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Accept to buy insurance and then cancel to get a bank loan

Avatar of Nick John By Nick John Dec18,2023 #Accept #insurance
Accept to buy insurance and then cancel to get a bank loan 3
Accept to buy insurance and then cancel to get a bank loan 3

Ms. Nhinh (HCMC) said that she had previously had two life insurance contracts that had been paying premiums for several years.

According to her calculations, with the option of buying insurance with a loan, she lost nearly 20 million in insurance premiums for the first year but still benefited from a 1% penalty fee reduction when paying the loan early.

When she has 4 life insurance contracts in hand, she must choose to cancel the two insurance packages purchased through the bank after paying the first year’s premium (her loan will not be affected by this cancellation).

Cross-selling insurance is one of the main goals besides credit with bankers.

Earlier this year, Thanh Tung and his wife (Hanoi) also paid off a 400 million VND car loan early and canceled a life insurance contract purchased at a bank nearly a year ago.

Even though he lost 15 million in insurance premiums for the first year, Thanh Tung found that not bad, because in return he got a better interest rate and was not bothered by bank staff.

With a series of complaints from people in the last two years, the situation of buying life insurance with a loan reluctantly and coping like the case of Ms. Nhinh and Mr. Tung is very common.

Some cases have even sued the bank for `forcing` to buy insurance with the loan and were successful in reclaiming the first year’s insurance premium.

The State Bank and the Ministry of Finance have also issued a document requesting to correct cross-selling of insurance activities. In fact, buying insurance with a loan is accepted by people in the industry and borrowers as an `implicit law`.

If you want a loan with hassle-free procedures and good interest rates, the borrower needs to buy an additional insurance policy – even if you don’t need it.

Commercial banks also repeatedly said they would not force them, but people said the opposite.

Deputy General Secretary of the Insurance Association, Mr. Ngo Trung Dung, acknowledged that there are still reports of customer dissatisfaction.

In the past two years, the bancassurance channel contributed about 30% of sales to exploit new market shares of life insurance businesses and the trend will increase in the near future.

On the banks’ side, they receive commissions along with prepayment fees ranging from trillions to tens of trillions of dong with constraints on revenue.

Currently, the rate of customers maintaining insurance contracts through the first years (through bancassurance channel) is not disclosed by businesses and banks.

However, a certain percentage of customers canceling contracts is a reality that businesses accept when distributing insurance through banking channels.

Not knowing all the data of the whole market, but according to Mr. Dung, some businesses, if implemented well, can have a good rate of maintaining contracts through the bancassurance channel at a level of 80-90%.

Quynh Trang

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