Tran Hien Mai from Van Quan, Ha Dong in Hanoi said in 2021, she borrowed VND1.5 billion from a bank as she needed money to buy a house. At that time, she was told by a bank officer that she had to take an insurance policy worth VND 130 million to be eligible for a loan. She had to take the insurance policy as requested though she did not want to.

One year later, the insurance company contacted Mai and told her to pay another VND 130 million. She intended to refuse, but then changed her mind and paid VND 130 million once again, because the bank threatened early final settlement of the loan. 

Mai has paid up the bank loan and she wants to discontinue the insurance policy. However, if she terminates the insurance policy, she won’t get the amount of VND 260 million back. Meanwhile, she doesn’t have money to continue to pay the insurance premiums (VND 130 million a year) for 10 more years.

“I once suffered from cancer, but the insurance policy shows that my health conditions are good. What do they (the insurance company) mean?” she said.

Mai is not alone. Hundreds of people have complained about insurance policies that they have taken out by mistake. Many of them have denounced commercial banks for tricking them into taking insurance policies, saying that the information provided by bank officers who acted as advisors is different from that shown on insurance policies. 

In many cases, they had to take insurance policies in exchange for the right to borrow money from the banks that sell insurance policies.

While bancassurance is considered a normal service in many other countries, it is called a ‘nightmare’ in Vietnam after people have asked for help as they have fallen into a ‘life insurance trap’. 

Insurance policies are designed with very complex provisions, thus confusing clients, while bancassurance is under loose management by state agencies.

According to the Vietnam Insurance Association (VIA), nearly 1 million insurance policies were sold via bancassurance in 2022 with sales of VND23.7 trillion, accounting for 46 percent of total sales of the life insurance market. 

The accumulated figures by the end of the first quarter of 2023 were 2.9 million policies and VND45 trillion.

The question is how many insurance policies have been bought by people on a voluntary basis and whether people truly understand the nature of the policies.

Analysts believe that the real figure must be much lower than the reported figure.

The inspection agency under the State Bank of Vietnam (SBV) admitted that the agency has recently received many complaints from the public about commercial banks forcing them to take out insurance policies, or deliberately giving wrong information about insurance products that caused misunderstandings. 

In many cases, people mistook insurance policies for bank deposits.

The confidence crisis

“This is the biggest ever confidence crisis in the market,” said Ngo Trung Dung, deputy secretary of VIA. 

But when did the crisis originate?

The audited finance reports of some commercial banks showed that in 2022, bancassurance continued to bring big revenue and high growth rates to many banks. The profit margin (after cost deductions) of bancassurance at banks was 50-60 percent. The exclusive contracts on selling insurance policies worth tens of trillions of VND brought big profits to banks.

Bank officers, encouraged by the promised high commissions, used every possible way to trick people into taking insurance policies. They either forced clients into taking insurance policies, or gave wrong advice about life insurance. They only give information about benefits, while ignoring problems and potential risks of insurance products.

Meanwhile, the training of insurance agents is problematic. The agents, in order to obtain as many clients as possible, are willing to turn a person with Parkinson disease into a person with ‘good health conditions’, and a person living on unemployment benefits into a securities investor with a monthly income of VND100 million a month.

Tran Thuy