Non-life insurance companies and related government agencies are cooperating to create a supportive legal framework for the reform and development of the sector.
The Insurance Supervisory Authority (ISA) at the Ministry of Finance (MoF) and insurance companies have recently put a great deal of effort into identifying the way the sector can develop in a sustainable and efficient manner. Many conferences have been held, where both life and non-life insurers were able to discuss policies that would help the sector reach its undoubted potential.
At conferences for non-life insurance companies, representatives expressed their appreciation of the efforts made by related government agencies last year in issuing Circular No. 194/2014/TT-BTC, creating a legal framework to develop the insurance market by resolving difficulties, providing support, promoting effective business growth, enhancing corporate governance, and simplifying administrative procedures.
For the non-life insurance sector the introduction of Circular No. 194 will truly have a positive effect in helping it minimize bad debts from unpaid premiums, which have become common over recent years and affected liquidity and operational efficiency.
Moreover, the circular included specific support to agents and details on bonuses and rewards they may receive, which must not be more than 50 per cent of whatever commission they receive on an insurance policy.
In order to secure the rights of customers and the reputation of the insurance company, the circular also indicates clearly how foreign insurance companies can issue certificates of authority to local agencies, which requires the name and issuance number of local agencies.
The circular also states that leaders of insurance departments and companies having total equity equal to legal capital are allowed to do business in the country. This article will tighten management due to subordinates having to complete all requirements regarding capital, management, and facilities, etc.
From June 1, 2016, non-life insurance agencies must separate their charter capital from premiums paid by customers.
Circular No. 194 also has requirements on the use of insurance experts in determining provisions and the ability to cope with losses, which aim to create transparency and clarify the profit and losses of each business.
Three main issues
Mr. Phung Ngoc Khanh, Director of ISA said the insurance sector must continue to record growth in a sustainable manner.
In this regard, the ISA will firstly focus on research to complete the legal framework and policies that create favorable conditions for non-life insurance companies.
Secondly, the ISA will try to simplify administrative procedures, strengthening risk management at insurance companies to create stable conditions for their operations and minimizing any unfair competition. It will also continue to issue regulations to encourage enterprises to develop new products and standardize certain insurance products to support welfare and social security efforts.
Thirdly, the ISA will amend and supplement procedures to strengthen corporate governance, to ensure transparency and the financial security of non-life insurance companies.
Mr. Khanh also said that, based on these three main issues, there have been seven key measures taken to amend and supplement Decree No. 45/2007/ND-CP and Decree No. 46/2007/ND-CP and nine key measures taken to amend and supplement Circular No. 124/2012/TT-BTC and Circular No. 125/2012/TT-BTC.
MoF has also been working with insurers on amendments and supplements to Circular No. 124/2012/TT-BTC and Circular No. 125/2012/TT-BTC, with conferences held and public surveys posted on its website to collect suggestions.