Accept to buy insurance and then cancel to get a bank loan

Ms. Nhinh (HCMC) said that before that, she had two life insurance policies that were paying premiums for several years. When borrowing from a bank, she accepts to buy two more insurance policies.

According to her calculations, with the option of buying insurance with the loan, she lost nearly 20 million to pay the insurance premium for the first year, but still benefited from a 1% reduction in the penalty fee when paying the loan early. Bank employees are also happy and have a commission, for completing the target.

When she has 4 life insurance policies in hand, she has to choose to cancel two insurance plans purchased through a bank after paying the first year’s premium. This is also the way the bank staff suggested when she said that “there is no need and no financial ability to participate in additional insurance”.

Earlier this year, husband and wife Thanh Tung (Hanoi) also prepaid a loan of 400 million VND for a car loan and canceled a life insurance policy purchased at a bank nearly a year ago.

Consider losing 15 million to pay the insurance premium for the first year, but Thanh Tung finds that not bad, because in return he gets more interest in interest rates and is not bothered by bank staff. For him, 15 million dong of insurance premium is considered a “fee” to get a quick loan when capital is needed.

Currently, the percentage of customers who maintain insurance policies over the first years (via bancassurance channel) is not disclosed by businesses and banks. But with a series of complaints from people in the last two years, the situation of buying life insurance with loans reluctantly and dealing with it like in the case of Ms. Linh and Mr. Tu is very common.

Some cases even sued the bank for “forced” to buy insurance with the loan and were successful in reclaiming the first year insurance premium.

The fact that the customer cancels the contract is not what the insurance company expects. Once a participant cancels the contract from the first year, the business will have to bear a loss when it loses the commission paid to the bank up to 100% of the first year’s premium, excluding other costs.

However, a certain percentage of customers cancel the contract is a fact that businesses accept when distributing insurance through banking channels. In return, they gain access to customer files, large-scale data and additional sales channels that are knowledgeable about customer finances.

In the last two years, the bancassurance channel has contributed about 30% of the revenue to exploit the new market share of life insurance businesses and the trend will increase in the coming time.

On the bank’s side, they receive a commission and an upfront fee from trillions to tens of trillions of dong with revenue constraints. When selling insurance becomes the key to making money for banks from non-credit services, boosting sales for employees is a common policy. However, under the pressure of quotas, a good product is approaching users in a misleading way.

Although the State Bank and the Ministry of Finance have written requests to regulate cross-selling of insurance, in fact, buying insurance with loans is accepted by both industry people and borrowers as an “implicit law”.

To get a loan with no hassle and good interest rates, borrowers need to buy an additional insurance policy – ​​even if there’s no need. Some bank employees even insist that they have to buy insurance to get disbursement.

Commercial banks have also repeatedly said not to force, but people have expressed the opposite. Mr. Chung Ba Phuong, actuarial expert, Chairman of TCA also shared, the success of bancassurance is because banks are in the upper hand, not because users see good policies and buy. There are still cases where customers have to buy life insurance through a bank channel in a reluctant mood, if they want to access the main services of the bank.

Deputy General Secretary of the Insurance Association, Mr. Ngo Trung Dung, acknowledged that there were still complaints about customer dissatisfaction. “Insurance businesses and the Association are also awkward in this regard, because there is no policy to force customers to buy insurance.” However, the sales tie between insurance companies and banks causes banks to assign targets down to employees.

I don’t know all the data of the whole market, but according to Mr. Dung, some businesses, if implemented well, can maintain a good rate of contract retention via bancassurance channel at 80-90%. According to him, insurers should also be open and transparent with clear information, including targets on contract retention rates, for the market to develop in a healthier way.

Quynh Trang