Rectifying insurance sales activities through banks, employees 'deliberately giving false advice'

The nature of life insurance is a highly humane product, helping to support people, minimizing loss and damage caused by illness. However, in recent times, public opinion has been skeptical about a series of "scandalous" incidents related to insurance contracts, including the form of insurance distribution through banking channels. Many customers have reported that they received information that was completely different from the information provided by consultants.

Usually, customers only listen to advice but rarely read and understand all the ideas in the insurance contract.

Controversy over "thinking investment-linked insurance is a savings deposit"

According to the Ministry of Finance , by the end of May 2023, the total assets of the insurance market were estimated at VND 855,635 billion, an increase of 12% over the same period last year, of which the total assets of life insurance enterprises were estimated at VND 736,764 billion; total equity was estimated at VND 179,651 billion, an increase of 4.09% over the same period last year.

Insurance companies reinvested in the economy is estimated at VND714,597 billion, up 14.6% over the same period last year, of which life insurance companies are estimated at VND649,040 billion. Total insurance reserves are estimated at VND558,549 billion, up 16.33% over the same period last year, of which life insurance companies are estimated at VND524,626 billion.

However, total insurance premium revenue is estimated at VND93,178 billion, down 1.46% over the same period last year. Insurance benefit payments are estimated at VND29,413 billion, up 19.58% over the same period last year.

Some economic experts say that the exploitation of new insurance premium revenue sold through the agency channel across the market is showing signs of decline after a long period of double-digit growth. Partly due to economic difficulties after the pandemic, people's income has decreased, on the other hand, confusing and controversial information in the life insurance market in recent times has shaken people's confidence in this type of insurance.

Mr. Do Minh Hoang, Acting General Director of Agricultural Bank Insurance Joint Stock Company ( Agribank Insurance) said: Agribank has issued a document requesting Agribank Insurance to strictly comply with legal regulations and directives of competent authorities. Due to the impact of the "scandals" of the life insurance market, in the first 5 months of 2023, Agribank Insurance - a non-life insurance unit - had negative growth compared to 2022. "Agribank Insurance is determined to remain a pioneer in implementing business activities mainly in the agricultural, farmer and rural areas to protect the capital of the parent bank, and focus all resources to carry out the task, overcome all difficulties", Mr. Do Minh Hoang affirmed,

Bancassurance is "insurance distribution through the banking channel" and is gradually losing its position as the "golden goose" for banks. According to the Insurance Association, by the end of 2022, there were about 2.9 million life insurance contracts purchased through the banking channel (bancassurance) with a revenue of VND45,000 billion. Last year alone, one million life insurance contracts were sold through the banking channel with a total new revenue of nearly VND23,800 billion. This figure accounted for 46% of the new revenue of the life insurance channel for the whole year.

As for the entire market by the end of March 2023, there were about 13.68 million life insurance contracts, a decrease of nearly 250,000 contracts compared to the end of 2022. According to statistics, insurance revenue in the first quarter of this year of many banks narrowed to only 50% compared to the same period.

Ms. Pham Thu Phuong, Deputy Director of the Department of Insurance Management and Supervision (Ministry of Finance) said: The shortcomings and limitations that have arisen in the life insurance market in recent times have gone against the humane nature of life insurance, reducing the trust of insurance participants. The life insurance market needs to be rectified.

“We evaluate the insurance distribution channel through banks, if done correctly and accurately, will bring great benefits to the participants because it will reduce a lot of costs for people who want to participate in a complete financial package in one place. However, in reality, during the implementation process, the control of the quality of consulting through the bank channel still has many complicated issues and is not strict. There is information reflecting that bank employees have the phenomenon of soliciting, enticing, providing incomplete advice, even forcing customers to buy insurance products to lend capital, while the act of forcing customers has been prohibited,” said Ms. Pham Thu Phuong.

The representative of the Ministry of Finance pointed out 3 reasons, which are that insurance contracts are long-term financial contracts, relatively specific, highly specialized. The law stipulates the obligations of insurance companies as well as the obligations of insurance agents in providing information to fully and clearly explain the terms of insurance products to customers. However, in recent times, there have been some agents whose quality of operations is not high, their advice is not complete and objective, especially for investment-linked insurance products, affecting the quality of market development in general. This is the main reason leading to the frustration that public opinion has reflected in recent times, which has greatly reduced the humanity of insurance.

In addition, it is an insurance product sold through credit institutions. To achieve the agreed target, some organizations assign insurance sales targets to employees, creating pressure on credit institution (CI) employees.

Inspection results of 4 insurance companies to be announced soon

Mr. Doan Thanh Tuan - Deputy Director of Insurance Management and Supervision Department (Ministry of Finance). Photo: BTC

According to Mr. Doan Thanh Tuan - Deputy Director of the Department of Insurance Management and Supervision (Ministry of Finance), the Ministry of Finance has completed the inspection of 4 life insurance companies (Prudential Vietnam Life Insurance Company; MB Ageas Life Insurance Company Limited, BIDV Metlife Life Insurance Company Limited, Sunlife Vietnam Life Insurance Company Limited - PV) that sell insurance through banks. "We are completing the procedures to complete the inspection conclusion and report to the competent authority before making it public," Mr. Doan Thanh Tuan informed.

Regarding how much money Manulife Vietnam Insurance Company has refunded to customers who were given ambiguous advice on depositing savings at SCB Bank with the "Investment Security" insurance package, the leader of the Department of Insurance Management and Supervision said that he did not yet know the specific figure.

According to National Assembly Delegate (NAD) Nguyen Thi Thuy (Bac Kan), a 70-100 page contract is a complex financial product with many specialized terms, and the main disadvantage is on the buyer's side if they encounter an unscrupulous consultant. Even many experts say they only understand about 70% of the contract. Notably, life insurance contracts in recent times are often in the form of links and investments. That is, a part of the customer's money is put into securities funds and bonds, making it even more complicated.

Regarding the team of consultants, the National Assembly member said that this is the key step leading to many controversies. Because of the complex nature of life insurance, a team of consultants is very necessary. However, many consultants intentionally try to be vague in order to quickly close the order and re-sign the contract.

According to the regulations of the Ministry of Finance, the maximum profit of an insurance contract is up to 40% in the first year. Insurance companies are keeping it at 35 - 40%. For example, with a contract of 100 million/year, right after the customer pays, the consultant will receive 35 - 40 million VND in the first year.

In order to achieve sales and large commissions, many consultants have deliberately given misleading advice, making customers mistakenly believe that they are participating in a high-profit investment product, which not only protects their health, but also compensates them in case of an unfortunate event, and when the contract ends, they will receive all the money they have paid and the profit. "However, in reality, there is no profit as the consultant said. With some investment-linked insurance contracts, the profit is only an expectation, depending on the market," said National Assembly member Nguyen Thi Thuy.

Thus, many people are concerned that the insurance company that invests this amount of money cannot be 100% sure that this amount will be profitable. Many consultants only talk about the benefits they receive, without clearly stating to customers the binding terms, the unfavorable terms when liquidating in the first 1-2 years, there is a risk of almost losing all the money paid... "This is the source of many recent frustrations due to the lack of transparency in consulting. This has seriously affected the team of consultants, who are properly trained, dedicated, and responsible", the National Assembly Deputy emphasized.

Only when there is transparency and sincerity, people will not turn their backs on life insurance. From the above analysis, the National Assembly member recommended that the Ministry of Finance needs to conduct a comprehensive inspection of life insurance activities, focusing on investment-linked insurance; recommend that the Ministry of Public Security verify recent complaints and reflections to clarify whether or not there are signs of fraud or deception of customers, and if so, initiate an investigation; recommend that insurance companies review all stages of insurance contracts, from contract design, consulting, signing and complaint settlement.

"We will continue to improve policies and mechanisms related to insurance products, publicize and make transparent information about products and insurance companies so that people can easily access information when researching and choosing suitable insurance products. On the other hand, the management agency continues to request review, strengthen inspection, supervision of activities and strictly handle cases where insurance agents are found to violate the law.

On the part of insurance companies, it is necessary to review insurance products, simplify rules and terms, and increase the disclosure and transparency of information about insurance products and their operations. Insurance companies must review and improve the quality of customer care services, perfect business processes, internal regulations, and risk management policies, ensuring compliance with legal regulations; at the same time, regularly train, retrain, and improve the training quality of agents to increase the quality of consulting and customer service," said Minister of Finance Ho Duc Phoc.

According to Tin Tuc Newspaper

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