To gain deeper insights into this issue, Saigon Investment engages in a conversation with Mr. TRẦN NGUYÊN ĐÁN, a lecturer specializing in insurance and financial risk management at the University of Economics Ho Chi Minh City.
JOURNALIST: - Sir, do you believe this regulation will address the issue of compelling borrowers to purchase insurance?
Mr. TRẦN NGUYÊN ĐÁN: - Circular 67 addresses a crucial aspect by drawing attention to the cross-selling of insurance through banks. Firstly, it's important to acknowledge that Circular 67 reflects the Ministry of Finance's receptiveness and efforts to curb the mandatory purchase of insurance before loan disbursement. However, I believe the regulations in the Circular are not comprehensive. In reality, insurance companies offer various types of insurance products, not just investment-linked ones. They also have mixed insurance products. If banks continue to "pressure" customers to borrow with the condition of buying mixed insurance, the problem won't be resolved.
Moreover, we often assert that banks compel borrowers to buy insurance, but there's no concrete evidence, such as documents demonstrating this coercion. It's more of a suggested practice during the consultation process, and customers seemingly lack the right to refuse. This pertains to the implementation of the advisory process, not the documentation itself. Therefore, despite Circular 67, there's a high likelihood that banks will persist in recommending borrowers to purchase mixed insurance. Consequently, this Circular may not completely address the issue of "compulsory" insurance purchases when customers seek loans.
- Sir, many opinions suggest a complete ban on selling insurance through banks. What's your stance on this?
- In my view, it's crucial to trace the roots of the issue: Why are customers required to purchase insurance when borrowing capital? The reality is that only customers with unsecured loans are obligated to buy insurance, while those with mortgage loans are exempt. When individuals secure a mortgage loan, they've already pledged their assets to the bank. Consequently, mandating life insurance isn't a critical factor that should force borrowers into a purchase.
It can be argued that if a customer already possesses life insurance, in the event of a risk causing a loss, the family can use the insurance funds to settle the bank debt, thereby reducing the risk of capital loss for the bank. However, the current practice of banks selling insurance appears to primarily address the issue of boosting bank profits. Essentially, it promotes the idea of buying more insurance even if the customer already has coverage. We shouldn't seek profit at the expense of customers; that's ethically incorrect. Therefore, the public opinion advocating a complete ban on selling insurance through banks is entirely valid.
However, from my perspective, an outright ban on banks selling insurance might not be necessary. If banks handle the sale of insurance appropriately and target a customer base that utilizes other services besides loans, they can offer valuable insurance products. Banks, as financial institutions, employ highly qualified personnel capable of providing sound insurance advice. The key issue lies in whether the bank offers accurate and responsible guidance to customers. This emphasizes the importance of the inspection and supervision stage. We face significant challenges in this regard, particularly because the Department of Insurance Management and Supervision under the Ministry of Finance currently lacks the authority to inspect and supervise banks' insurance sales activities. Therefore, a reevaluation of this regulatory step is warranted.
- In addition to enhancing inspection and supervision, as you mentioned, what measures must be taken to rebuild people's trust when purchasing insurance through this channel, sir?
- As I mentioned earlier, bank staff are indeed qualified to provide insurance advice, so a complete prohibition is unnecessary. However, to regain people's trust in this channel, banks themselves must reform their sales methods. One effective approach is to establish a dedicated area separate from loan and deposit transaction counters. When customers enter this area, they should be aware that they will receive advice on insurance products. This process requires close monitoring, including random checks on customers buying insurance at the bank to ensure that it is a voluntary decision.
The second crucial aspect is that state management agencies should impose substantial penalties for any wrongdoing to rectify the market. For instance, in 2013, a British bank was fined nearly 1 billion pounds for mis-selling products to customers, specifically insurance that did not meet their requirements. In our context, lax monitoring and relatively insignificant fines fail to act as effective deterrents. The recent proposal by the Ministry of Finance to increase fines to up to 100 million VND for sellers who fail to explain the insurance details adequately and resort to coercion may not be sufficient. A more effective approach could involve fines based on a revenue ratio, as seen in other countries. Only through hefty fines and rigorous supervision will insurance business activities become more cautious. We shouldn't adopt a mindset that seeks to ban what cannot be controlled.
- Thank you very much.
