Dam The Thai, director of Personal Banking for An Binh Bank, noted that the bank strives to become an "all-round finance supermarket," by cooperating with two insurance companies to bring benefits to all three parties.

The benefits of the Bank Insurance Model or BMI, popularly known as "bancassurance" (the distribution of insurance products through bank networks), have been recognised by more and more insurance companies and banks.

Clients benefit when they can conveniently access financial services with low costs. Banks have a new product without the cost of research and design and thus gain more clients plus commissions from policy premiums.

Additionally, bancassurance helps insurers expand their market share by gaining clients from cooperating banks.

Low level of benefits

Despite the touted potential of bancassurance, many banks cannot measure its efficiency.

To date, over 10 banks are cooperating with insurance companies. However, many of them have yet to begin selling the insurance products and those that have begun are reporting modest results.

One bank, recognised as most successful in bancassurance cooperation, has sold 140 insurance policies in eight months of implementation, worth 1.5 billion dong.

An insurer with a state-owned bank that has cooperated with many banks for a long time has revealed a bancassurance turnover of only 20.7 billion dong, or less than eight percent of total revenue.

According to an ACE Life official, the total revenue from bancassurance remains modest, accounting for one percent of the total life insurance policy premiums in Vietnam. Meanwhile, the proportion is much higher in developed countries, 72 percent in Spain, 70 percent in Italia and 42 percent in China.

Dinh The Hien, a senior financial expert, noted that bancassurance is just a "secondary product" for banks and asserted that banks have no pressure to care about how much they can sell. Bank officers also tend to be less enthusiastic and less professional in client consultations than insurance companies' officers.

According to Hien, cooperation between insurers and bankers is really the insurance companies "borrowing" bank offices to sell insurance.

Focus on future revenues

Pankaj Banerjee, a senior executive of Prudential Life Insurance, listed cooperative agreements with four banks: ABBank, Standard Chartered, Agribank and Vietcombank.

Since 2009, cooperation has been considered a crucial part of their business strategy. Prudential is now only cooperating with banks in Hanoi and HCM City, but has plans to expand cooperation across Vietnam.

The reason Prudential wants to expand cooperation, according to Banerjee, is that they predict cooperation will develop in Vietnam as in many other Asian countries and the turnover ratio from bancassurance will be two digit figures in the next two or three years.

ACE Life reported that it has already joined forces with ANZ and HD Bank and now will sign bancassurance agreements with two more banks. The insurer plans to expand cooperation to an additional 10 banks by 2010.

Saigon Economic Times - December 9, 2009