January 23, 2019 07:50

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Revise mechanisms and policies on insurance business

12:36 | 27/06/2018

VCN- After 17 years of implementation of the Law on Insurance Business, the insurance market has witnessed remarkable development, but also revealed many limitations, requiring the revision and improvement of legal framework for this area.

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It is necessary to complete the policy mechanism on insurance business.

Positive results

At the seminar "Assessing the results of the implementation of the Law on Insurance Business for 2000-2017 and the direction of perfecting mechanisms and policies in the insurance business sector" held by the Financial Policy and Strategy Institute and the Department of Insurance Management and Supervision, under the Ministry of Finance in Ho Chi Minh City on 22 June 2018, Mr. Doan Thanh Tuan, the Deputy Director of the Department of Insurance Management and Supervision said, through 17 years of implementation, the Law on Insurance Business created a legal basis for growing the insurance market.

The size of the market has grown rapidly from 15 enterprises in 2000 to 63 enterprises and 1 branch abroad in 2017. Financial capacity and efficiency of enterprises have been improved with total assets of VND 315 trillion in 2017, an average increase of 24% per year. The professional reserves reached VND 300 trillion, an increase of 23% and equity was VND 65 trillion, an increase of 8% per year. The turnover of enterprises has also increased by 20% during the last 17 years.

Along with the development of scale, financial capacity and operational efficiency, insurance activity is also a channel to mobilize capital effectively and invest back into the economy. In 2017, life insurance reached more than VND 213,000 billion, and non-life insurance reached over VND 38,000 billion. Of which more than 60% of the portfolios of life insurance companies invested in Government bonds.

At the coverage level, by the end of 2017, 10 million people had health insurance; over 12 million students had health and accident insurance; over 18 million passengers were covered by aviation liability; over 12 million passengers were covered by road insurance, and over 80% of infrastructure works and large economic projects are covered by insurance. There are 1,300 insurance products with nationwide service network now.

In addition, the insurance business has implemented the programs, targets and urgent tasks of the Government, such as the agricultural insurance program under Decision 315 / QD-TTg applied from 2011-2013 in 20 provinces and cities with a total insurance value of VND 7,748 billion and compensation amount of VND 713 billion. The fishery insurance in accordance with Decree 67/2014 / ND-CP has a total insurance value of more than VND 41,000 billion, with 10,757 vessels and 10,214 insured crews, and total compensation amounted to VND 390 billion.

Many contents need to be supplemented or amended

Besides the positive aspects, according to Mr. Doan Thanh Tuan, the implementation of the Law on Insurance Business in the past also caused some difficulties and problems because the scope of regulation did not cover all participants. Some concepts of digital insurance should be added and modified. Along with that, some provisions in the insurance policy, regulation of capital and solvency of insurance companies, agents, organizations, examination need to be amended.

Highly appreciating the impact of the Law on Insurance Business for Vietnam's insurance market, Mr. Bui Gia Anh, General Secretary of the Vietnam Insurance Association, said that although the stability is quite high, the Law on Insurance Business needed to be added, modified to keep up with the current trend.

Apart from the above-mentioned contents, the contents of the basic principles in insurance activities, types of insurance operations, the conclusion of contracts for human insurance in case of death and some compulsory insurance should also be considered for amendment and revision.

From a corporate perspective, Mr. Luong Tien Dung, Chief Financial Officer of Bao Viet Insurance said that the provisions of the Law on Insurance Business were not deep enough and inconsistent with the business nature of insurance, especially non-life insurance business. The legal environment of insurance business activities is not favorable for enterprises to compete and integrate. There is not enough firm foundation for companies to catch up with the development of business trends and management applications of high technology in the world.

In order to overcome the limitations of the Law, Mr. Dung said that the authorities needed to be flexible in approving non-life insurance products, price control and management of implementation. On the management of insurance business operations, it is necessary to strengthen competition management through framework regulation; reduce the adjustment to increase the initiative for business operations. Regarding investment management, the investment activities of non-life insurers should be more active and flexible in terms of assets and investment activities, while allowing enterprises to be more active and flexible in determining and dividing the costs and benefits among the parties.

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Regarding the transparency of insurance information, an expert from the University of Finance - Marketing also said that the Law should stipulate a mechanism that obliges insurance companies to disclose information because customers also need to know the financial status of insurance companies. In fact, apart from a number of listed companies, there are still financial reports for other companies with very little information. The information disclosure to customers not only help customers access and evaluate the situation of enterprises but also motivate businesses to develop more effectively.

By Nguyen Hue/ Hoang Anh