Who will win the Bancassurance race?

Saigon Thuong Tin Commercial Joint-Stock Bank, the only bank traded on the Ho Chi Minh City Stock Exchange, signed an agreement with Bao Minh Insurance, Vietnam's second-biggest non-life insurer.

Saigon Thuong Tin, or Sacombank, is Vietnam's second largest non-state-owned bank, has a total assets through the end of August of 45.3 trillion dong

Bao Minh, which is traded on Vietnam's smaller stock exchange in Hanoi, generated 1.47 trillion dong in sales last year, has about a fifth of the country's non-life insurance market.

Individual wealth is rising in the nation of 85 million people, where economic growth has averaged 7.8 percent in the past five years and per-capita incomes have doubled within the decade. Vietnam's banking industry may grow at twice the rate of the economy, as only 6 percent of Vietnamese hold bank accounts.

Bancassurance is a term used to describe agreements between financial-service and insurance companies that call for arrangements such as allowing insurers access to bank customers.

“The insurance sector in Vietnam will be very strong in the future,” Tran Xuan Huy, general director of Sacombank, said. “The full international type of bancassurance may not arrive here for some years, but we need to get ready now.”

Sacombank may set up its own insurance company in the future and the bank may “consider” buying a direct stake in Bao Minh.

AXA, Europe's second-largest insurer had agreed to buy a 16.6 percent stake in Bao Minh for 54 million euros. HSBC Holdings bought 10 percent of Bao Viet Insurance & Finance Group for $255 million. Bao Viet is Vietnam's biggest state-owned insurer.

The recent years have seen the banks vying for the Bancassurance business in the region as banks gear for a share in this lucrative business. Locally, we see insurance giant Prudential tying up with Standard Chartered and Maybank, DBS with Aviva and Citibank with Manulife, for example. Bancassurance has also ventured into the Singapore post, known as Postassurance.

As the region prospers, the Bancassurance business will be a dire path for banks to increase earnings from existing customers. Is this a win win situation for the consumers as well as for the bank?

Unlike loans or investment products, insurance products once purchased, can stay with the customers for many years, and in participating plans, sometimes for life. So, can banks match the personalised long term financial services traditionally offered by insurance agents?