An article from CanCham’s January 2020 newsletter cited Vietnam as the “Land of Opportunity” for life insurers. The article noted that the life insurance market is relatively new in Vietnam (being formed over the last 20 years), but has achieved almost VND 30 trillion (C$1.8 billion) of first-year premiums in 2018 and is now rivaling many of its regional neighbours. Drilling down to look at this impressive historical growth, we see the primary driver of this rapid expansion over the past several years is bancassurance: insurance partnerships with banks who distribute insurance products. This article will focus on “The Rise of Bancassurance in the Land of Opportunity,” looking at how the insurance landscape has transformed in Vietnam to include bancassurance, as well as the opportunities and challenges presented by this growing channel.

Rapid expansion

For much of its 20 year history, the life insurance market has not relied on bank distribution, with most insurers opting to distribute primarily through tied-agency sales forces. In fact, as recently as 2015, bancassurance formed an immaterial portion of the total life insurance market in Vietnam.

Insurers were still distributing through bank partners, but usually on a non-exclusive basis, where one bank would often sell insurance products from several insurers. Focus on the channel was generally low and sales production reflected this. This stance started to change in 2016 and 2017 as insurers began to recognize and unlock the significant potential of bank partnerships, with many entering into exclusive partnerships with banks and placing more financial resources into the channel, including paying upfront fees to the bank in return for exclusivity. In a short period of time, bancassurance sales rose to achieve 13% of the total insurance market in 2017, before accelerating further to reach 22% in 2018 and 29% in 2019[1]. Keeping in mind that the total market was also significantly growing at the same time, this represents a compound annual growth rate (CAGR) of approximately 80% for bancassurance sales over this period.

Fast forward to the current environment and almost all major banks in Vietnam now have an exclusive partnerships with life insurance companies. Recognizing the importance of the partnerships, deal valuations for these exclusive partnerships have steadily increased as well, with FWD recently announcing a 15-year exclusive partnership with Vietcombank, valued at an estimated VND 9.4 trillion (C$555 million)[2].

Canadian insurers Manulife and Sun Life are also active players in the bancassurance space. Manulife partnered with Saigon Commercial Bank (SCB) in 2015 and expanded to sign another agreement with Techcombank in 2017. Sun Life is a relatively new entrant to bancassurance business, signing an exclusive agreement with Tien Phong (TP) Bank at the end of 2019.

Strong strategic fit creates opportunities and challenges

The strategic fit between banks and insurers is undeniable. With bank’s already distributing a wide array of financial services products (including mortgages, loans and credit cards), insurance provides a strong complement, helping to protect the assets the client has accumulated at the bank. For example, some insurers offer credit life products that can be bundled together with bank loans. Consequently, when a bank client applies for a loan, they have the option of purchasing a credit life insurance product. This credit life insurance provides protection to the loan client (and the bank), as the policy will pay an amount equal to outstanding loan balance if the insured suffers an unfortunate event (usually death) during the loan term. This helps to provide security to the clients’ family, as they are not left with a large outstanding debt to pay, and also provides certainty to the bank, as the client is less likely to default on the loan.

Outside of credit life insurance, insurers generally offer similar products to their bank partners as they offer through their agency force. Although there are some exceptions, there are significant opportunities for insurers to differentiate their product offerings to meet the specific needs of their bancassurance partners and their clients. Often this can involve simplifying underwriting requirements, where in some cases, existing information available to the bancassurance partner can support the financial underwriting requirements of the insurer. In other cases, there are opportunities to tailor products to specific client segments from the bank, such as their priority banking clients.

Similar to the broader life insurance industry, the rapid rise of bancassurance distribution also presents unique challenges that need to be addressed in order for the growth to continue in a sustainable manner. Many of the same challenges that were noted in the previous CanCham article apply equally to bancassurance distribution. However, one additional challenge for insurers, which is unique to bancassurance, is the potential issue of tied-selling – forced bundling of life insurance products together with banking products (particularly loans).

We noted that credit life products were often offered as optional coverage when the client applies for a loan. However, in some cases, bank sales staff may push sales too hard and require the loan client to buy the credit life insurance before issuing the loan, a practice which is currently prohibited in Vietnam. This practice can lead to a poor client experience that can result in complaints to the bank and insurer. Both insurers and banks need to carefully monitor sales practices and advisor conduct to ensure that products are sold in a way that is fair and transparent to clients.

A bright future

Even at a 29% share of the total insurance market (as achieved in 2019), there is still room for bancassurance to expand further to take a larger percentage of total insurance business in Vietnam. Looking across Asia at other markets, in more developed countries like Hong Kong, bancassurance formed 45% of the total market in 2019[3]. Similarly, bancassurance accounted for 45% of Indonesian life insurance sales in 2019[4] and 33% in Malaysia[5], all higher than the current share in Vietnam.

The future is bright for both insurers and banks to further tap into the bank’s client base to reach large segments of the uninsured Vietnamese population. We should look for bancassurance business to continue to expand on top of the already rapid expansion of the life insurance market in the coming years.

[1] Vietnam Actuarial Working Group


[3] Hong Kong Insurance Authority

[4] Indonesian Life Insurance Association

[5] Life Insurance Association of Malaysia

Matthew Mohr

Executive Board Member – CanCham Vietnam

Chief Actuary & Chief Risk Officer – Sun Life Vietnam