Legislator proposes probe into life insurance sector after customer complaints

A parliament member wanted Vietnamese regulators to inspect the country’s life insurance industry following multiple customer complaints about 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's (NA) Judiciary Committee, said at a discussion session of the legislative body.

She made the request in the context people have complained that they were forced by banks to buy life insurance policies in order to access bank loans. Others have said their savings deposits were partially used to purchase life insurance without their knowledge.

"The Ministry of Finance needs a comprehensive inspection of life insurance, focusing on insurance-cum-investment plans,” Thuy said.

“The Ministry of Public Security needs to verify and clarify whether there are signs of fraud or deception of customers. If yes, the ministry needs to prosecute the cases."

For life insurers, she said they need to review the process of building contracts, consulting, deal signing, and solving customer complaints.

Thuy explained that a life insurance contract often has more than a hundred pages with so many terms, and it is easy for insurance buyers to become victims if they encounter a dishonest consultant.

She stressed that even financial and legal experts cannot understand all terms in the contract, and many experts said they can understand 70% of them.

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, quite a few agents, also called consultants, set their top priority as signing contracts to make their own pockets bigger.

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 for them 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 plans, 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 they intentionally ignore this.

Minister of Finance Ho Duc Phoc on Wednesday 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.