With regard to bancassurance agreements, Vietnamese law treats banks as agents of the insurer and bancassurance distribution agreements as insurance agreements. Insurers and banks can audit existing and new bancassurance agreements to assess the effects and compliance issues of Circular 86 Circular 37, which applies only to bancassurance agreements between banks and life insurers. Circular 37 expands this flexibility to include general (non-life) insurance and reinsurance companies. Bancassurance as a term first appeared in France in the 1980s. At first, many countries thought that the practice of bancassurance would give banks too much control over financial products in the market. As a result, it has been limited. The IRDAI has authorized the four banks resulting from the recent megabank merger to continue for one year the existing bancassurance agreements of the lenders that have partnered with them. The Glass-Steagall Act of 1933 prohibited U.S. banks from conducting transactions with companies that provided another type of financial service. In 1999, most of the Glass-Steagall Act was repealed, allowing Bancassurance, also known as Allfinanz. However, it has still not been fully recognized as a practice for most forms of insurance.
For banks, their employees need to learn more about insurance products, which requires a higher workload and training. In the case of several bancassurance agreements, bank advisors may have incentives for conflict. You can recommend one product through another for personal interest. It is also difficult to determine who should assume legal responsibility in the event of a dispute with clients. When collecting insurance premiums, banks may collect insurance premiums from their customers on behalf of insurers. However, Circular 37 does not allow banks to use the insurance premiums recovered for purposes other than those defined in the bancassurance agreement. The Bank of Piraeus has been cooperating with Victoria General since 2005, but not exclusively. The new agreement builds on the successful cooperation of the parties and elevates it to a higher level of trade cooperation. Customers` financial needs can be met through bancassurance. They can save time and energy because they have access to two different financial services at the same time.
In addition, they are more familiar with their Bank financial advisors, smoothing the process of auditing and selecting products. As far as bancassurance is concerned, the bank`s customer relations play a decisive role. In bancassurance, banks provide the distribution channel and insurance companies remain product developers. It allows two sectors to use the existing network available to banks. In addition, Circular 37 provides that bancassurance agreements (i) write the provision and verification of customer information and related information; and (ii) insurance premium collection and payment agreements between the bank and the insurer. Circular 37 will come into force on 2 March 2020 without clarifying the transitional mechanisms or the effects on bancassurance agreements implemented before it came into force. The State Bank of Vietnam (SBV) recently issued Circular 37, which contains guidelines for bancassurance operations, in particular insurance agencies of foreign credit institutions and bank branches (« banks ») for insurance companies (« insurers »).