The National Assembly of Vietnam has passed the new Insurance Business Law (“New Law“) on 16 June 2022 at the meeting of the National Assembly. The New Law has provided significant changes to current laws and will have a major impact on the development of Vietnam’s insurance market.
The New law will come into effect from 1 January 2023, except for certain provisions on risk-based capital and intervention measures that will take effect from 1 January 2028.
The New Law has provided various significant changes, with various highlights:
- The applicable scope of the New Law is clearer than that of the Current Law.
- There will be certain changes to the scope of compulsory insurance products: The New Law has removed certain insurances on professional liabilities in the legal advisory profession and the insurance brokerage profession. The New Law does not allow insurers to deny selling compulsory insurances upon requests of policyholders who are qualified to purchase compulsory insurances.
- On insurance policies, the fundamental principles (such as: utmost good faith, insurable interest, indemnity, subrogation) are more clearly provided in the New Law. These principles are already in place in Vietnam practice, but they have not yet specified clearly in the Current Law as fundamental principles.
- There is a new provision on temporary life insurance, allowing the insurer to provide temporary insurance to a policyholder when the insurer has received an insurance application and the policyholder has paid the estimated insurance premium.
- There is a new proposed change to the operation of the insurers (i.e., provision of insurance auxiliary services and other activities directly related to the insurance business) and the New Law expands the cases where an insurer is allowed to concurrently sell different insurance products.
- The New Law recognizes the investment from a financial and insurance group, of which the investor may not be an insurer but in the group has an entity doing insurance business.
- This will be the first time a regulation on insurance business provides specific regulations and restrictions on outsourcing activities in the insurance sector.
- It will provide a mechanism for insurers to sell insurance via online channels.
- New proposed changes applicable to the insurance agency activities will (i) set out provisions on the principles in the operation of insurance agencies, rights and obligations of parties in the insurance agency operation which are currently provided in the decree level, (ii) separate types of insurance agency certificates corresponding to each insurance product, and (iii) insurance agency certificate issued before the effective date of the new law which will continue taking effective until 31 December 2025.
- Capital adequacy ratio will be based on the actual capital and the risk-based capital.
- The New Law contains principles on technical reserves of insurers and/or reinsurers.
- There are other changes, such as foreign ownership cap, the time to apply provisions on management of risk, capital and solvency, information disclosure by insurers and on a dispute resolution body.