Bancassurance brings risks for insurers
The model of distributing insurance products via banks (bancassurance) has contributed significantly to increasing insurers’ revenue, but experts warned that the overheating growth of the business could cause insurers to have to pay compensations due to mistakes made by bank employees, who also act as insurance products consultants.
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Data of insurance companies showed that by July 2018, the new premium revenue through bancassurance reached over VND2.86 trillion (US$122 million), up 12% compared to the same period of 2017 and accounting for about 20% of the market’s total new premium revenue.
However, industry insiders said that since the distribution channel is growing too fast, many employees at banks, who also act as insurance products consultants, have not been properly trained. As a result, many insurance companies had to pay unfair compensation due to the employees’ errors in providing consulting services.
The latest case involved an insurance company which was required by law to compensate a corporate customer with VND3 billion. The compensation had to be paid as a result of errors in the consultancy process of the staff at the bank which cooperates with that insurer in distributing insurance products. Specifically, the bank staff did not fully explain the terms of exclusion in the contract with the customer.
Industry insiders said that there were many other cases where the insurance disputes started from the mistakes of banks (in the role of the insurer’s agent).
However, when the mistakes damage the legitimate rights and interests of the insured customers, the insurers shall still be the first to take responsibility, the experts said.
According to lawyer Tran Quoc Tuan from the HCM City Lawyers Association, insurance agents operate under the authorisation of insurance companies so that when the acts of the agents cause damage to the legitimate rights and interests of customers, the insurance companies have to take the responsibility. After that, insurance companies shall take measures to deal with the violated agents.
Experts therefore suggested insurance companies should not increase its distribution channel through banks too fast and focus more on training for banks’ staff, those will act as insurance products consultants.
