KUALA LUMPUR, March 14 (Bernama) -- A change in Vietnam law pertaining to the distribution and purchase of insurance products via the bancassurance channel is expected to constrain sales growth over the near term, more so for life side products than the non-life side of the business.
According to a new AM Best report, amendments to Vietnam’s Law on Credit Institutions is geared toward improving financial conduct and restoring consumer confidence in the country’s bancassurance channel.
The new law takes effect in July and focuses primarily on credit institutions such as banks, foreign bank branches and leasing companies operating in Vietnam; however, it includes a restriction prohibiting credit institutions from bundling the sale of non-compulsory insurance products alongside any financial services.
The amended law is expected to benefit consumers by giving policyholders the ability to choose only products they require at competitive prices, thus AM Best expects that the regulatory shift will generate near-term headwinds for Vietnam’s insurers.
“Bancassurance is an important distribution channel, especially for the life segment, accounting for approximately 20 per cent of total life insurance premiums and 14 per cent of total non-life insurance revenue in 2022.
“Some insurers derive a higher proportion of premiums from bancassurance due to strategic partnerships or corporate affiliations with banking groups,” said AM Best senior financial analyst, Ken Lau in a statement.
Business acquired through Vietnam’s bancassurance channel has grown considerably in the run-up to 2023, owing to rising insurance demand, economic growth and increased tie-ups between banks and insurance companies.
However, following complaints from the clients of banks and insurance companies related to unfair sales practices and the subsequent regulatory scrutiny, revenue sourced through bancassurance may have peaked and many banks reported double-digit declines in revenue from insurance services in the first three quarters of 2023 from the prior year period.
Headquartered in the United States and does business in over 100 countries, AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry.
-- BERNAMA
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