Amending Law on Insurance Business: Ensuring interests of the business and individuals participating in insurance

It’s time to promulgate revised Law on Insurance Business. Source: Internet

The Law on Insurance Business was promulgated 20 years ago, when the insurance market was still young, the regulator was also newly established, the market size was still small and the products and distribution channels were not diversified. Therefore, up to now, this law is not following the scale of the market development.

The Vietnamese insurance market is completely dependent on foreign reinsurers when developing new insurance products or receiving insurance for large projects and assets. This will lead to long-term financial risks for insurance companies and the independence and sovereignty of the Vietnamese insurance market.

Therefore, it is time to promulgate an amended Law on Insurance Business. In particular, it is important to supplement and complete regulations on the rights and obligations of insurance firms and individuals participating in insurance. Accordingly, in the draft regulation, the insurance business organisation can collect the insurance premium as agreed in the insurance contract and request the buyer to provide complete and truthful information relating to the conclusion and performance of the insurance contract. At the same time, the firm has the right to cancel insurance contract as well as refuse to pay the benefit to the beneficiary or refuse to compensate the insured in the absence of the scope of insurance liability or exclusion of insurance liability as agreed upon in the insurance contract.

The draft also specifies the rights and obligations of the insurance buyer. Specifically, they have the right to choose an insurance business operating in Vietnam to purchase insurance; to request the insurance business organisation explain the insurance conditions and terms; issuing an insurance certificate or insurance policy; to request the insurance business organisation pay insurance money to the beneficiary or to compensate the insured as agreed in the contract upon the occurrence of an insured event; to transfer the insurance contract as agreed in the insurance contract or in accordance with the law.

The draft revised Law on Insurance Business also states that before entering into an insurance contract, the buyers of insurance must provide complete and accurate information about the subject of insurance to the business insurance organisation at the request of the insurance company.

Notably, in the draft, the agency also provides quite specific provisions for the case where the insurance buyer breaches its obligations. If the insurance buyer breaches its obligations prior to an insurance event, the insurance business organisation can propose a reasonable change in the insurance contract. If the policyholder accepts such changes, the insurance contract will continue to be valid. If the buyer does not accept such changes, the insurance business organisation can cancel the contract and collect the fee until the time of contract termination. The time for proposing changes to an insurance contract must be given by an insurance business organisation within 30 days of the date of realising the insurance buyers made inaccurate information declaration. Buyers have 30 days to approve or disapprove such changes. During this period, if an insured event occurs under the responsibility of providing information of the insurance buyer, the insurance business organisation should not have to pay a premium and does not have to refund the premium. If the insurance event is not responsible for providing the information of the insurance buyer, the insurance business organisation must still pay the insurance premium.

In a case where the insurance buyer breaches obligations after an insured event occurs, the insurance business organisation can cancel the insurance contract or to accept continued insurance. Where the insurance business organisation cancels the insurance contract, the insurance business organisation should not have to pay the premium and refund the premium. Where the insurance business organisation still accepts to continue insurance, the insurance business organisation can increase the premium or decrease the amount of compensation and eliminate the insured event where the insurance buyer breaches its obligations.