The Art of Pleasing Customers: Unveiling the Power of Empathy in the Insurance Industry

The once-booming bank insurance channel, accounting for 50-70% of life insurance companies’ sales, has faced a reputational crisis, leading to a significant decline in the industry’s revenue.

Has the insurance industry truly changed?

According to statistics from the Vietnam Insurance Association, the number of new life insurance policies sold in the first half of 2024 decreased by nearly 23% compared to the same period last year, with only 769,336 policies. Total new premium income also decreased by approximately 22%, reaching VND 12,063 billion.

Notably, with new legal regulations and tighter control from management agencies, commercial banks are no longer allowed to sell investment-linked insurance, as it tends to confuse customers with capital mobilization and investment trust products. As a result, insurance sales through banks plummeted by 39% in the first six months.

Ms. Trinh Ngoc Phuong, a resident of Binh Tan District, Ho Chi Minh City, shared that she was once persuaded by a bank employee to purchase a life insurance policy with an attractive flexible investment fund package, promising double the interest of a savings account and the ability to withdraw money at any time. However, reality struck, and she spent an entire year retrieving only half of her initial investment. Since then, she has lost faith in life insurance and investment products.

Mr. Tran Ngoc Trang, a resident of District 10, Ho Chi Minh City, shared a similar experience. Almost a decade ago, he was enticed by an insurance agent who highlighted numerous benefits of a life insurance policy. However, when he needed to withdraw his money, he could only access 50% of his contributions due to various initial and annual fees. Mr. Trang felt misled as the agent had not disclosed these fees initially, and he has since refused any offers to purchase life insurance.

The decline in customer trust has significantly impacted those working in the industry. Ms. Ngo Thi Yen, a long-time insurance agent from District 1, Ho Chi Minh City, lamented the challenges they now face. It is no longer feasible to rely on family and friends as potential customers. Agents must now identify genuine prospects, provide comprehensive consultations covering benefits, costs, and associated risks, adhering to company requirements and regulations. However, when presented with the various fees and potential risks, most prospects decline to proceed.

Ms. Yen further explained that consultations with customers must now be recorded and sent to the company for verification. Subsequently, the company conducts additional steps, such as calling customers to confirm the consultation’s accuracy and providing codes to access information on their system. As a result, insurance agents often express frustration, finding it challenging to not only acquire new customers but also to finalize contracts with prospects.

According to Mr. Phung Ba Khang, Deputy General Director of Marketing and Value Proposition at AIA Vietnam, to regain customer trust, companies must offer high-quality products that meet diverse needs. Moreover, companies should not only sell products but also accompany customers throughout their journey.

The need for scrutiny and control

Apart from service improvements and transparency, life insurance companies have been striving to regain customer loyalty by introducing innovative products with attractive benefits. For instance, AIA Vietnam has launched a new health insurance product called “Bung Gia Luc,” focusing on family health care. Prudential Vietnam has introduced a range of Pru products, including optimal protection, peace of mind for life, solidity, and whole family prosperity. Manulife has also launched a new term life insurance product, “An Tam Vui Song 2.0,” with a 100% premium commitment, and “Song Khoe Moi Ngay” (Healthy Every Day) version 2024.

Master Tran Anh Tung, Head of the Business Administration Department at the University of Economics and Finance in Ho Chi Minh City, predicts that the insurance industry will remain sluggish until the end of 2025 due to the economic recession. Instead of focusing on new products, companies should prioritize comprehensive communication about their existing offerings and leverage social media channels to enhance transparency. Additionally, a clear handover process within the company is essential to prevent customers from feeling abandoned.

Similarly, Master Nguyen Tien Hung, Program Director of the Insurance Sector at the University of Economics in Ho Chi Minh City, emphasized the need for comprehensive change and transparency in the industry. It is crucial for customers to grasp all the information, including whether the insurance product is suitable for them. He stressed, “Let’s go back to the root cause of the crisis and why people lost faith in life insurance. Companies need to identify these reasons and find solutions rather than just introducing new products while maintaining the same old practices.”

Master Nguyen Tien Hung further explained that traditionally, people understood life insurance as protection against risks. However, modern insurance products consist of two parts: risk protection (often accompanied by health packages) and investment delegation. In investment delegation, customers entrust their money to the insurance company for investment, but the outcome depends on various factors. In the past, insurance sellers tended to highlight only the expected benefits without clarifying the risks involved in investment activities. “Customers who purchased insurance between 2019 and 2020 benefited from higher interest rates and a booming stock market, resulting in profits for the insurance company’s investment funds. However, the situation changed with the COVID-19 pandemic and economic challenges, leading to a significant decline in investment performance. At this point, the insurance company, acting as both the insurer and the recipient of the investment delegation, continued to profit from management fees while customers incurred losses, leading to legal disputes,” the expert explained.

Therefore, Decree 46 and Circular 67 have clearly stipulated that selling insurance through banks as agents requires a practicing certificate, and consultations must be recorded to address any ambiguities. The critical question now is whether insurance companies will comply and if the implementation will be strictly monitored. Without rigorous adherence, disputes may persist.