Perfecting the legal system, creating new changes for the insurance market

Looking back on the past year, please share with us a general overview of the insurance market in 2023 after the reflections on the quality of life insurance agents, especially through the bancassurance channel?

New distribution channels, including bancassurance, have made significant contributions to the total revenue of the Vietnamese insurance market, with new business premium rates far exceeding those of other distribution channels. Insurance companies take advantage of the sales advantages, partners with a wide network of offices and a potential customer base to bring insurance products closer and more conveniently to people. Many businesses have shifted their focus to bancassurance, surpassing traditional agency channels and considering this as a driving force for continued strong growth in the market.

According to calculations, the proportion of new business premiums through the bancassurance channel accounts for about 20% of the total premium revenue of the life insurance market and about 14% of the total premium revenue of the non-life insurance market. However, due to the rapid growth of bancassurance, the management and supervision of the quality of insurance sales through the banking channel has not kept pace. Some salespeople are dishonest when providing advice or do not provide full information about the product, which leads to misunderstandings and negative impressions about insurance products among customers. This has made the business situation of the entire insurance industry, especially life insurance, lackluster in the past year.

In addition, in 2023, the global and domestic macroeconomy faced many difficulties and challenges. These unfavorable factors affect many industries and fields, including the insurance sector. However, with the efforts to implement a series of policies by the Government to support, remove difficulties, restore production, develop the economy and continue to improve the mechanisms and policies in the insurance sector, the insurance market is expected to create a platform for the market to recover in the coming years.

The insurance market currently has 81 insurance enterprises, including 31 non-life insurance companies, 19 life insurance companies, 2 reinsurance companies and 29 insurance brokerage companies; 1 branch of a foreign non-life insurance company.

Total assets of the insurance market are estimated to reach VND 913,308 billion, up 11.12% compared to the same period of the previous year. Insurance enterprises invested back in the economy amounted to VND 762,580 billion, up 12.78% compared to the same period of the previous year. Total equity capital is estimated to reach VND 190,201 billion, up 7.09% compared to the same period of the previous year.

Total insurance premium revenue is estimated to reach VND 227,134 billion, down 8.02% compared to the same period of the previous year. In which, the non-life insurance market increased by 2.87%, the life insurance market decreased by about 12.5% compared to the same period in 2022; insurance benefits paid are estimated to be around VND 86,376 billion, up 31.14% compared to the same period of the previous year.

From the perspective of the management agency, in the face of the above-mentioned reflections on the quality of life insurance agents, especially through the banking channel, what solutions has the Insurance Supervision and Inspection Department (Ministry of Finance) proposed to rectify this situation?

To rectify this situation, with the strong direction of the Government and the leaders of the Ministry of Finance, we have implemented many drastic solutions, focusing on improving mechanisms and policies and strengthening inspection and examination. These solutions have helped the market change in a better direction.

The legal framework for insurance agency activities, especially the agency channel through banks, is basically complete and strict. Together with the efforts of management agencies, the change of insurance companies and the support of policyholders, this is the foundation for the insurance market in general and the life insurance market in particular to operate more transparently, healthily and sustainably.

In terms of improving mechanisms and policies, the Law on Insurance Business No. 08/2022/QH15 supplements a number of regulations to enhance the quality of this distribution channel, including supplementing conditions for corporate agents. Accordingly, in addition to the previous conditions, corporate agents must meet the personnel and other conditions as prescribed by the Government.

In addition, the guiding documents of the Law on Insurance Business also supplement regulations to ensure stricter management of this distribution channel, including: a group of regulations related to the conditions for insurance agents as banks; a group of regulations on the principles of insurance exploitation through banks for insurance enterprises; a group of regulations on the responsibilities of the bank’s agency organization in distributing insurance products.

It is noteworthy that additional requirements have been introduced for sales illustration materials and product introduction documents. These materials must clearly outline the insurance benefits offered and avoid ambiguous wording that could lead to false expectations or misunderstandings about the benefits of the insurance product. For sales illustration materials of insurance products distributed through agent organizations, sales illustration materials must include additional minimum, necessary information.

In terms of management, supervision, and inspection, the Ministry of Finance has strengthened its inspection, supervision, and monitoring of insurance distribution activities conducted through banks. Any violations discovered will be strictly handled in accordance with the law. The Ministry of Finance has also established a hotline to receive and handle feedback and suggestions from organizations and individuals on the insurance sector.

In early October 2023, the Ministry of Finance (Insurance Supervision and Inspection Department) and the State Bank of Vietnam (Banking Inspection and Supervision Agency) signed a coordination mechanism to further enhance the effectiveness of coordination in policy development, inspection, supervision, and monitoring. This will facilitate the prompt identification of policy gaps and inconsistencies, enabling timely adjustments and effective enforcement of regulations against non-compliant insurance agents.

To avoid the instability experienced in the past, what are the requirements that must be met when providing insurance products through credit institutions?

Along with the Law on Insurance Business and Decree 46/2023/ND-CP, the issuance of Circular 67/2023/TT-BTC has basically completed the legal framework for the insurance market. Accordingly, the legal framework for regulating insurance sales through banks is quite comprehensive and in line with the situation of the insurance market in the past time, as well as ensuring stable development in the coming time.

The regulations focus on three main pillars including: enhancing transparency in providing insurance through banks; ensure customers’ right to proactively choose to participate; Strengthen supervision and quality assurance of insurance sales activities through banks.

Accordingly, the provision of insurance products through credit institutions must meet the following requirements.

First, increase transparency in providing insurance through banks. At each branch and transaction office of a credit institution, a separate transaction counter must be established to carry out insurance agency activities, separate from other professional operations areas of the credit institution. At the same time, insurance agents are required to record the insurance consulting process for complex insurance products such as investment-linked insurance products.

During the process of consulting on insurance products, insurance agents, or employees in agency organizations directly performing insurance agency activities, must provide complete and accurate information to the insurance buyer. information about insurance products through documents developed and provided by insurance enterprises.

Regarding the requirements for documents in insurance contracts, for long-term life insurance products with surrender value, insurance companies are responsible for providing a paper summary to policyholders and must obtain their acknowledgment. This is to ensure that policyholders have easy access to information, fully understand the product, their rights, and obligations before entering into a life insurance contract. The 21-day cooling-off period for insurance participation begins from the time the policyholder confirms receipt of the aforementioned documents.

It is important to note that banks acting as agents must also clearly inform customers that insurance products distributed through credit institutions are not bank products and that participation in insurance products is not a mandatory condition for using other bank services or products.

Second, ensure customers’ right to proactively choose to participate. Insurance businesses must set up a calculation tool on their website and provide instructions so that customers can proactively build an insurance plan suitable for themselves before choosing to enter into an insurance contract.

Credit institutions are not allowed to advise, introduce, offer, or arrange the conclusion of investment-linked insurance contracts for customers within 60 days before and after 60 days from the date of disbursement of the entire loan.

Third, strengthen the responsibility for monitoring and ensuring the quality of insurance sales activities through banks, regulating requirements for credit institutions operating as insurance agents to perform the following tasks.

Credit institutions must establish a specialized department to carry out insurance agency activities, and must have a process to monitor and control the quality of the implementation of insurance agency activities by employees in the agency organization. This process must ensure that employees in the agency organization directly carrying out agency activities comply with the principles of agency operations, the authorized content in the agency contract and the provisions of related law.

From the perspective of businesses, insurance companies are allowed to participate in the process of inspecting, monitoring, and handling violations related to the quality of agency activities of employees in agency organizations.

Insurance companies must conduct periodic monitoring and inspection to ensure the quality of insurance product introduction and consultation activities by employees of agency organizations. They must promptly coordinate with agency organizations to inspect, review, and handle complaints from policyholders related to the consultation of agency organization employees and handle violations (if any).

The new regulation also modifies the limitations on commissions by requiring a longer commission payout schedule. This aims to encourage agents to focus on quality underwriting and maintaining insurance contracts. The Ministry of Finance also adds limitations on bonuses and support for agents to ensure the effective business operation of insurance companies, aiming for quality development rather than focusing on quantity.

The market space is still very large when Vietnam currently has about 10% of the population participating in life insurance, while the Vietnam Insurance Market Development Strategy to 2030 sets a target of 15 people by 2025. % of the population participates in life insurance and increases to 18% by 2030. For the market to develop healthily and sustainably, what core solutions will management agencies focus on in the coming time?

To continue to support the insurance market to develop safely, sustainably, and effectively, meeting the diverse insurance needs of organizations and individuals, ensuring social security along with solutions and measures. implementation, in the coming time, the management agency will continue to synchronously deploy many solutions, focusing on a few main solutions.

We will continue to review and improve the insurance business legal system in a clear and transparent direction, creating favorable conditions for insurance businesses and insurance buyers. At the same time, continue to reform administrative procedures and enhance the application of information technology to improve the effectiveness and efficiency of management and supervision of management agencies.

The Ministry of Finance is moving towards managing and supervising insurance enterprises on a risk-based basis by examining capital safety indicators, classifying and evaluating enterprises, risk management, updating and improving the monitoring and early warning system… At the same time, it requires insurance enterprises to strengthen their financial capacity, risk management, corporate governance, customer service quality and transparency.

In parallel with this, the Ministry will continue to strengthen the management, supervision, inspection and examination, and strictly handle violations of the law to deter and increase compliance by enterprises. On the other hand, it will closely coordinate with relevant agencies in supervising the activities of insurance agents, especially insurance agents that are banks, to ensure that this distribution channel develops healthily and in the right direction.

In addition, we will continue to promote insurance propaganda, promote international cooperation and integration in the insurance sector, and strengthen the role of social and professional organizations in the insurance business field.

Insurance is proving its role in contributing to macroeconomic stability as well as complementing social security policies. The Vietnamese insurance market is assessed as having great potential for development due to the large demand for insurance protection among the people. In order to develop a safe, sound and transparent insurance market, in addition to the efforts and solutions of management agencies, coordination between ministries and sectors, the cooperation of insurance enterprises and the whole people is very much needed, so that insurance can truly affirm its role in the economy – society.