Current status of applying Bancassurance model in Vietnam insurance market

- Nguyen Thu Thuy Trang (2009), “Solutions for Bancassurance development in Vietnam”, Student Scientific Research Journal 2009, No. 11.

However, the above scientific articles and research topics only solve the problem in some aspects, up to now there has been no research project that comprehensively evaluates the current status of how the Bancassurance model is applied. Therefore, this topic does not overlap with previous topics.

3. Research purpose

Based on objective analysis and assessment of the current status of applying the Bancassurance model in the Vietnamese insurance market, the thesis proposes specific solutions to promote the development and improvement of the Bancassurance service model in Vietnam.

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4. Research tasks

- Clarifying theoretical issues about Bancassurance and necessary and sufficient conditions for implementing Bancassurance.

- Research on the current status of Bancassurance service model development in Vietnam insurance market.

- Proposing solutions to develop Bancassurance model in Vietnam.

5. Research objects and scope:

Research subjects:

The research object of the thesis is the insurance business activities of banks in the Vietnamese insurance market, in which special emphasis is placed on assessing the current status of implementing the Bancassurance model in Vietnam. At the same time, the thesis also studies and proposes a number of solutions to develop this model in the Vietnamese insurance market.

Research scope:

In terms of space: the thesis limits the scope of research to the current status of applying the Bancassurance model in the Vietnamese insurance market, and also in some insurance markets of other countries.

In terms of time: the thesis focuses on studying the formation and development of the Bancassurance model in the Vietnamese market from 1993 to present.

6. Research method:

The research method of the thesis is based on historical materialism and dialectical materialism, combined with other research methods such as synthesis, statistics, qualitative and quantitative analysis, comparison and the use of some illustrative documents. The figures and data are collected from many reliable sources including the State Bank, the Ministry of Trade, the Ministry of Finance, etc. In addition, the thesis also refers to and inherits previous research results, from newspapers and other sources exploited on the Internet.

7. Structure of the thesis:

In addition to the Introduction, Conclusion, List of abbreviations, List of tables, charts and List of references, the thesis content is divided into 3 chapters as follows:

Chapter 1: Overview of Bancassurance model.

Chapter 2: Current status of applying Bancassurance model in Vietnam insurance market.

Chapter 3: Some solutions to develop the Bancassurance model in Vietnam.

The Bancassurance model in Vietnam is not yet strongly developed and is still in its infancy.

quite new, so the author's suggestions are based only on past research.

Documents and newspapers should limit the specificity and practicality of the graduation thesis. The recommendations made by the author certainly have many shortcomings and do not meet the requirements of the readers, so the author hopes to receive comments from teachers, colleagues and readers.

During the process of writing the thesis, the author encountered many difficulties, but with the enthusiastic help of the Graduate School, the teachers of the Foreign Trade University, especially the lecturer Ms. Nguyen Thi Hien, who always cared for and guided her thoughtfully and practically. The author would like to sincerely thank her for that valuable help.

CHAPTER 1: OVERVIEW OF THE BANCASSURANCE MODEL

I- OVERVIEW OF BANCASSURANCE

1. Origin and development of Bancassurane

In the early 1970s, ACM (Assurances du Crédit Mutuel) Vie et IARD (life and general insurance - Life and Non-life Insurance Company or can be translated as Composite Insurance Company) was officially licensed to operate - a turning point in the history of the insurance industry. The idea of this company was to avoid the need for an intermediary to insure loans and to insure itself for customers who had banking transactions with it. This was the precursor to an activity that 15 years later would be called "Bancassurance".

This concept includes the implementation of insurance products from banks. Simply put, Bancassurance is insurance products and services provided by banks, or provided through banks. Bancassurance was born as an inevitable result of a series of socio-economic factors.

As we know, since the 1970s, the economies of developed countries have undergone major changes, most clearly manifested in the frequent changes in interest rates. For example, in the United States, before the 1970s, interest rates in the economy were relatively stable, but from 1971 onwards, interest rates have fluctuated greatly, even fluctuating a lot in one year. From that fluctuation in interest rates, traditional insurance products with fixed fee elements are no longer suitable from both the perspective of customers and life insurance companies. Because from the perspective of life insurance companies, when interest rates are always fluctuating, to ensure the ability to earn profits, as well as pay for customers participating in

insurance companies, insurance companies use technical interest rates to calculate fees quite cautiously, insurance premiums of insurance products always tend to increase. On the other hand, applying high fixed interest rates, insurance companies have to bear risks when interest rates drop too low. Meanwhile, from the customer's perspective, fluctuating interest rates greatly affect their ability to buy life insurance products, because they no longer prefer traditional products with fixed interest rates, they want to receive more when market interest rates increase. Moreover, since the 70s, due to economic development, people's lives have improved along with advances in medicine, and the average life expectancy of people has increased significantly. Therefore, they pay more attention to the investment factor of life insurance products, a factor that depends a lot on bank interest rates.

For the above reasons, in order to share risks and benefit from interest rate fluctuations, a new type of life insurance product was born, combining banking and insurance to partly solve the limitations of traditional products. In addition, the desire of insurance companies to diversify distribution channels to reduce risks due to over-reliance on traditional distribution channels (through agents) is also a factor contributing to the birth of Bancassurance.

With positive impacts on profit, strengthening customer loyalty and diversifying insurance products, the Bancassurance model has achieved great success in many countries, as evidenced by the first bank-affiliated insurance company established in France in the mid-1980s of the 20th century with the life insurance business. By the early 1990s, the world witnessed the first official penetration of these companies into the non-life insurance business, also in the French market. The companies

Bank-owned insurance has proven to be very successful in

business activities, and dominates life insurance products. Specifically, business insurance premiums collected through distribution channels at banks increased from 37% in 1990 to 64% in 2006. Non-life insurance premiums also increased significantly.

Banks are currently applying the Bancassurance model quite successfully in the life insurance business, which creates momentum for other products and services to be born and developed. The innovation of terms in non-standard insurance contracts such as personal insurance contracts, civil liability insurance contracts, property insurance contracts, etc. has just been introduced, which depends on the demographics of each region and each country. With positive changes in tax policies and rules, regulations have helped Bancassurance in France maintain its market share in the insurance market. New products and services designed for customers are creating new opportunities for Bancassurance to grow.

Although first appearing in France, the Bancassurance model has developed strongly in the US and other European countries, especially Spain and Austria, the two countries with the most developed Bancassurance model. Bancassurance is a major distribution channel in Europe, according to actual calculations, over 60% of individual life insurance premiums are in France, Italy, Spain and Portugal, and over 50% in Belgium. In other countries such as the UK and Germany, the Bancassurance model has not developed as expected. In Asia, the Bancassurance model is also forming and developing in countries such as Malaysia, Singapore, Thailand, Hong Kong, etc.

Thus, with a favorable legal framework, a developed banking system, simple but creative financial products, and a close, connected relationship

between banks – banks, banks – insurance has helped Bancassurance to develop more and more.

2. Concept of Bancassurance:

2.1. Definition

Bancassurance is a concept that has been popularized by its success in the European market and is not a new concept to the Asian market. There are many different definitions of Bancassurance:

- Bancassurance is “a strategy used by banks or insurance companies to operate in the financial market in a way that integrates services to some extent”.

- Bancassurance is “the cooperation of banks and insurance companies to develop and distribute banking and insurance products efficiently by offering products to the same customer base”.

- Bancassurance is the “provision of insurance and banking products through a common distribution channel or to the same customer base”.

From the above definitions, Bancassurance (banca + assurance) is a French term used to refer to the sale of insurance products through the banking system to the same customer base. In general, the Bancassurance model can be understood in the simplest way as banks participating in providing insurance products to their customers. For example, banks sell third-party liability insurance products to people who borrow money to buy cars... It is necessary to distinguish between banks distributing insurance products and insurance companies providing and distributing financial services.

Assurbanking.

2.2. Characteristics and scope of application of the Bancassurance model

2.2.1. Characteristics of Bancassurance

Although it was born late, Bancassurance has shown its superiority in terms of advantages and competitiveness compared to traditional insurance distribution channels. With the outstanding features below, it can be seen that this association will contribute to the development and distribution of banking and insurance products in the most effective way.

Wide, effective and reputable distribution channel

Bancassurance is known as the operation of banking and insurance linkage models. This model produces products that can be designed by insurance companies, or designed by insurance in conjunction with banks on the basis of cooperation between banks and insurance companies, and all of these products are sold through the network of bank branches. This creates the ability to provide Bancassurance products in a cost-effective and convenient way. By being able to meet customer needs in a timely and effective manner, Bancassurance will create customer trust and loyalty to the bank as well as to the banking-insurance linkage.

The efficiency feature also comes from the characteristics of banking activities. With a dense and efficient banking network, banks are an important financial institution, influencing all economic activities and meeting all the diverse needs of customers. This will also have a positive impact on Bancassurance activities.

On the other hand, the prestige of the Bancassurance channel is reflected in the fact that customers who buy insurance at banks will feel more confident than buying insurance at insurance agents thanks to the name, brand and prestige of the bank that customers already know. Banks have a great influence on the market.

and has built a good image with customers. Besides, banks

Current status of applying Bancassurance model in Vietnam insurance market - 2

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