Composed of 157 articles, the 2022 Law on Insurance Business (the new Law) will supersede its 2000 predecessor with revisions made in 2010 and 2019 (the 2000 Law) from the beginning of next year.
The new Law concretizes seven groups of major policies regarding:
(i) Organizational models and establishment and operation conditions for insurance enterprises and reinsurance enterprises;
(ii) Financial management models applicable to insurance enterprises and reinsurance enterprises;
(iii) Insurance contracts, ensuring adherence to the principles of equality, transparency and safety for insurance transactions;
(iv) Promotion of the application of information technology in order to standardize insurance activities and transactions in the market and improve the efficiency of insurance activities;
(v) Development and improvement of the quality of human resources in the field of insurance business;
(vi) Safety assurance, loss prevention and limitation, insurance fraud prevention and control, and improvement of dispute resolution efficiency; and,
(vii) Raising of the effectiveness and efficiency of state management and facilitation of insurance development.
|A transaction office of Bao Viet Life Corporation__Photo: Tran Viet/VNA|
Scope of application of the new Law
The scope of application of the new Law is provided more clearly than the 2000 Law.
The new Law regulates the organization and operation of insurance business, rights and obligations of organizations and individuals participating in insurance, and state management of insurance business activities.
It is designed to apply to (i) insurance enterprises, reinsurance enterprises, insurance agents, insurance brokerage enterprises, organizations and individuals providing insurance auxiliary services, and mutual organizations providing microinsurance; (ii) branches of foreign non-life insurance enterprises and branches of foreign reinsurance enterprises (Vietnam-based foreign branches); (iii) representative offices of foreign insurance enterprises, foreign reinsurance enterprises, foreign insurance brokerage enterprises, and foreign finance and insurance groups in Vietnam; (iv) insurance buyers, the insured and beneficiaries; (v) state management agencies in charge of insurance business activities; and (vi) organizations and individuals involved in insurance business activities.
In case another law enacted after the effective date of the new Law needs to provide differently from the new Law insurance contracts, establishment, operation organization, operational operations, finance, cost accounting and financial statements, solvency, and intervention measures for insurance enterprises, reinsurance enterprises, Vietnam-based foreign branches, mutual organizations providing microinsurance and insurance brokerage enterprises, it is required to specify contents to be regulated or not to be regulated by the new Law.
Parties to insurance contracts, reinsurance contracts or insurance brokerage contracts may reach agreement on application of international practices in case at least one of them is a foreign entity or they are Vietnamese organizations or citizens but the objects of insurance are based or the contracts are performed overseas. If the application of international practices contravenes the basic principles of Vietnam’s law, the latter shall prevail.
The new Law does not apply to social insurance, health insurance, deposit insurance and other types of insurance which are provided by the State not for commercial purposes.
Significant changes of the new Law
With respect to types of insurance, the new Law classifies insurance into three types according to international practices, namely life insurance, non-life insurance and health insurance.
Regarding compulsory insurance, the new Law abolishes insurance for civil liability of air carriers for passengers, which must comply with the Vietnam Civil Aviation Law and international practices. It also removes insurance on professional liability in legal consulting activities and insurance on professional liability for insurance brokers that suffer risks not greatly affecting public interests and social safety.
The new Law says that insurers may not deny selling compulsory insurance to organizations and individuals that are qualified to purchase compulsory insurance.
Outsourcing activities in the insurance sector are introduced in the new Law for the first time. According to Article 90 of the new Law, an insurance enterprise, a reinsurance enterprise or a Vietnam-based foreign branch may enter into an outsourcing contract with another organization or individual for the latter to perform part of the former’s processes or operations, except the following operations: internal control; internal audit; risk management; consulting, introducing, and offering for sale insurance products, and arranging the conclusion of insurance contracts.
The new Law has an article, i.e., Article 14, regulating the provision of insurance services and products in the cyberspace. It defines organizations and individuals permitted to provide insurance services and products in the cyberspace as well as responsibilities of these entities.
The new Law also sets requirements on setting aside of technical reserves and gives new provisions on capital adequacy ratio, foreign holding cap, management of risks, capital and solvency, information disclosure, and dispute resolution.
As planned, three government decrees and five circulars of the Minister of Finance will be issued to guide the implementation of the new Law.-