Amended draft Law on Insurance Business to increase autonomy for insurers

Hanoi (VNA) - New regulations in the draft Law on Insurance Business (amended) will help businesses reduce costs and take the initiative in business activities thanks to simplified administrative procedures.

According to the draft that have been submitted to the Prime Minister for consideration by the Ministry of Finance, amendments to the Law on Insurance Business will allow enterprises to increase their autonomy and self-responsibility in determining and diversifying business methods thus innovating their growth models.

It’s time for changes

Ngo Viet Trung, Director of the Insurance Supervisory Authority under the Ministry of Finance, said the Law on Insurance Business, which was issued 20 years ago, has showed a number of shortcomings amid the development of the current insurance market.

Firstly, a number of provisions of the current law are no longer consistent and synchronous with newly amended and supplemented provisions in the Civil Code.

Secondly, the current law stipulates principles for most policies in insurance business activities so sometimes there is a lack of basis or certain difficulties, especially related to authority and process to handle insurance enterprises facing financial difficulties, the application or integration of technology in insurance business, requirements on internal control and audit, linkage between management agencies in implementing the Government’s insurance programmes.

Thirdly, policies for insurance enterprises specified in the law have not kept pace with international practices. Provisions on preventing insurance frauds, money laundering, and terrorist financing are inadequate, while conditions for foreign investors are limited, financial management models are outdated, and there are no mandatory requirements for risk management.

Trung emphasised that the promulgation of the Law on Insurance Business (amended) is necessary in order to meet requirements of synchronousness in the legal system, suitable with the reality and Vietnam's commitments, and towards international standards in insurance.

The revised Law on Insurance Business ensures the objectives of institutionalizing the Party's guidelines and policies, and the State's policies on socio-economic development and insurance market, and meets the country’s development needs.

The amendments to the Law on Insurance Business will help address inadequacies of the policy mechanism and the market existence.

Strong institutional reform will help meet requirements of regional and global integration, Trung said, noting that the revised Law on Insurance Business needs to create a foundation for Vietnam to become a developed insurance market in Asia.

Facilitation given to insurers

According to Trung, the draft Law on Insurance Business (amended) closely follows seven main contents, aiming at increasing autonomy for insurers in business activities.

Management agencies will give priority to supervising and promoting transparency and healthy development of the insurance market, Trung said.
This draft completes regulations on financial management models for businesses, completes insurance contracts, and ensures the principles of equality, transparency and safety, he noted.

It also specifically encourages businesses to use and apply information technology to standardize insurance activities and transactions in the market, as well as supplementing regulations on developing and improving the quality of human resources in this field, and regulations on safety assurance, loss prevention and control, insurance fraud prevention, and improvement of dispute settlement.

In the first eight months of the year, the insurance market still recorded positive growth despite the pandemic. By the end of August, total assets in the insurance market were estimated at nearly 643.6 trillion VND (28.3 billion USD), up 22.1 percent year-on-year, with total premium revenue during the period also rising nearly 17 percent to more than 133 trillion VND.

During 2019-2020, some insurers recorded impressive performance. Post - Telecommunication Joint Stock Insurance Corporation (PTI)’s profit jumped 475 percent and 113 percent in 2019 and 2020, respectively. BIDV Insurance Corporation (BIC) also witnessed growth of 25 percent and 39 percent, respectively, while MIG’s profit surged 30 per cent and 37 percent, respectively.

The draft amended Law on Insurance Business is carried out with the aim of applying international experiences and boost the development of the Vietnamese market.

Vietnam has high potential for insurance services, but the development pace is still low compared to the region and world. The amended Law on Insurance Business is expected to take effect from 2023./.