the law on life insurance business in vietnam theoretical and practical issues

MINISTRY OF EDUCATION AND TRAINING MINISTRY OF JUSTICE HANOI LAW UNIVERSITY TRAN VU HAI THE LAW ON LIFE INSURANCE BUSINESS IN VIETNAM THEORETICAL AND PRACTICAL ISSUES Specialty: ECONOMIC LAW Code: 62.38.01.07 SUMMARY OF DISSERTATION HANOI - 2014 The dissertation is completed at: HANOI LAW UNIVERSITY Academic Supervisors: 1) Dr. Bui Ngoc Cuong 2) Dr. Nguyen Van Tuyen Reviewer 1: Ass. Prof. Dr. Nguyen Nhu Phat Reviewer 2: Dr. Nguyen Am Hieu Reviewer 3: Ass. Prof. Dr. Le Thi Thu Thuy Dissertation will be examined by the Council of Dissertation Evaluation at Hanoi Law University at ……… date …………… Dissertation is available at: 1) National Library of Vietnam 2) Library of Hanoi Law University INTRODUCTION 1. Rationale Life insurance business has developed in the world for a long time, especially in developed countries. But in Vietnam, insurance experts and regulators suppose that Vietnam life insurance market is still relatively new and potential . Besides providing insurance benefits to society, life insurance is recognized as a role of effective channel for investment into the national economy with a capital of trillions of dollars worldwide. Life insurance market in Vietnam was officially recognized legally as issuing Decree 100/1993/ND-CP of the insurance business dated 12/18/1993 . From then until now, the insurance legal system in general and legal system for life insurance business in particular is gradually improved and adjusted However, to meet the growing demands of Vietnam 's economy and of the process of international integration , the life insurance business law still needs to be amended and revised. The dispute in life insurance was more and more growing, and in some cases originated from the inadequacies of the regulations. The regulations of the insurance business activities such as design, distribution, investment, financial management showed limitations and drawbacks. Regulatory supervision still revealed flaws, including the coordination between the governmental agencies and organizations involved have not really operated effectively. Currently, the research of theoretical and practical summary in life insurance business in term of legislations in Vietnam is not much. Many theoretical issues such as the concept of life insurance products, content of life insurance business, legal structure of life insurance business law including the parts and factors contributing have been unsolved. On a practical level, there have been no research work covering overall real situation in legislation of life insurance business in Vietnam in connection with legislative parts together, thus research recommendations have not - 2 - consisted of systematic conclusions. Meanwhile, improving the legal and regulation in life insurance business is one of urgent requirements. There are many international norms and practices have been applied in many countries but have not been recognized in term of insurance business laws in Vietnam, especially the recommendations and guidelines issued by International Association of Insurance Supervisors (IAIS) to which Vietnam is a member. Therefore, it is essential, theoretically and practically, to have a thorough study of insurance business law in the present context in order to construct feasible solutions for purposes consolidating legal system then building an oriented-socialist economy. The Author have chosen dissertation topic “The legislations on life insurance business in Vietnam - The theoretical and practical issues” as name of thesis of Ph.D program. 2. Research Purposes and Tasks The purpose of the thesis is to develop a theoretical background for life insurance business law, and then to assess the statement of current legislation and recommend the solutions for improving legislation of life insurance business in order to meet the requirements of the economy and international integration. For such purposes , the task of dissertation research are: - Verify current and common perspectives, from which to build the legal theoretic for life insurance business i.e. concept of life insurance products and life insurance business, determination of the basic principles and structure life insurance business law as well as the key factors. - Evaluate content of insurance business regulations, including the advantages and limitations of the current regulations. The evaluation is performed in respect of structure of each part of the law in detail in order to detect gaps, and limitations of the current regulations. - Determine orientation and recommend solutions to improve the current legal regulations on life insurance business. These orientations should be strictly close to Communist Party of Vietnam’s directions and - 3 - the government’s policy to promote the healthy development of the insurance market. The given solutions should be feasible scientific and be abstracted from theoretical basis as well as the assessment of the current situation. 3. Research objectives and scope Research objectives of the thesis includes: - The system of laws on life insurance business includes the Insurance business Act, the legal documents guiding the implementation of the Insurance Business Act and other legal documents related as the Enterprise Act, Civil Code, Commercial Act, Consumers' Rights Protection Act. - The scientific opinion has been the individual authors and institutions announce in the study of insurance business in general and the life insurance business in particular, both domestic and international. Scope of research is limited as follows: - Study objectives are legislative system of life insurance business in Vietnam since the Insurance Business Act enacted in 2000 until now. The period before the Insurance Business Act in effect is excluded from the scope of the research. - The thesis research focused on a system of laws and regulations covering life insurance business in general, does not go into the specific rules to regulate some specific life insurance products. 4. Research Methodology To accomplish the tasks of research and research purposes, under the generalized sense, methodology for study was employed Marxism - Leninism approach in solving research tasks. For each specific content, the thesis mainly took use of analytical methods, statistical methods, methods of comparative jurisprudence and the historical method. 5. Scientific sense and practical applications The thesis is monographs to build a system of on legal reasoning - 4 - on life insurance business as well as assessment of comprehensive life insurance business in term of the current law and regulations related to. Therefore, the result of research will contribute additional knowledge in the field of legal science in general and law of economics in particular. The research results of the thesis have practical applicability. First, the thesis contributes a scientific basis for the improvement of business life insurance law and regulations in Vietnam. Secondly, the thesis would contribute to the knowledge of the legal system that should be useful for the regulators, insurers and the insured in application of regulations effectively. 6. The research structure Besides the introduction and conclusion, the thesis has consisted four chapters: - Chapter 1: Overview of Research - Chapter 2: The theoretical issues about life insurance business and legislation on life insurance business - Chapter 3: Current situation of the life insurance business laws in Vietnam - Chapter 4: The recommended solutions to improve the life insurance business laws in Vietnam CHAPTER 1 OVERVIEW OF THE RESEARCH The topic “The legislations on life insurance business in Vietnam - The theoretical and practical issues” is unprecedented research and the first study solved at the level of Ph.D. thesis at jurisprudence. However, each aspect of the research is the subject mentioned many studies at different levels at home and abroad, Some results of the these studies should be used, but have not solved all tasks of research, especially under the legal aspects of science. - 5 - The limitations of the previous research results can be summarized as follows : firstly, the lack of systematic sense before building the basic concepts and lack of determination the structure of life insurance law; secondly, limitations in results in term of theory, the lack in mention to comparisons among Vietnam law, other countries law and international norms in assessment. From the considerations in research results, the author of thesis has defined the problems that is needed to solve in the thesis, identified specific tasks on theoretical study of current law, from which to recommend solutions in order to improve legal legislation in life insurance business. CHAPTER 2 THE THEORETICAL ISSUSES ABOUT LIFE INSURANCE BUSSINESS AND LEGISLATION ON LIFE INSURANCE BUSINESS 2.1. THE THEORETICAL ISSUSES ABOUT LIFE INSURANCE BUSSINESS 2.1.1. Life Insurance and life insurance products a) Concept of life insurance In the historical development of the insurance industry, life insurance as a commercial service appeared later than non-life insurance business, also associated with the introduction and development of probable and statistical science . After about two and a half centuries of development, life insurance market in the world grew at a large scale along with relatively completed legal system. In Vietnam, life insurance is financial services are relatively new. In term of legislation, life insurance market was formally re-established over 20 years ago under the introduction of Decree No.100 dated 18/12/1993. - 6 - Despite appearing quite some time, but now the concept of life insurance is still not consensus. The differences in concept of life insurance were resulted in different approaches in the theoretical literature and in legal systems in countries around the world, but it can be stated that the reasons of differences in definition could be identified as follows. First, the difference in opinion varying in countries due to the different socio- economic condition, economic development policies in general and life insurance market development. Second, the development of the life insurance market encourages creativity in life insurance business with new products that consist features to satisfy various needs of customers. Finally, difference in approaches (in aspect of economic, legal or state administration etc.) that led to various definitions. However, most researchers and laws of the countries are basically agreed on the following characteristics of life insurance: First, in technical of life insurance business, object of life insurance is lifetime of the insured. Second, insured events commonly are relatively diversified with diversity causes Third, life insurance includes saving and investment elements i.e. the insurance benefit is usually greater than accumulative premium paid up by customers. Then, in summary and in term of legal science,, life insurance should be defined as follows "life insurance is a kind of commercial insurance under which insurers agree and commit to pay a specific amount when specific insured event occur in case the insured live or die in a given time, with or without the investment benefits, with conditions that premiums is paid by the policyholder under agreements. c) Concept of Life insurance product Life insurance product is a specific commercial product of life insurance business. In other words, the life insurance is understood principles, as "technical" that insurers design products suitable to their customers. - 7 - With the approach, we can see there are some basic characteristics of life insurance products following: First, life insurance products as well as other insurance products, but it has property of the asset. Second, as well as other insurance products, life insurance product business requires special business processes: Revenue estimated before expenses incurred and the uncertainty expenses incurred depending each product as well as each customer. Third, life insurance products served for multi- purposes and insurers often offer multiple type of life insurance products for different customers. Fourth, life insurance product is identified through life insurance contracts and activities of insurers to meet the customers’ need depending on contract implementation. Fifth, the technical basis of the basic life insurance products is the law of large numbers , mortality tables ,technique interest rates and average premium. Sixth, life insurance products are delivered with a relatively long duration. d) Types of life insurance products Under aspects of insurance commitments, there are 3 types of life insurance products mainly includes endowment life insurance, term life insurance, mixed life insurance. In term of number the insured in the insurance policy, life insurance products including individual or group insurance. In term of combination of life insurance and non-insurance provided by insurance companies, the two types of life insurance products is pure life insurance products and investment-linked life insurance. 2.1.2. Life insurance business a) Concept of life insurance business Definition of life insurance business is not easy to identify due to - 8 - different approaches. To build the concept, consider the basic characteristics of life insurance business activities as follows: First, the life insurance business must meet legal requirements. Second, life insurance business covers insurance benefits delivering through insurance products and investment result from the idle premium reserve . Investment from the premium reserve is considered as life insurance business for the following reasons: (i) insurers always hold a substantial amount of premium and have the right to use resources for investment , (ii) investment operations of insurance companies from reserves is of the nature of the insurance business operations, and quite differentiate from gambling and bet; (iii) investment activities of insurers have crucial significance to the survival of the insurers, (iv) life insurance products are more and more focusing on investment factors than traditional insurance for protection. From the above arguments, we can give a definition of life insurance business as follows: Life insurance business is a type of business requiring license in which insurers provide its services via insurance products, investment of collected premium and other capital to guarantee their commitments to the insured under legal regulation. b) Content of life insurance business The provision of life insurance services The provision of life insurance services through insurance products includes the following: - Insurers design insurance products based on its self-control in business in compliance with regulations of law. - Insurance distribution is a process to bring the insurance products to the customers via different channel such as direct distribution or indirect distribution (including agent and broker, bancassurance, etc.). The outcome of distribution process is contract will been signed [...]... First, there are inconsistency between Civil Code and Insurance Business Act about benefit payment regulation when the insured person die in the human insurance (including life insurance) Second, Insurance Business Act does not define some common terms in life insurance contract, although the terms are often used in the law and the legal guidelines, which lead to many different interpretations Third, Insurance. .. on Insurance Business that used commonly in other documents but not define Second, adding specified rights and obligations of the insured and the beneficiary Third, amending the regulations of insurable interest under the direction of separation between the definition in human insurance and in property insurance and liability insurance b) Provision on the content of insurance policy First, removing... of the restructuring of the insurance market in order to meet the demands of the economy and international integration requirements 4.2 SPECIFIC SOLUTIONS TO IMPROVE THE LAW ON LIFE INSURANCE BUSINESS AND ITS IMPLEMENTATION 4.2.1 Improve regulations on life insurers a) Regulations on liciencing First, propose revisions and amendments in the Insurance Business Act and legal documents towards allowing... modifying the regulations of the Insured Protection Fund includes expanding the scope of protection, adding policy transfer regulations, defining the Fund as an independent legal entity and changing the management structure of the Fund 4.2.2 Improving provision on life insurance policies a) Provision on the participants to insurance First, adding the concept of "participants to insurance" in the Law on. .. classification into three major products i.e term insurance, - 20 endowment insurance and mixes insurance; Additional concepts of life insurance products so that clearly separates the two concepts between life insurance and life insurance products Second, recognition of the most basic regulations the Law on Insurance Business as specifying which agencies implementing life insurance product approval and procedures... protecting the rights of the insured 2.2.2 Structure of Insurance Business Law Structure of insurance business law can be looked at from different perspectives with different goals To analyze the structure of life insurance business law, the most convenient way is looking from the essential social relations that arise from the life insurance business Seen from position of the insurance business, insurance. .. also requires the concept of members in the Enterprise Act or their own definition member in the Insurance Business Act These recommended regulations requires guidelines on qualifications and numbers of independent member in the Board c) Regulations on providing insurance services First, Insurance Business Act should be amended and supplemented toward to the nature of life insurance and life insurance. .. necessary to distinguish which case applied the inspection or verification SUMMARY OF THE THESIS Through the study of the theoretical issues and practice in law on life insurance business, the author could state following conclusions: It is important to build the content of legal reasoning on life insurance in assessing the legal regulations in practice, thereof it can be proposed a complete solution to ensure... based on which the law on life insurance business is amended and supplemented in accordance with the proposals of the Thesis is an important solution contributing to the improvement of the legal system in order to promote the development of the insurance market, meeting the internal needs of the economy and international integration, ensuring the sustainable and comprehensive development of the financial... allows reinsurers can operate in 3 types of business re- life insurance , non -life reinsurance and health reinsurance 3.1.2 Regulation on operational and management structure in life insurance companies Regarding the organizational structure and apparatus of insurers, in general the regulations of the current law of Vietnam has asymptotic common with those of international standards, in particular the recommendations . of life insurance products is pure life insurance products and investment-linked life insurance. 2.1.2. Life insurance business a) Concept of life insurance business Definition of life insurance. BUSSINESS AND LEGISLATION ON LIFE INSURANCE BUSINESS 2.1. THE THEORETICAL ISSUSES ABOUT LIFE INSURANCE BUSSINESS 2.1.1. Life Insurance and life insurance products a) Concept of life insurance. Many theoretical issues such as the concept of life insurance products, content of life insurance business, legal structure of life insurance business law including the parts and factors contributing