The Vietnamese Ministry of Finance has introduced a proposed decree that could subject life insurance companies to fines of up to VNĐ100 million for intentionally providing “incorrect advice.” This initiative is part of a broader strategy to address violations in the insurance industry and ensure consumer protection.
Once enacted, the decree aims to impose strict penalties to discourage improper practices, particularly within the distribution of insurance products and services. The focus is on maintaining clarity and accuracy in product information.
Practices such as offering illegal benefits, advising clients to opt for less competitive insurance terms, and employing unqualified brokers will now incur fines rather than mere warnings.
According to Vietnam News, Trần Nguyên Đán, a member of the Vietnam Lawyers Association, has advocated for even more stringent measures. He suggests that severe violations should be treated as criminal offenses, underscoring the gravity of such practices.
Bancassurance practices under scrutiny
Vietnamese Prime Minister Phạm Minh Chính has recently called for a report on bancassurance, the sale of insurance products through banks. This practice has faced criticism for misleading customers, engaging in fraudulent practices, and using coercive sales tactics.
Numerous customers have reported being misled by bankers who allegedly misrepresented insurance products as high-interest banking products or pressured them into purchasing insurance to secure loans. An anonymous employee from a state-owned bank in HCM City revealed that it is an “unwritten rule” for borrowers to buy life insurance to qualify for a loan.
While bancassurance has become a significant revenue source for many banks through fees and commissions, a Ministry of Finance investigation uncovered various violations. These include insurers failing to provide direct advice to customers and breaches of regulations by insurance agents and bank employees.
In a related development, Vietnam’s national bureau responsible for implementing Protocol 5, the ASEAN Scheme of Compulsory Motor Vehicle Insurance (VINABAI), has announced the successful connection of Vietnam to the ASEAN Compulsory Motor Insurance (ACMI) database system.
