of the profits of commercial banks.

With such great reality and benefits, delegate Thinh said that if the draft Law only accepts the direction of adding Clause 2, Article 113: Commercial banks are allowed to conduct insurance agency activities according to the provisions 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, then there will be no guarantee that there will not be a situation of forcing customers to borrow money to buy insurance or taking advantage of the lack of knowledge of customers with savings deposits to buy life insurance products as in the recent past.

Finance - Banking - Concerns when commercial banks act as insurance agents (Image 2). — Delegates at the meeting on the afternoon of January 15.

Delegate Thinh suggested that the draft Law should add the assignment of 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.

Delegate Pham Van Hoa (Dong Thap delegation) expressed his agreement with the opinions of the delegates speaking on the content of joint venture banks and insurance sales associations, especially delegate Thinh.

Delegate Hoa emphasized that the consequences of joint venture and joint banks selling insurance in the past have been very clear. Banks do not have insurance headquarters. Therefore, the delegate supports the view that joint venture and joint banks are not allowed to sell insurance...

Commenting on Article 10 of the draft law on the responsibility of credit institutions and foreign bank branches in protecting customers' rights, delegate Duong Khac Mai (Dak Nong delegation) said that although there are relevant regulations in the Law on Insurance Business 2022 and other legal documents, in order to better protect customers' rights, it is necessary to study and legalize them to prevent and handle violations by employees of credit institutions and banks such as:

Inadequate consultation causes some customers to confuse insurance products with banking products or to request to buy insurance associated with loans when they need to borrow from banks as the media has reported recently .

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