It’s time to strictly tighten bancassurance

The crisis in bancassurance is necessary to restore a proper trajectory for the life insurance industry, but this situation requires vital regulatory actions from the authorities. When bancassurance became the talk of the town in 2021, an insurance management leader expressed concerns about its rapid growth and how it could hinder the overall development of the life insurance industry. Until now, his concern has seemingly come true as the bancassurance market has gradually been distorted.

Contract cancellations within the first year increased when warnings about “beer with peanuts” through banks spread concerns. Should the functional agencies publicize these figures to easily control the market?

Market distortion is cause for concern. So why have functional agencies not been tougher on bancassurance from the start of its establishment and growth? Bancassurance currently accounts for approximately 20% of the total premium revenue in the life insurance market, according to the Ministry of Finance. This figure nearly doubled the ratio three years ago. In developed markets, industry experts suggest that bancassurance can account for up to 50% of sales due to its efficiency and benefits for all parties involved.

Rapid development has led to quality management issues in bancassurance, including violations of the “voluntary” principle when purchasing insurance, according to the Ministry of Finance’s assessment.

Another significant issue is fraud in bancassurance, with customers being tricked into signing contracts. Under this circumstance, customers are usually in a weak position as they lack substantial evidence to prove that the insurance agent provided incorrect advice, inadequate information or caused misunderstanding.

From a market perspective, bancassurance has recently grown rapidly, partly due to shortages of credit growth quotas, fluctuations in the stock market and consumers’ unawareness of insurance products.

The Ministry of Finance has proposed new regulations to tackle bancassurance-related problems. For instance, banks must record and store all advice given to customers when selling insurance for five years and provide clear information about contract terms without creating any misunderstanding.

Insurance companies are required to regularly check the quality of their advice and handling of complaints with banks, including independent checks, before deciding to issue contracts.

Given the current chaotic market, the authority should promptly take strong action to prevent bancassurance-related problems instead of waiting for specific evidence from individuals or isolated incidents.

Perhaps, it is necessary to firmly handle a few specific cases to serve as a warning to the market and restore overall credibility for the life insurance industry in the long run.