Legislative body orders comprehensive inspection of life insurance market

The National Assembly of Vietnam has assigned the government to conduct a comprehensive inspection of the life insurance market, especially insurance-cum-investment products, in a freshly adopted resolution.

The resolution was passed on Saturday with nearly 97.4% of the vote. Parliament has also asked the government to fix shortcomings in life insurance brokerage and cross-selling activities when reviewing loan applications or providing consultancy on corporate bond investments.

At a discussion on the socio-economic situation on June 1, many National Assembly (NA) members raised problems in the insurance market, especially insurance-cum-investment products. They called for the Ministry of Public Security to inspect the country’s life insurance industry following multiple customer complaints regarding deception.

"Probes are needed to make it clear whether customers in the industry have been deceived," Nguyen Thi Thuy, vice head of the National Assembly Judiciary Committee, said.

She made the request after members of the public complained they had been forced by banks to buy life insurance policies in order to access bank loans. Others said their savings deposits were partially used to purchase life insurance without their knowledge.

"The Ministry of Finance needs to conduct a comprehensive inspection of life insurance, focusing on insurance-cum-investment packages. The Ministry of Public Security needs to verify and clarify whether there are signs of fraud or deception. If there are, the ministry needs to prosecute the cases," Thuy said.

Regarding insurance-cum-investment plans, part of the money from customers is used by insurers to invest in stocks or bonds, therefore the situation becomes more complicated, Thuy noted. In addition, many agents, also called consultants, have made signing contracts their top priority to fill their own pockets.

Under Ministry of Finance regulations, the maximum commission rate for consultants is 40% of the contract value in the first year. At present, the rates from life insurers range from 30-40%. To make more money, consultants may give false advice to make buyers think that they are getting a highly profitable product, including both insurance and compensation if something unfortunate happens; and at the end of the contract term, they will get their full amount paid together with yields.

Thuy explained that for insurance-cum-investment products, yields completely depend on the market via companies’ investments, which means the companies can see losses in these investments.

The lawmaker also noted that some insurers are aware that some of their agents are dishonest but turn a blind eye.

Previously, Minister of Finance Ho Duc Phoc had said quality needs to be lifted in the country’s fast-expanding life insurance sector following multiple customer complaints. He noted that many established life insurers, including some that have been operating in the Vietnamese market for more than 25 years, only focus on revenue and ignore quality.

The market has recently witnessed a crisis of confidence because many residents are frustrated with the quality of life insurance enterprises, including bancassurance services, a popular channel through which life insurers and banks cooperate to sell insurance policies.

Baoviet Life, Dai-ichi, Prudential, Manulife and AIA were the top life insurers in Vietnam in terms of premiums from 2015-2022, according to the companies' reports.