Ph.D Thesis summary: Develop bencassurance of insurance companies under VietNamese state commercial bank

Ministry of education and training
National economics university
__________________



DoAn thÞ thanh tAm





DEVELOP BANCASSURANCE OF INSURANCE
COMPANIES UNDER VIETNAMESE STATE
COMMERCIAL BANKS



Major: FINANCIAL BANKING
Code: 62340201



Ph.d thesis summary






Hµ Néi – 2014

Ministry of education and training
National economics university

__________________


Doan thÞ thanh tam





DEVELOP BANCASSURANCE OF INSURANCE
COMPANIES UNDER VIETNAMESE STATE
COMMERCIAL BANKS


Major: FINANCIAL BANKING
Code: 62340201

Ph.d thesis of economics



Science guide: 1. Doctor- Professor. Dinh van son
2 .Doctor. nguyen thi hai ®uong
THE THESIS COMPLETED AT
NATIONAL ECONOMICS UNIVERSITY

Science guide: 1. Doctor- Professor.Dinh van son
2 .Doctor. nguyen thi hai ®uong


















GENERAL INTRODUCTION
1. OPENING
a. Choosing subject reasons
In Vietnam, Bancassurance is not a new concept but these associated
activities are still in the initial steps for development at the present and in the
future. Vietnamese State Commercial Banks develop bancassurance model
which is suitable for the overall trend with many advantages in the market,
brand, infrastructure and resource. However, the results of their operations

themselves in bancassurance has not been effective such as the case study of
Bao Ngan and VCLI; or their development is not accordance with their ability in
fact due to their difficulties in exploiting market such as the case of BIC, ABIC.
That’s why postgraduate researcher selected research subject: "Development of
bancassurance activities of insurance companies under the Vietnamese
Commercial State Banks." This is the necessary research from that researcher
proposed the solutions to develop bancassurance activities of Insurance
companies under the Vietnamese Commercial State Banks to best exploit their
existing potential.
b. Research purposes
Research objectives set out for this subject is to evaluate the current status
and development activities of bancasurance and clarify the factors affecting the
development of bancassurance of the Insurance Companies under Vietnamese
Commercial State Banks so as to propose appropriate development solutions.
Specific objectives:
- Formalize and clarify the fundamental theoretical issues about bancassurance
and its activities.
- Analyse the current situation of developing bancassurance activities, clarify the
factors affecting its development of the Insurance Companies under the
Vietnamese State Commercial Banks.
- Propose solutions for Bancassurance development of the Insurance Companies
under Vietnamese State Commercial Banks in the coming time.
Research questions:
To achieve the set objectives, the subject should answer the following research
questions:
- What are bancassurance and its activities?
- How are bancasurance activities currently developed in every country? What
can Vietnamese Insurance companies learn from the experienced bancasurance
development activities in the world?
- Why haven’t bancasurance activities of the Insurance Companies under the

Vietnamese State Commercial Banks achieved as our expectation?
- Which trend should the Insurance Companies under the Vietnamese State
Commercial Banks follow to develop bancasurance activities?
c. Object and scale of research
Object of research:
The object of this PhD thesis will focus on studies of developing bancassurance
activities of the Insurance Companies under the Vietnamese State Commercial
Banks.
Scale of research:
- Space: This PhD thesis focused on developing bancassurance activities of the
Insurance Companies under the Vietnamese Commercial State Banks.
- Time: This PhD thesis mainly reviewed and analysed bancassurance activities
of the Insurance Companies under the Vietnamese State Commercial Banks
during the period from 2007 to 2012.
2.Overview of Research
There are many international studies on bancassurance in the regions, in
many countries as well as of banks or financial corporations in the world. The
study by Wong and Cheung (2002), and Syprus Violaris (2001), A. Karunagaran
(2006), Clarence Wong, Mike Bamahan, Lucia Bevere (2007), Elisabeth
Standler (2010), Steven I Davis (2007) for see overview of bancassurance in
various insurance markets in the world related to the bancassurance model of
banks and financial corporations, product development of bancassurance in the
countries, the selection of the bancassurance partners and target market, develop
effective distribution channel. These studies provided valuable experience for
Vietnamese banks in developing bancassurance model.
In Vietnam, the study of bancassurance is only at the graduate level. In
theory, studies of the authors Do Minh Hoang (2009), Vo Quoc Dat (2009),
Vietnam Pham Ha (2010), Nguyen Thi Giang (2011), Nguyen Thi Van (2011),
Nguyen Thi Le Thuy (2011) are mainly referring to the general theory of
bancasurance related to models, products and distribution channels. Those

studies provide the general concept of bancasurance but they do not summarize
research or develop a unified concept of bancasurance. Those studies remain a
single analysis at a bancasurance of a bank, or as study of Pham Ha (2010) is the
market assessment overview but it is not in detail and it has no assessment of the
potential market.
Based on the current research on bancassurance in Vietnam, there is a lot
of space for postgraduate author to research involving model selection, product
development, distribution channel development, etc. Postgraduate author
selected to research is solving the problem that the previous studies which do
not concern that is assessing comprehensively the development of
bancassurance of the Insurance Companies under the Vietnamese State
Commercial Banks regarding the bancassurance model selection, evaluating the
overall product development and distribution channels of the Insurance
Companies under the Vietnamese Commercial State Banks and assessing factors
affecting this model at the present and in the future.
3. Rationale and scientific hypotheses
Research Hypothesis of the research is that the development of
bancassurance of the Insurance Companies under the Vietnamese State
Commercial Banks is not really effective, the insurance companies only exploit
a very small market share of the potential market at the banks. The cause of this
problem is the factors that influence both inside and outside the insurance
company. However, the insurance companies can fully improve their internal
factors to develop bancassurance activities efficiently and exploit a possible
maximum of its potential market.
4.Research methods
4.1. Research Design
The research is an exploring study because bancassurance in Vietnam is a
new formation and develops to meet the needs of society and the general trend
of development of the banking and financial institutions. Research is done in the
context of the development of bancassurance activities of Vietnamese State

Commercial Banks occurring naturally and follows the development trend of the
market in normal environment, its activities occur in a usual manner without any
interference and impact from the study.
4.2. Information collection
Data used for the study of thesis consists of primary and secondary data.
4.3. Information Analysis
The main analytical information methods used are qualitative analysis,
synthesis and comparison. On the basis of data collected from the information
collection methods mentioned above, the authors analyzed and compared the
information to get the overall picture on development status as well as
bancassurance developing potential of the State Commercial Banks in Vietnam,
focusing mainly on the development of model, product and distribution network.
Besides the two methods of analysis mentioned above, quantitative
analysis methods were used to analyze the information obtained from the
sociology survey information for the purpose of retesting the results of
qualitative analysis.
Quantitative analysis of the study will be based on the analysis of discrete
variables, so the author has used the non-parametric testing, correlation analysis
with discrete variables and hierarchical regression models to confirm the
comments related to bancassurance activities in the State commercial banks.
5. Research Results
After completion, the thesis has achieved the following results:
- Develop and introduce the formal concept of model bancassurance model and
bancassurance distribution channel, systemize theoretical issues related to
bancassurance including products, distribution channels, the impact factor, etc.
- Determining causes of success or failure of the bancassurance in markets and
banks, the insurance financial corporations.
- Identify the key factors affecting the development of the bancassurance of the
Vietnamese Commercial State Banks, leading to the reasons why the
bancassurance has not fully exploited or exploited the existing potential

ineffectively.
- Assess accurate the potential market of Bancassurance of the Vietnamese
Commercial State Banks.
- Propose solutions for Bancassurance development towards overcoming the
influenced factors of internal bancassurance and insurance banks linkage.
6. Structure of the thesis
As for the structure, in addition to the introduction, conclusion and
attacted statement data, the thesis is divided into three chapters:
Chapter 1: General Theory of Bancassurance
Chapter 2: Current status of the Bancassurance development of the Insurance
Companies under Vietnamese State Commercial Banks
Chapter 3: Solution for the development of Bancassurance development of the
Insurance Companies under Vietnamese State Commercial Banks
Chapter I: General Theory of Bancassurance
1.1. An overview of bancassurance
1.1.1Formation and development history of bancassurance
1.1.2. The concept and characteristics of bancassurance
From the actual development of bancassurance in the market and studies
related to the bancassurance of the specialists we can summarize the basic
terminology termsrelated to bancassurance as follows: "Bancassurance is a
combination of insurance and banking services to maximize the service and
profit of the parties "; Bancassurane distribution channel is defined as " It is the
distribution channel of insurance products through banks, distribution of
insurance products to bank customers." In the insurance company,
"bancassurance activities" as: "The company's efforts in developing insurance
products, establish relationships with banks to develop effective distribution
channels, and other activities aimed at achieving the highest results from
bancassurance distribution channel ". Regardless of the level of development of
bancassurance, bancassurance operation is always crucial factor.
1.1.3. Bancassurance models.

On the basis of summarizing bancassurance activities in several countries,
the researches classified three basic bancassurance models: distribution
agreement model: dealer partners and develop more strategic alliances, joint
venture integration model and the single ownership model.
1.2. Development of bancassurance activities in insurance companies
1.2.1. Bancassurance with the development of the insurance companies
1.2.2. Bancassurance products
1.2.2.1. Traditional insurance products
1.2.2.2. Insurance Integrated Products
1.2.2.3. Development of bancassurance products
The insurance products developed to serve bancassurance activities
include traditional products and integrated products (insurance products
associated with the integration of banking products). The level of product
development often depends on market demand, the capacity of insurers, socio-
economic conditions.
1.2.3. Bancassurance distribution channel development
Bancassurance distribution channel can be developed in many directions:
Distributed in the transaction department, direct response distribution, online
distribution (via the Internet).
The insurance company (bancassurer) organizes distribution models in three
basic models: matching model, expert model and financial planning model.
1.2.4. The indicator of the level of development of bancassurance activities
of insurance companies
1.2.4.1. The absolute targets.
These indicators include revenue from bancassurance fee, the number of
bancassurance agents, bancassurance product number: the number of traditional
products and the number of integrated products, commission fees
bancassurrance channel. In life insurance could use additional criterias: the
amount of insurance money, the insurance money due to new exploitations, the
insurance money due to exploitations of new insurance revenue, maintenance

contracts in effect, the number of new mining contracts.
1.2.4.2. The relative targets.
These relative figures will be used for: revenue growth of operating
bancassurance fee, proportion of total direct bancassurance revenue, the rate of
successful exploitation of market potential
1.3. Factors affecting the development of bancassurance of insurance
company
1.3.1. The objective factors
Socio-economic condition, legal environment, spending cultural, competitors
1.3.2. The subjective factors
Partners and level of commitment of the parties in integration, the
bancasurance target market, product and technology, human resource quality.
1.4. Experience in developing activities bancassurrance
1.4.1. Development of bancassurance activities of several banks and
financial insurance corporations
Thesis researched experience in developing bancassurance of Allianz,
Aviva, City Group Maybank, Wells Fargo. These are leading financial
corporations in the world and have many years of experience in developing
world- wide bancassurance in different markets.
1.4.2. Bancassurance developing experience for Vietnam Insurance
Companies
Based on the study of financial corporations in the development of
bancassurance, the author found that the regulatory role of the legal regulations r
is a premise for the development of bancassurance activities in each country. In
order to development successfully, the insurance companies need to focus on
several issues as follow: First, select suitable partners and bancassurance
models. This factor can make a success of bancassurance but for many insurance
companies this is the decisive factor to the failure due to inappropriate partners.
Second, the choice of the market and target customer segments successful.
Third, the development of diversified and proper products. Fourth, there is a

need to focusing on developing the quality of network and distribution channels
quality.
Chapter II: Current status of Bancassurance
development of the Insurance Companies under
Vietnamese State Commercial Banks.
2.1. Overview of the Insurance Companies under Vietnamese State
Commercial Banks
2.1.1. Insurance joint stock Corporation of Bank for Investment and
Development of Vietnam.
Insurance joint stock Corporation of Vietnamese Investment and
Development Bank. (BIC) is the earliest bancassurance model in the
bancassurance models of Vietnamese state commercial banks. BIC was formerly
Vietnamese- Australian joint venture insurance company established on the
basis of a joint venture between Bank for Investment and Development of
Vietnam and QBE Insurance Group of Australia. In 2006, BIDV bought the
shares of International Insurance Group QBE (Australia) in Vietnamese-
Australian joint venture insurance company and officially went into operation
with the company trading as Insurance joint stock Corporation of Vietnamese
Bank for Investment and Development. (BIC).
2.1.2. Insurance Company of Vietnamese Agricultural and Rural
Development Bank (ABIC)
Insurance Company of Vietnamese Agricultural and Rural Development
Bank (ABIC) established in 2006 is the bancassurance model developed by
Vietnamese Agriculture and Rural Development Bank. ABIC can be classified
into group of bancassurance single owned model with controlling shareholder is
Vietnamese Bank for Agriculture and Rural Development, with 51% of the
charter capital. This model allowed Agribank to offer customers many services
as well as opportunities for ABIC to promote its active right in exploiting and
developing customers market of Agribank
2.1.3. Insurance Company of Vietnamese Industrial and Commercial Bank

(Bao Ngan).
Insurance Company (Bao Ngan) is the bancassurance model developed by
Vietnamese Industrial and Commercial Bank in the field of non-life insurance.
Bao Ngan Bank is classified as single ownership model with legal form of a
member Limited Insurance Company of Vietnamese Industrial and Commercial
Bank owned by Vietinbank. Bao Ngan had formerly owned by Asia Insurance
joint venture company - Industrial and Commercial Bank. In 2008, Vietnamese
Industrial and Commercial Bank acquired the entire equity of the foreign partner
in the joint venture company and the company officially moved into Insurance
Company of Vietnamese Industrial and Commercial Bank (Bao Ngan) and had
independent accounting
2.1.4. Vietin - Aviva Limited Life Insurance Company
Vietin- Aviva Limited Life Insurance Company (VietinbankAviva) is
licensed under the license No 64/GP-KHBH July 2011 as a joint venture
between Vietinbank and Aviva Insurance Group, the biggest Britain insurance
group. This is the bancassurance model established in the form of alliances
strategy in the field of life insurance.
2.1.5. Vietcombank Cardif Limited Life Insurance Company
(VCLI) is bancassurance model developed by Vietnamese Foreign Trade
Bank (Vietcombank). VCLI is the life insurance company established in
10/2008 on the basis of strategic cooperative venture between Vietnamese
Foreign Trade Bank (Vietcombank), South East Asia Bank (Seabank) and BNP
Paribas Assurance (Cardif) Company – a life insurance company of European
leading BNP Paribas financial group.
2.2. Reality bancassurance activities of the Insurance Companies under
Vietnamese Commercial State Banks
2.2.1. Product development status
2.2.1.1. Product development at BIC
The insurance products marketed by BIC include the traditional insurance
products and integrated products. BIC Integrated Products are in association

with each group of banking products. BIC - Bình An associated with the credit
operation and is currently the leading bancassurance products, BIC- Bình An
Comprehensive Security products associated with savings products, and BIC -
Visa Gold associated with the card service.
2.2.1.2. Product Development at ABIC
ABIC provides a full range of traditional insurance products available in
non-life insurance market. Products integrating with existing products of ABIC
bank is Credit Security for household customers and individuals having relation
with deposit or mortgage loan at Agribank. This product is successfully
developed by the ABIC because they are suitable for customers, simple and easy
risk management leading to lower costs.
2.2.1.3. Product Development at Bao Ngan
Bao Ngan only develops traditional insurance products similar to
insurance products of other insurance companies in the market to serve
customers of Vietinbank.
2.2.1.4. Product Development at VCLI and VietinAviva
VCLI provide both savings products and protective products. However,
the only product currently offered in the market is VCLI credit insurance
products serving personal credit customers of Vietcombank and Seabank.
Life insurance products developed by VietinAviva focus on two types of
life insurance as saving life insurance and death period life insurance and they
are divided into three groups of products: protection product, savings products
and bancasssurance product. However currently VietinAviva mainly exploits
Phát An Bảo Tín products.
On overall, the development of bancassurance products except Bao Ngan
shows the remaining bancassurance as BIC, ABIC, and VietinbankAviva VCLI
have developed complement integrated product line, traditional product line so
as to provide the convenience to banks’ customers as well as protection for
banks’ customers and banks. However, at both the 4 bancassurance products,
integrated product group is only in human insurance related to human mortality

risks, personal accident and focuses on credit customer.
2.2.2. Current status of development of the bancassurance distribution
channel of the Insurance Companies under Vietnamese State Commercial
Banks
2.2.2.1. Bancassurance distribution channel development at BIC
BIC contracts directly agent with BIDV branches in the provinces. The
linkage between BIC and BIDV in developing new bancassurance distribution
channel is only at the level of transactions through agency contracts, BIDV has
no relationship with the direction of insurance exploitation of branch BIDV
branches - BIC and BIC agents. BIC Bancassurance distribution channel
performs two functions: direct distribution of retail products and support BIC to
exploit enterprise customers.
2.2.2.2. Bancassurance distribution channel development at ABIC
ABIC bancassurance distribution channel is the most closely cooperation
operating in Vietnam. ABIC contracts agent with Agribank branches and creates
a system of general agences including all nation- wide Agribank branches.
Members participating in the general agencies are mainly credit officers and
leaders of Agribank branches. ABIC and general agencies are directly
supervised and operated by Bancassurance leading board at the Steering
Committee of Agribank to its members.
2.2.2.3. Bancassurance distribution channel development at Bao Ngan
Bao Ngan established agency relations with the whole of 147 Vietinbank
branches covering the country. There are currently over 400 staff at managing
level and over 3000 people who are mainly Vietinbank credit officers trained
and issued Bao Ngan certificates. In bancassurance distribution channels model
between Vietinbank and Bao Ngan, in customer organizations require complex
insurance assets cases, the exploitation are transferred to Bao Ngan staff with
the information provided Vietinbank. The level of commitment between
Vietinbank and Bao Ngan is based on agency contracts and not really tight and
articulate.

2.2.2.4. Development and distribution channels at VLCI and VietinAviva
VLCI and VietinAviva develop distribution network through
bancassurance channel and focus on exploiting the bank internal customers, they
haven’t reached the bank external customers. VCLI direct agents are often
exploited by bank credit officers. Collaborative process involving two parts is
the customer relations department (customer management of Seabank
Vietcombankk) and Debt Management Department of Banking to monitor and
ensure the bank benefits. Vietcombank and Seabank play a key role in this
connection, VCLI plays the technical, insurance claims evaluation and decision-
making level insurance policy role.
VietinAviva has just been operated and gradually built and set up. At
present, sources of VietinAviva agents are meeting difficulties due to the legal
provisions relating to Bao Ngan life and non -life bancassurance agency codes.
Just as in the case of Bao Ngan, Vietinbank commitment to VietinAviva is still
entirely based on the contract between the two parties and there is no direct
supervising linkage like Agribank case.
2.3. The results of the activities of the Insurance Companies under
Vietnamese State Commercial Banks
2.3.1. The result of the Insurance Companies in non-life insurance field.
a. Results of BIC activities
BIC is in top ten enterprises with the largest collection of original
coverage insurance on Vietnam's insurance market. BIC profit before tax
maintains annual growth, reaching 110.32 billion in 2012 increased 10%
compared to 2011. ROE of BIC increased steadily and reached 12.8% in 2012.
Business results of the bancassurance distribution channel indicates the
channel's revenue has increased over the years with a growth rate higher than the
overall growth rate of the original premium revenue of BIC. In 2008, BIC
bancassurance sales reached 23 billion, with a density of 8.53% of the total
direct premium revenue in 2012, the bancassurance revenue reached 144.72
billion, accounting for 21.59% by total orginal premium revenue growth.

bancassurance premiums growth is always over 50%. However, with the
advantage of being dominated by BIDV bancassurance, result of bancassurance
activities also shows that this result does not correspond with existing and
potential advantages that BIDV gives BIC in general and bancassurance
distribution channel in particular.
b. Results of operations ABIC
Compared with BIC and Bao Ngan, ABIC is under the bank with the
widest retail market banking services system on banking service market, It has
the advantage in developing retail products, ABIC has taken advantage of a
bancassurance. ABIC business results have improved considerably when the
insurance market steadily increased from year to year from 0.20% in 2007 to 2%
in 2012. Revenue increased premiums from 16 billion in 2007 (ABIC
established in May 6/2006) to 455 billion in 2012
Existing bancassurance channel is ABIC main channel with the
proportion of channel sales tending to increase, the proportion of revenue from
bancassurance channel was only 38.5 % in 2008, then in 2011 this proportion
was increased to 72.72 % and 85 % in 2012 with an increase from 51 in 2008 to
387 billion VND billion in 2012. Growth of bancassurance sales peaked with the
corresponding ratio reached 214.72 % in 2009, 45.81% in 2011 and 30.74% in
2012. According to ABIC statistics,in 2012- revenue from Credit security
products reached 268 billion accounted for approximately 59% of direct
premium revenue [21].
c. Results of operations of Bao Ngan
Bao Ngan shift from bancassurance venture into single ownership model,
it also has thrived for Bao Ngan. Before 2008, Bao Ngan original premium
revenue was just over 20 billion with growth of about 10%, since 2009 Bao
Ngan original premium revenue has improved markedly,the original insurance
premium revenue reached 67.354 billion in 2009, 130.760 billion in 2010,
151.412 in 2011 and 121.061 billion billion in 2012.
Overall, results of Bao Ngan insurance operations improves and speeds up

certain development compared with the venture previous stage and Bao Ngan
against itself over the years. However, if compared with other bancassurance at
the same advantages, the results of Bao Ngan Insurance Business is not really
good.
2.3.2. Results of the bancassurance activities in the life insurance field
VCLI and VietinAviva have disadvantage because they were founded
later and at a time when Vietnam's economy fell into financial crisis and
economic downturn. VCLI business results - according to the Vietnam
Insurance Association from 2009 to 2012, and 2012 began seeing results for
mixed life insurance products with the number of 107 exploiting contracts, the
insured amount reached 8,133 million and first year premium revenue reached
609 million For death period life insurance products, VCLI business results has
improved significantly, if 2009 began exploiting operations with 117 death
period life insurance products, in 2010, the number of new exploiting contracts
reached 3,540 contracts and 6,728 contracts remain in force, in 2012 the number
of new exploiting contracts reached 28 380 contracts and annuity contracts is 32
332 contracts. VietinAviva actually started going into operation in 2012, the
exploiting results showed that VietinAviva has focused on exploiting mixed
insurance products with some new exploiting contracts reached at1,079
contracts and the amount of insurance operators reached 108 129 million
contracts, insurance contracts to exploit death period life insurance products in
2012 was only 276 contracts with the insurance money reached at 70 780
million.
2.4. Assessment of the status of the bancassurance activities of the
Insurance Companies under Vietnamese State Commercial Banks
2.4.1. Results
The selection of integrated partners or banks’bancassurance model is
appropriate. Basically, bancassurance model which commercial state banks
select is reasonable and makes significant contribution to the operation of the
bancassurance.

- Revenue and market share:
In the field of non-life insurance: In three bancassurance, ABIC is now
improved market share and growth is 11.71% higher than the overall growth of
the market. In comparison to 2008 - the year when BIC and ABIC started
operational stability after establishing or model shift with 2012, revenue and
position of the bancassurance can be seen with significantly improvement:
business ABIC revenues increased from 16,538 million to 454 960 million with
a market share increased from 1.2% to 2 %; BIC 's sales increased from 147,922
million to 670.37 million, the market share increased from 2.43% to 2.95%. Bao
Ngan in particular, in 2008 it operated as a joint venture, sales of bank storage is
25 599 million in 2008 with a market share of 0.22 %. After switching model of
the business results Bao Ngan changed markedly revenue in 2009 reached 57
654 million compared to 23 823 million in 2008. 's 2012 revenue reached 121
061 million short statement to the share increased from 0.22% in 2008 to 0.53%
in 2012.
In the life insurance sector, both VCLI and VietinAviva are two insurers
licensed and put into new operation on the market, VCLI has 3 years of
operation, VietinAviva has 1 year of operation. VietinAvia and VCLI’s market
share has been small.
VCLI is one of five life insurance companies coverage the largest exploiting
amounts insurance and death period life insurance premiums in the market in
2012 with market share of exploiting insurance money reached 3.17% and the
amount insurance operators reached 5869.73 billion. VCLI has employed a
relatively good position to exploit a bancassurance market potential at
Vietcombank and Seabank.
VietinAvia case is more complicated than VCLI. Although it has achieved
certain results in exploitation activities with a new exploiting premiums market
share reached 0.21 % and the amount of new exploiting insurance to reach 0.1%
in 2012. However, VietinAvia position is different from other bancassurance on
the market because they are under Vietinbank and have to the internal

competition with Bao Ngan in developing death period life insurance products.
- Profitability and contribution to the parent bank
Commissions and expenses to support the risk assessment that the
bancassurance pay for the parent bank is still small compared with income of
banking operation but it also shows the potential to develop insurance services
for the bank when these incomes have increased over the years.
- Product Development
Except Bao Ngan, four existing bancassurance are developing insurance
products attacted to bank products to exploit the advantages brought by the
parent bank. The credit insurance products are effective and highly structured
sales in total sales of bancassurance.
- Development of distribution channels
It can be estimated that the bancassurance as ABIC, BIC, VCLI has good
experience in choosing partners and boost sales supervision of bancassurance
models of banks, financial groups in the world.
2.4.2. Limitations and causes
First, the relationship between the parent bank and the insurers is not really
tight leading to the exploitation of bancassurance distribution channels in the
potential market customers of the parent bank is not high.
Second, the number of integrated products is limited, coverage of the product
is still very narrow so it limits customer choice.
Third, distribution channel through the bank is not really effective.
Fourth, financial capability, insurance capacity was weak, quality customer
service is not really high in some Bancassurance and general agents for the
Bank's branches.
Fifth, except for the case of ABIC, BIC, the remaining bancassurance has not
taken advantage of support from the parent group.
Sixth, the brands of bancassurance is still very famous because the insurers
are new on the market.
Practical survey results show that in the samples, there are 82.2% of bank

customers have been insured. This indicates the insurance needs of bank
customers is great. Referring to the issue of the quality and results of the
distribution channels, customers tend to choose the method by participating
insurance employees achieve the highest rate (43.7% in the number of customers
participating insurance). Second and third are forms of insurance through the
bank staff (29.7%) and the insured person at the insurance company but through
the introduction of bank staff (27, 8%). Survey results also showed that the
quality of the current service coverage reached only above average.
Using Multinominal Logistic model, the analysis results show that: In order
to enhance the level of service quality evaluation from the low level (level 5) to
the good level (level 1) and the not so good level (level 2), the role of banker
attitude when introducing products makes sense.
In addition to the limitations above analyzed, the development of
bancassurance is also influenced by the objective reasons of economy, such as
insufficiency of the legal system to adjust Bancassurance activities in Vietnam;
The lack of trust and subjective customer; The fluctuation of the economy due to
the effects of financial crisis in the U.S. A in 2008 on Vietnam's insurance
market.
Chapter III: SOLUTIONS FOR Bancassurance development
of the Insurance Companies under Vietnamese State
Commercial Banks.
3.1. Basis for Bancassurance development of the Insurance Companies
under Vietnamese State Commercial Banks.
3.1.1. Social, political and economic conditions.
With the economic objectives set out in Vietnamese Sustainable
Development Strategy 2011-2020: "Striving to achieve Gross Domestic Product
(GDP) on average 7-8% per year. GDP by 2020 at comparative prices will be
about 2.2 times compared with 2010; GDP per head at current prices will be
about $ 3,000. Ensuring macroeconomic stability "and a series of optimistic
economic indicators will be an opportunity for the insurance sector and the

direct opportunity to develop bancassurance - the entities under big banks, the
transferring mobilized units will supply a big amount of capital to the economy
3.1.2. Integration and globalization trend
Current panorama of Vietnam's insurance market clearly shows the
impact of globalization and integration. Some financial foreign insurance
corporations have stopped the partnership, integrated relationship, which is seen
in the case of HSBC divested capital from Vietnamese Insurance corporation
and transfer shares to Sumitomo; or the case of Bao Ngan, BIC also had a
change from joint venture model to single owned model especially when foreign
insurers withdrew out of the market. In contrast, the number of insurance
financial corporations coming to vietnamto seek opportunities increase and
bring fresh air to the market. Vietnam life insurance market is a typical image
showing the integration and guidance of foreign insurers in Vietnam's insurance
market.
3.1.3. The legal provisions
The legal documents system related to the insurance sector are
increasingly completed with the enact of Insurance Business laws issued in
2000, amended and added in 2010 and a series of decrees and circulars are
issued in detailed instructions for implementing the Law on Insurance Business.
3.1.4. Technical infrastructure of the economy and services using habits of
consumers
In Vietnam, payment systems and information technology are currently
developing relatively fast and strongly. The information connection is a
favorable basis to the insurer and the bancassurance to apply modern technology
management, it is also a necessary condition for business to develop online
distribution channels system. On the other hand, encouraging people to use POS
payment systems, online payment, gradually forms the habit of using modern
services to clients, towards a modern spending trends in population.
3.1.5. Potential customer market in Vietnamese State Commercial Banks
Calculating the Investment Capital Operating Rate (ICOR) (the amount of

operating capital to increase 1unit in GDP) under 5 unit to the predicted
calculation (presently it is 5,27 according to the data of the year 2011) so the
total asset value and invested capital into the economy is quite big and create a
lot of opportunities for insurance businesses to develop their market[6].
Especially, Bancassurance in non- life insurance as BIC, ABIC, Bao Ngan are
insurance companies under State Commercial banks with controlled ratio- big
creditors hold over 60% banking service market share of banking sector with
growing planned figure at 15% at period 2011- 2015, development opportunities
are very prospective.
Moreover, the investigated survey data of the author and insurance faculty
researching group at 4 State Commercial banks (2 appendix) showed that the
number of the customers desiring to continue using insurance in the future
counted 84,1% out of current using insurance customers, in which the ratio
between individuals and business customers is equivalent (80,3% and 81,6%).
This result shows that the demand for Insurance Integrated Products is gradually
increasing so Bancassurance need to focus on developing and diversifying this
group of product.
3.2 Solution for the development of Bancassurance development of the
Insurance Companies under Vietnamese State Commercial Banks
3.2.1 Direct solutions
3.2.1.1.Reinforce the linkage between banks and insurance businesses
Solution for Reinforce the linkage between banks and bancassurance needs to
centre on following issues: Constructing the integrating and connecting model
banks and bancassurance from central authority to localities in order to support
and speed up the operation of bancassurance and general agents in form of
braches of banks. Operating integrating model flexibly to ensure to encourage
the linkage between banks and bancassurance in sales promotion, information
share, ensuring the interests of customers, banks and using insurance customers.
Having maximum and constant support from banks’ leading board in promoting
is the linkage between the two parties.

The success of ABIC bancassurance distribution channel is a model to
construct the tight cooperation between banks and insurance.
3.2.1.2. Developing and diversifying insurance products
Insurance Integrated Products designed and developed in the coming time need
to focus on two groups: individual and group insurance.
In the near future, individual insurance products can concentrate on
human insurance, household insurance, health care insurance. These are new
products, meet the necessary requirement of most of customers (the survey
result showed that more than 37% investigated customers chose health care
insurance, health care cost insurance). These products are suitable for
distribution through bancassurance or online channel due to its essentiality.
For each product insurer should have its own development: The case of ABIC,
basically Credit Security product is a flagship product. However, products that
can develop additional provisions to expand coverage. In case of Bao Ngan,
BIC, in spite of developing personal credit insurance products, however
characterized by urban banks, customers concentrated in urban areas and they
usually have high income, so the product can be designed to target high quality
health care products with high payment. Similarly, VCLI and VietinAviva can
fully develop products aimed at individual groups of customers of the bank.
- In case of Bao Ngan, BIC, ABIC, they can develop household insurance
product within the next 3-5 years until customers of the have gradually formed
habits of income and insurance, savings are increasingly improved. Especially,
BIC and Bao Ngan can develop products because BIDV and Vietinbank are the
big urban banks.
- For group products, which are oriented product development in the long term o
f insurance businesses.
3.2.1.3.Diversify distribution methods via bank
Diversifying distribution methods within internal bancassurance distribution
channel needs to be developed in the following directions: direct distribution
through dealer network; Set channels to provide information to serve the direct

exploitation of the insurer for the bank's customers, channel provide information
should be in the bancassurance distribution channel to gain the most responsive
and timely service for exploitation; Develop online distribution channel
belonged to bancassurance distribution channel; Develop the introduction of
distribution by e-mail, mail and telephone.
3.2.1.4. Improving the quality of human resources
The quality of human resources is critical factor to the success of any
business, especially businesses operating in the financial services sector. Human
resources development in the field of business activities in general, insurance
and bancassurance activities in particular need to focus on the groups: managers,
technical working groups, professional management; direct sales group: direct
sales staff and agents. Improving the quality of human resources should be taken
at all stages in the work of human resource management: improving the quality
of inputs, and improving the quality of personnel working. Doing this will solve
many problems at the same time and related to quality distribution channels,
quality assessment and risk management, quality of service.
3.2.2. The complementary solution
3.2.2.1. Form commission policy, reasonable rewards
3.2.2.2. Promote advertising propaganda
3.2.2.3. Invest in the technology development and application
3.3. Recommendations for developing bancassurance activities of the
insurance business under Vietnamese State commercial Bank
3.3.1. Recommendations for State management offices
- Add provisions on new distribution channels including Bancassurance channel
- Add rules on selling and introducing insurance product method of
Bancassurance channel.
- Specify the number of insurers that are bank affiliate
- Add payment mechanisms on commission for insurance agents group.
- Add provisions on training programs and issuing certification of training
insurance agents for sales team bancassurance.

3.3.2. Recommendations for Vietnamese State Commercial Banks
- Encourage group activities
- Actively share customer database, comply accurately with commitments from
the leaders of the two parties
- Cooperate with the insurer on all areas of deposits and loans
- Insurance is required to coordinate effectively and fully with other marketing
efforts from banks.
- Training and retraining of basic knowledge about insurance for staff engaging
in bancassurance
CONCLUSION
The thesis clarifies the objectives set at the beginning of the study that is to
systematize the theoretical issues of bancassurance: clarifies the concept of
bancassurance, bancassurance operations, bancassurance distribution channel,
integrated product. Clarifying the bancassurance model under development
patterns and factors affecting the development of bancassurance activities. For
the reality, the thesis introduces the basics of business insurance under
Vietnamese State Commercial Banks, clarifies the advantages of these
enterprises associated with each parent and partner banks. The practical analysis
also analyses in detail the product development, development of distributed
systems and bancassurance distribution channel of each insurer, clarifies issues
done and not done and the specific evidence in business results of each insurer.
The evaluation of the results, the limitations and the causes of the limitations in
bancassurance operations development of each insurer is an important basis to
propose solutions of the thesis.
The solutions proposed in the third chapter are associated with the fact of each
business and clarifies the systemized and time for the solution implementation.
Solutions are associated with the cause of limitations issues related to the link
between banks and insurers, the issue of product development, distribution
channels and distribution methods and quality of human resources. The
supplement solutions and recommendations are the conditions for implementing

the direct solutions effectively.
.






LIST OF SCIENTIFIC ANNOUNCED WORKS OF THE AUTHOR
RELATED TO THE SUBJECT RESEARCH

1. Nguyen Thị Chinh and Doan Thị Thanh Tam (2012), “Develop
bancassurance activities in The People Republic of Laos”, The summary
record of international scient conference “Vietnam- Laos economic
cooperation: Develop some key industries to 2020”, Vientian, Laos, NEU
publishing house,10/2012.
2. Doan Thị Thanh Tam (2013), “ Bancassurance activities development
experience for banks, insurance companiesin Vietnam”, Asian Pacific
Economic Review, No 401/ 5/ 2013
3. Nguyen Thi Hai Dương, Doan Thị Thanh Tam (2013), “Bancassurance
model in Vietnam and its impact factors”, Economic Development review, No
May/ 2013.
4. Doan Thị Thanh Tam (2013), “Develop bancassurance in Insurance joint-
stock company under the Vietnamese Bank of Investment and
Development ”, Asian Pacific Economic Review, No 402/ 6/ 2013.