Back to news listing A “BOOST” TO DEVELOPMENT OF THE INSURANCE MARKET
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On June 16, 2022, the 3rd meeting of the 15th National Assembly ratified the Law on Insurance Business 2022 (“LIB 2022”) which replaces the Law on Insurance Business 2000 (incl. its amendments in 2010 and 2019). The LIB 2022 will take effect on January 1, 2023.
Here are some notable contents of the LIB 2022:
1. MARKET OPENING
To fulfill Vietnam’s international commitments in the WTO and other trade agreements in the insurance services sector, the LIB 2022 has added provisions on the establishment of branches in Vietnam of foreign reinsurance enterprises and a clause affirming that foreign investors are allowed to own interest in shares or contributed capital that makes up as high as 100% of the charter capital of insurance as well as reinsurance enterprises.
The LIB 2022 provides for additional forms of offshore investment by insurance enterprises (IEs), reinsurance enterprises (RIEs) such as new establishment or capital contribution or purchase of shares in foreign IEs and RIEs; setting up branches, representatives office or other forms of commercial presence in foreign countries.
2. TRANSPARENCY OF INFORMATION
The LIB 2022 requires periodic, regular, and unusual information disclosure to ensure clear and transparent information about insurers.
3. PROACTIVE DEVELOPMENT OF INSURANCE PRODUCTS
In terms of business operations, one of the significant changes is that the LIB 2022 allows insurers to take the initiative in designing and building insurance products (wording, terms & conditions, premium rates), and only certain information (i.e. method and charging basis of life insurance, health insurance and motor vehicle insurance products, except for compulsory insurance) is required to be registered with the Ministry of Finance for approval.
4. NEW PROVISIONS ON CONTRACTING AND IMPLEMENTATION OF INSURANCE CONTRACTS
A remarkable new point of the LIB 2022 is the expansion of the definition of insured persons to which the policyholder has insurable interests to buy health insurance or life insurance, i.e., having a financial interest or an employment relationship between the policyholder & those insured people, or having the written consensus of the insured person with the policyholder; this change has critically taken down current difficulties in the practical implementation of selling health insurance.
For the purpose of protecting the best interests of policyholders during the conclusion of the insurance policy, the LIB 2022 requires insurers to have proof that the policyholder has been advised by the insurer or its agent and fully understood the insurance exclusion clauses.
In addition, the LIB 2022 introduces default interest rates in case of late compensation and payments by the insurer. The rates shall be subject to the parties’ agreement in accordance with the provisions of the Civil Code. Regarding dispute settlement mechanism, the LIB 2022 stipulates three main methods, namely conciliation, arbitration, and court proceedings subject to the agreement in the insurance contract and the provisions of law.
5. GROUP INSURANCE
This is a new regulation of the LIB 2022 which allows insurers to offer insurance products to a "group", such as employers buying health insurance for their employees.
To ensure eligibility of the policy, the group must be a group that has been formed not for the purpose of participating in insurance (i.e. insurance association, club, etc.). In addition, the policyholder and the insured can agree to jointly pay the premium.
Here are some notable contents of the LIB 2022:
1. MARKET OPENING
To fulfill Vietnam’s international commitments in the WTO and other trade agreements in the insurance services sector, the LIB 2022 has added provisions on the establishment of branches in Vietnam of foreign reinsurance enterprises and a clause affirming that foreign investors are allowed to own interest in shares or contributed capital that makes up as high as 100% of the charter capital of insurance as well as reinsurance enterprises.
The LIB 2022 provides for additional forms of offshore investment by insurance enterprises (IEs), reinsurance enterprises (RIEs) such as new establishment or capital contribution or purchase of shares in foreign IEs and RIEs; setting up branches, representatives office or other forms of commercial presence in foreign countries.
2. TRANSPARENCY OF INFORMATION
The LIB 2022 requires periodic, regular, and unusual information disclosure to ensure clear and transparent information about insurers.
3. PROACTIVE DEVELOPMENT OF INSURANCE PRODUCTS
In terms of business operations, one of the significant changes is that the LIB 2022 allows insurers to take the initiative in designing and building insurance products (wording, terms & conditions, premium rates), and only certain information (i.e. method and charging basis of life insurance, health insurance and motor vehicle insurance products, except for compulsory insurance) is required to be registered with the Ministry of Finance for approval.
4. NEW PROVISIONS ON CONTRACTING AND IMPLEMENTATION OF INSURANCE CONTRACTS
A remarkable new point of the LIB 2022 is the expansion of the definition of insured persons to which the policyholder has insurable interests to buy health insurance or life insurance, i.e., having a financial interest or an employment relationship between the policyholder & those insured people, or having the written consensus of the insured person with the policyholder; this change has critically taken down current difficulties in the practical implementation of selling health insurance.
For the purpose of protecting the best interests of policyholders during the conclusion of the insurance policy, the LIB 2022 requires insurers to have proof that the policyholder has been advised by the insurer or its agent and fully understood the insurance exclusion clauses.
In addition, the LIB 2022 introduces default interest rates in case of late compensation and payments by the insurer. The rates shall be subject to the parties’ agreement in accordance with the provisions of the Civil Code. Regarding dispute settlement mechanism, the LIB 2022 stipulates three main methods, namely conciliation, arbitration, and court proceedings subject to the agreement in the insurance contract and the provisions of law.
5. GROUP INSURANCE
This is a new regulation of the LIB 2022 which allows insurers to offer insurance products to a "group", such as employers buying health insurance for their employees.
To ensure eligibility of the policy, the group must be a group that has been formed not for the purpose of participating in insurance (i.e. insurance association, club, etc.). In addition, the policyholder and the insured can agree to jointly pay the premium.
