Income from insurance agents accounts for a large proportion of banks' profits.
"The story of a woman who, because of debt, went to a commercial bank and mortgaged 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 two streams of tears streaming down her face and sobbing, which I happened to see when I went to the commercial bank, urged me to speak again about this issue," he said.
According to the delegate, the maximum discount for life insurance agents with two popular life insurance products, term life insurance and mixed insurance, is 4% for the first year's premium. At commercial banks that are affiliated with life insurance agents, there is a phenomenon of suggesting and forcing loan customers to buy life insurance with an annual payment of 2-4% of the loan value. At the same time, at commercial banks, bank employees are assigned targets for the number of insurance contracts and life insurance premium revenue.
National Assembly Delegate Pham Van Thinh.
Delegate Pham Van Thinh also cited data from the Ministry of Finance's July 2023 inspection conclusion on four life insurance companies providing insurance products to customers through commercial banks, showing that the contract cancellation rate after the first year of customers is up to 70%, and 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 alone had about VND 2,000 billion in insurance premiums that customers canceled in the first year.
"Many banks also suggest that borrowers pay fees for the first two years, so the amount of money borrowers have to pay is up to 4-8% of the loan value. The real interest rate of capital released into the economy due to having to buy additional life insurance can increase by 50-100% in the first two years after the interest rate on the credit contract," he analyzed.
Along with that, the first year's prepayment for the exclusive cooperation contract that the insurance company pays to the commercial bank, which is made public when signing, accounts for a large proportion of the pre-tax income of the commercial bank. Here are the figures for 2020 of some banks: Vietcombank had a 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 Bank had VND 9,596 billion, the prepayment fee that the bank received was VND 8,400 billion. Not including the agent commission on the insurance premium received according to the regulations of insurance business.
Vice Chairman of the National Assembly Nguyen Duc Hai chaired the discussion.
"Thus, it can be said that from 2018 to 2022, income from life insurance agents of commercial banks accounted for a very large proportion of the profits of commercial banks," said a National Assembly delegate from Bac Giang province.
With such great reality and benefits, he said that if the draft law only accepts the direction of adding Clause 2, Article 113 that 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, there will be no guarantee for the 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.
"The easy cross-selling of life insurance through commercial banks has forced commercial banks and life insurance companies to ignore professional boundaries and accumulated reputations to enter the profit-seeking spiral" - he emphasized and suggested that if the ban on cross-selling of life insurance through commercial banks is not implemented, the draft law needs to add an article for the Government to issue, regulating the business 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 business sectors," said delegate Pham Van Thinh.
Need to sanction inadequate consulting behavior of bank employees
National Assembly Delegate Pham Van Hoa.
Also related to this content, National Assembly Deputy Duong Khac Mai (Dak Nong) said that, in order to protect the interests of customers, it is necessary to study the law to have sanctions to prevent and strictly handle violations by employees of credit institutions and banks, such as inadequate consultation causing some customers to confuse insurance products with banking products, or requiring to buy insurance associated with loans when needing to borrow capital from banks as the mass media has reported in the recent past.
Agreeing with the above two opinions, National Assembly Delegate Pham Van Hoa (Dong Thap) affirmed that for the third time he defended the view that "joint-stock commercial banks should not be allowed to sell insurance to insurance companies", and the consequences have already occurred.
"Currently, as far as I know, there are still some insurance companies that customers are very concerned about selling insurance. What are the consequences? To establish an insurance company, there must be an insurance headquarters, but this insurance headquarters does not exist. For example, 13 provinces in the Mekong Delta only have 2 insurance headquarters. So, when customers have problems, they go to the bank to buy insurance, the bank staff only go to Long Xuyen, Can Tho. I live in Dong Thap and have to go to Long Xuyen, Can Tho to make complaints and lawsuits. I think this is an extremely difficult problem," the delegate gave an example.
Concluding the discussion, Vice Chairman of the National Assembly Nguyen Duc Ha said that the delegates also mentioned the content of the relationship between banking organizations and insurance organizations on the basis of protecting the interests of customers and avoiding exploitation and negativity as in the recent past. Many opinions were valid and specific to the chapters, articles and clauses in the law; the opinions were very dedicated and responsible, and needed to be carefully studied to perfect the draft law, both in terms of content and technique.
The Standing Committee of the National Assembly will direct the Drafting Agency, the Reviewing Agency and relevant agencies to urgently study and fully absorb opinions to complete, report, explain, absorb, revise and complete the draft law, and first submit a report to the Standing Committee of the National Assembly at the meeting on the morning of Wednesday, January 17 to prepare for submission to the National Assembly for consideration and approval.
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