The future of bancassurance in digital era

nHat naM

In recent years, bancassurance in Vietnam has seen strong growth, significantly contributing to banks’ non-interest income.

CURRENT STATE OF BANCASSURANCE IN VIETNAM

Digital transformation today has become an inevitable trend of the economy and the banking sector in particular. Vietnamese commercial banks are racing to set up digital banking branches or centers, invest in information technology and apply cutting-edge technologies such as cloud computing, artificial intelligence, Blockchain. The vibrant development of Fintech companies, and financial service provision by Bigtech and telecommunications companies pressed banks to quickly change to compete with.

The insurance industry is no exception as insurers have been strongly digitalising to meet the needs of customers. According to EY's 2021 Global Insurance Outlook report, 84 percent of customers prefer working with an insurance advisor/agent either by phone or online, 69 percent of customers prefer buying automotive policies online. Insurance companies, therefore, have defined digital transformation as their key strategic goal in the coming time.

Insurers have been moving - in some cases, boldly - in the direction of agility, digitization and customercentricity for the last several years. Those efforts were accelerated dramatically, and by necessity, by the pandemic. The long-standing concerns and debates about the need to digitize distribution were resolved because digital was the only available channel.

According to BIDV Training and Research Institute, in 2020 despite the impact of the Covid-19 pandemic, listed commercial banks posted PBT growth of 15.8 percent; with main drivers being non-interest income (including Bancassurance which contributed up to 30 percent to new premium revenue) and cost reduction.

For Bancassurance, while insurance companies can access a larger number of customers, banks also diversify their service ecosystem and earn a significant amount of income. This activity has become more vibrant in

Vietnam in recent years.

According to Insurance Association of Vietnam, the proportion of insurance distribution through this channel accounted for nearly 40 percent of new sales, doubling after three years. Six years ago, this number was about 6-7 percent. With such a high growth rate, many insurance companies, particularly large foreign ones, accepted to pay a large amount to cooperate in bancassurance business with banks in Vietnam.

Bancassurance has generated large non-interest income and high profits for banks. Therefore, banks are increasingly cooperating with insurance companies and bancassurance is forecasted to thrive in the future.

DIGITAL TRANSFORMATION OF BANCASSURANCE

Vietnamese banks are making significant changes in digital transformation. According to the State Bank of Vietnam, 95 percent of Vietnamese commercial banks have initially been implementing or developing a digital transformation strategy. Some banks have changed their organizational model to serve the digital transformation process (19 percent established a new digital bank, 88 percent digitized business activities). The banking ecosystem has gradually been formed, supported by Fintech and Bigtech to provide a number of products and services (especially payment, consumer credit).

Insurers also beefed up their digitilisation process: Prudential Vietnam launched Pulse by Prudential - the first digital healthcare application in Asia; Manulife Vietnam introduced eClaims to help customers have a better and more convenient experience in the process of making online insurance claims; FWD, through a digital app, has reduced paper and cash transactions, digitalising 100 percent of transaction types; Post and Telecommunications Insurance Corporation (PTI) cooperated with INSO Vietnam (a startup in the technology field) to launch INSO app that allows users to buy insurance and claim claims anytime, anywhere. In March 2021, BIDV Insurance Company, a subsidiary of BIDV, signed a contract with PwC on digital transformation consultancy.

In addition, the InsurTech market in Vietnam, although small in size, is growing positively. Recently, a series of online insurance startups, both local and foreign, have been launched such as 9line, Papaya.

However, as with the world, Vietnam’s insurance industry is considered to be slower in digitalisation transformation than banks. An insurance business leader said that the insurance industry is 20 years behind the banking industry in terms of database.

While commercial banks and insurance companies have been strongly digitized, bancassurance activities are mainly carried out in the traditional way through a network of bank branches. Tellers, credit officers when offering products of the bank also try to introduce insurance products to customers.

Putting the bancassurance model to work well in the digital era is one of the strategies that banks are particularly interested in. Simply put, the bancassurance development should be integrated in the overall digital transformation program, towards digitizing with omnichannel distribution of products and services to customers.