Finance Ministry announces to pay visits to insurance enterprises

The Ministry of Finance announced that it has a plan to pay visits to six insurance enterprises in 2024.

Minister of Finance Ho Duc Phoc

According to the Ministry’s plan, inspectors from the Ministry will work with six insurance enterprises on the implementation of insurance sales through credit institutions and branches of foreign banks in the field of personal longevity insurance.

At the 31st session of the National Assembly Standing Committee, Minister of Finance Ho Duc Phoc reported a number of contents related to the group of issues to the NA.

The head of the financial industry said that in 2024, the Ministry of Finance plans to inspect 6 insurance enterprises, focusing on inspecting the implementation of insurance sales through credit institutions and foreign bank branches about longevity insurance.

According to the above report, Vietnam's insurance market has experienced more than a quarter of a century of high growth with average rate of 20 percent per year and is relatively stable. Insurance companies basically completed their strategy for insurance market development from 2011 to 2020.

However, due to rapid development, in recent times, the insurance market, especially life insurance, has had a number of problems regarding the quality of consulting activities, as well as care and customers’ insurance benefits.

At the same time, the market only had traditional distribution channels in insurance in the past; however, in recent times, many other distribution channels have been formed. Various alternative distribution channels include organizational agents, typically distribution channels through banks or bancassurance - an arrangement between a bank and an insurance company, through which the insurer can sell its products to the bank's customers. The insurance company benefits from increased sales and a broader client base without having to expand its sales force. Bancassurance helps insurance operations become more diverse, but also creates more complexity, which needs to be identified and rectified to operate healthily.

According to Finance Minister Ho Duc Phoc, in 2022 and 2023, the Ministry of Finance inspected 10/17 life insurance enterprises that sell insurance through credit institutions and branches of foreign banks with insurance premium revenue through the bancassurance channel accounting for 96.83 percent of the total revenue from the bancassurance channel of the entire life insurance market.

Through inspection, inspectors have discovered violations through the bancassurance channel such as violations in promulgating processes and regulations and violations related to product fee schedules.

Since then, the authorities have proposed a total financial settlement of VND 21,000 billion. Additionally, inspectors imposed administrative sanctions against 2 insurance enterprises collecting VND310 million along with a number of other additional sanctions.

In 2024, according to the approved plan, the Ministry of Finance plans to inspect 6 insurance enterprises. In particular, there will be an inspection of the implementation of insurance sales through credit institutions and foreign bank branches for two life insurance enterprises namely Mirae Asset Prévoir Life Insurance Company Limited and Cathay Insurance Company Life Vietnam.

To address the market, the Ministry of Finance has submitted to competent authorities for promulgation and additional amendments of many legal regulations to promptly adjust arising market problems and enhance transparency to protect insurance buyers.

Specifically, the Ministry will standardize several regulations on insurance contracts to ensure the rights of insurance participants and supplement more regulations to enhance the responsibility of insurance enterprises in the process of consulting and concluding insurance contracts to make it clearer while insurance buyers are given correct advice, enough information, and clarity about product so that they can choose right insurance products voluntary as per their real needs.

Moreover, the Ministry will supplement additional regulations to prevent banks from forcing people to buy insurance or giving incorrect advice on investment-linked insurance products.

Accordingly, the Minister said that credit institutions operating as insurance agents must clearly explain to customers that insurance products are not products of credit institutions. Buying insurance is not a mandatory condition to use other products and services of credit institutions operating as agents. Such credit institutions are not allowed to carry out insurance agency activities such as the introduction of various insurance kinds, offer to sell, or arrange the conclusion of investment-linked insurance contracts for customers within 60 days before and after 60 days after the full loan disbursement date in order to avoid bank staff forcing loan borrowers to buy insurance.

For investment-linked insurance products, insurance agents or employees in insurance agency operations must record the consulting process, including the customer's confirmation of insurance participation on a voluntary basis and in accordance with financial needs. The insurance company is not allowed to issue a contract in case the recording content does not contain the insurance buyer's confirmation of participating in insurance on a voluntary basis.

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