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
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
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
-2consisted 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
- 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
-3the 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
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
- 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
-4on 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
- 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
- Chapter 4: The recommended solutions to improve the life
insurance business laws in Vietnam
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.
-5The 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.
THE THEORETICAL ISSUSES ABOUT LIFE INSURANCE
BUSSINESS AND LEGISLATION ON LIFE INSURANCE
2.1. THE THEORETICAL
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
-6Despite 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 socioeconomic 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
Third, life insurance includes saving and investment elements i.e.
the insurance benefit is usually greater than accumulative premium paid up
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.
-7With 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
Sixth, life insurance products are delivered with a relatively long
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
-8different 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
-9between insurers and policyholders. Life insurance policies in particular
and insurance policies in general are kind of pre-composed contracts by
insurers due to complicated and special insurance relations. In theory, life
insurance regulations in the policy have characteristics of common
contracts term and standard contract terms. According to the approach of
European Union law, a majority of the contract terms included in a contract
is considered as standard contract in order to protect customers, the sample
is considered as standardized contract to protect consumers. The insurers
usually emphasize to clients that insurance regulations are inseparable parts
Investment from the collected premium
Investment activities of insurers have the following basic
First, investment requires long-term investing to stable income.
Second, investment scale is larger than investment in non-life
Third, investment connects closely to life insurance product design.
Investment activities of insurers should require two important
priorities: safety of the investment portfolio and the liquidity of invested
2.2.1. Principles of life insurance business law
a) Self-control in business
To ensure the principle of self-control business, laws need to show
- First, the law should ensure equality between economic sectors to
participate in the establishment, capital contributions to insurers.
- Second, the law stipulates freedom in establishment of insurance
companies in accordance with the process in development of insurance market.
- 10 - Third, the laws have to ensure the sound competition through the
design and distribution of life insurance products, premiums rating and
other benefits of customers .
- Fourth, to ensure the freedom of business is done, there are legal
regulations to limit the incompetent insurers, state unfair competition as
well as aggressive behaviors harm to the fairness and transparency in the
b) Protection the customers’ benefits
Besides the principle of protecting the legitimate interests of all
parties to the contract, the principle of protecting the policyholders give
prominence for reasons:
First, insurance policies general and life insurance policies in
particular are very complicated.
Second, most of the content of insurance policies are drafted and
issued by insurers, often referred to as standard clauses. Therefore, it is
necessary for the regulations to establish mechanisms to balance its
position between the parties in insurance contracts .
Third, the insurance benefits depend on behavior of insurer can
lead to unfair contract performance of insurers .
Fourth, protecting the insured to maintain the public trust for the
Law of all countries generally established for 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 business law need to cover the following:
First, the law should regulate to group of social relations of insurer
- 11 as a legal status with business functions such as regulation of life insurance
licensing activities, regulations on organization and personnel, regulations
on delivering life insurance products , regulation of investment activities of
insurers and regulations on the solvency of insurance companies .
Second, the law should regulate to group of social relations
between insurers and the policyholders in a relation via insurance contracts
such as status of the insured, content and form of contract, the validity of
Third, the law should regulate to group of social relations between
regulators and insurers in monitoring activities as defined in information
transparency obligations, authority, content and methods of supervision.
2.2.3. Key elements affect on Law of Insurance Business
Legislation in the development process was affected of various
factors such as : (i) The perspectives of government on development of the
life insurance market in each specific period, (ii) the requirement for
development of the life insurance market with new products and better
transparency, (iii) international law and international practices in term of
life insurance business as the WTO rules or guidelines from the IAIS ; (iv)
the interaction between the parts of the law such as corporate law, contract
law, consumer protection law etc., (v) and finally to consider proficiency of
compliance to laws by the relevant entities including insurers , the insured,
regulators and the Court in settling disputes arising from insurance policies.
CURRENT SITUATION OF
LIFE INSURANCE BUSINESS IN VIETNAM
3.1. CURRENT SITUATION OF REGULATIONS ON LIFE
3.1.1. Regulations on licensing for life insurer
- 12 In general, licensing regulations for life insurance business in the
law of Vietnam is similar to other countries. It is easy to see the similarity
in the regulations in many countries such as France, Germany, Australia or
the U.S., and in accordance with international standards, such as the IAIS
However, besides these advantages, licensing regulations in the law
of Vietnam showed limitations:
Firstly, Law still does not allow foreigners obtaining license of life
insurance business in the form of joint stock companies or branches of
foreign life insurer in Vietnam.
Second, regulations on reinsurance is irrelevant when 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 the IAIS and similar legislation many countries.
However, compared with the IAIS guidance as well as many national laws,
the current regulations on the management and administration of insurance
companies also have some disadvantages as follows:
First, Vietnam law provides on a permanent organ of management
in insurance company is the Board of Directors (the Board members) under
the operational model of one level management but have not specified the
independent members, while the IAIS guidance and many national laws are
quite specific recognition of independent members.
Second, current law does not ensure balance in control of the
management apparatus ie not separate the two specified positions between
Chairman of the Board of Directors (the Board members) and Chief
Executive Officer (General Director) .
- 13 3.1.3. Regulation on life insurance product distribution
According to the majority of the regulations of the law of Vietnam
for distribution life insurance services is consistent with the nature of the
business sector and in common with regulations in many countries around
the world. Besides these advantages, the current regulations, there are some
limitations as follows:
First, the Insurance Business Act was not clear in classifying life
insurance business and understanding about life insurance products.
Second, the current regulations on life insurance products approval
is not clear and transparent to ensure the rights and responsibilities of the
Third, the current law is defined as insurance agents not having
independent status is not reasonable. Besides, bancassurance has been
deployed for a long time without specific regulations.
3.1.4. Regulation on porfolio and activitie of investment by life
The laws of Vietnam may be supposed regulations of the law on
investment by insurance companies in Vietnam are quite similar to
regulations in many countries worldwide. Besides the advantages gained,
the regulations of the law covering investment activities of life insurance
companies are still some shortcomings as follows:
First, the regulations on investment limits are quite simple, and
does not ensure balance principle between safety and profitability in
Second, regulations on trust investment is not clear, can distort the
investment restrictions in practice.
Third, there is a conflict between the Insurance Business Act and
the Credit Institutions Act related to loans.
3.1.5. Regulations on solvency of life insuers
a) Regulations on legal capital
- 14 Regulations on legal capital for insurance business in general and
life insurance in particular are relatively popular in the world, and the legal
capital regulations under Vietnam law are consistent and equivalent
regulations of many countries in the world. However, applying the same
legal capital level for all life insurers without consideration about the risk
and risk tolerance of insurers will lead to mis-judgement on solvency of
b) Regulations on techical reserves
The laws of Vietnam may be supposed that is quite similar to
international practices and regulations and laws in many countries when
provides compulsory technical reserve for life insurers. However, besides
these advantages have been achieved, the regulations are still some
shortcomings as follows:
First, the technical basis using CSO 1980 to evaluate mathematical
reserve is not really relevance .
Second, although the law allows insurers may select one of the
methods of mathematical reserves under international rules , but the
Ministry of Finance does not issue specific instructions.
Third, the law also not be stipulated compensation reserve in the
case insurance companies refuse to pay claim and although the
policyholders have the right to take legal proceed to Court for a period of
three years from the date of refusal.
c) Regulations on solvency margin
There is a general comment that the minimum solvency margin
regulations in Vietnam Law is quite similar, even stricter than those
prescribed in other countries are. However, there are some shortcomings in
the rules and practice of the solvency of insurance companies following:
First, the assessment of solvency has not consistently followed the
model of the European Union or the model of the U.S - Japan .
Second, regulations on deduction value assets in accounting when
- 15 determining the solvency margin is not suitable currently.
Third, the method of calculating the solvency margin is now only
based on liquidity risks of property without consideration other risks in
d) Regulations the Insured Protection Fund
An important forward step of the Insurance Business Act after
amended in 2010 is the existing of regulations for setting-up the Insured
Protection Fund. However, besides recognizing the advantages gained, the
regulations of the Insured Protection Fund are having shortcomings,
First, the name of the Fund did not cover all the objects that need
to be "protected" in life insurance business.
Second, the law provided limited function of the Fund in operation,
thus not consistent with international practice.
Third, the Fund's legal status is unclear and administer of Fund is
The Association of Vietnamese Insurers (AVI) should be not appropriate.
3.2. CURRENT SITUATION OF REGULATION ON LIFE
3.2.1. Regulations on the policyholders
The insurance business Act covered relevent issues for the
policyholders and showed similarities with national law and international
practice. However, there are some shortcomings, as indicated in the
following major contents:
First, the law has not clearly defined the rights and obligations of
the insured and the beneficiary.
Second, the concept of insurable interest seemed be inconsequential
to the nature of human insurance, including life insurance.
3.2.2. Regulations on the content of life insurance contracts
Regulations on content as prescribed by the laws of Vietnam as
well as actual agreement are consistent with international practice.
- 16 However, besides the positive regulations of the law on life insurance
contracts, there are some shortcomings of the following:
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 Business Act is not specified on the policy
transferring in life insurance sector.
Fourth, not the concept of standard clauses have not been defined,
even how to adjust in compliance with standard contracts give the
differences interpretation among Civil Code, Protection of Consumers'
Rights Act and Insurance Business Act.
Fifth, Protection of Consumers' Rights Act not defined a approval
as a kind of registration
3.2.3. Regulations on the form of life insurance contracts
Provision for insurance policy in writing is basically consistent
with international practice. However, provision on the form of insurance
policy is sketchy, as indicated in the following points:
First, the lack of legal recognition of elements forms insurance
policy. In fact, many policyholders are not aware of terms and conditions
pre-printed in the policies playing as important role in agreement.
Second, current law does not contain regulations on how to print
and present an insurance policy. The print font size too small or faded
colors can make policyholder ignore the important regulations.
3.2.4. The validity of life insurance policy and its nagtive effect
The Insurance Business Act has no specific regulations on validity
of insurance policy but explicitly stated in the case the policy void. It is
- 17 seen with the regulations on void policy cases in the law in Vietnam which
are similar to many national laws.
Besides the logical content, the Insurance Business Act showed
some inadequacies in regulation when insurance policy considered void, it
is clear with the contradictions the provision in Article 19 and Article 22
leads to the different legal consequences.
In the process of implementing insurance policy in fact, still
occurred many negative cases such as fraud and disputes of insurance
contracts. Insurance fraud tended to increase with more sophisticated tricks
in recent years. The capability of judge in trial is still relatively low.
3.3. CURRENT REGULATIONS ON LIFE INSURANCE
3.3.1. Regulations in information disclosure
In general, legal requirements for information disclosure have
gradually reached the international standards in comparison with the
recommendations by the IAIS and laws of many countries and have been
consistent with the level of development of the life insurance market.
However, the author assumed still exist some problems as follows:
First, It is not compulsory in the law for disclosure on standard
clauses in the website of insurers .
Second, the law does not contain regulations on database exchange
between insurers on information of policyholder to prevent insurance fraud.
Third, regulations on accounting and financial reporting of life
insurers are still insufficient.
3.3.2. Regulations on supervisory authority in life insurance
Similar in laws of other countries, Vietnam has Insurance
Supervisory Authority (ISA) in charge of insurance supervision under the
Ministry of Finance. Besides the advantages of regulations on supervising
competence in life insurance, there are the following limitations:
- 18 First, the assignment of mission and juridical power of state
agencies are unclear and inadequacies that were derived from breakdown
by sector in supervising financial markets thus active of supervision
became less effective.
Second, supervisory authorities, including the ISA, are commonly
have two functions i.e issuing legal regulations and supervising thus make
the supervision less effective.
Third, the important role of Association of Vietnamese Insurers
(AVI) in monitoring the insurance business is not legislated.
3.3.3. Regulations on supervisory subject matters and manners
on life insurance business.
In general, the legal framework on supervison in insurance
business is relatively clear and in accordance with international practice.
However, these regulations also exposed some shortcomings of the
First, supervisory objectives defined in the legal documents are
relatively generic, less emphasis on protecting the rights of the parties in
insurance agreement as those in developed countries’s law.
Second, although much of supervisory subject matters are specified
but the supervisory framework has not been defined, especially lack of
internal audit model.
Third, because legal regulations is not specific on supervisory
activities on life insurance products may less effective.
Fourth, the law has not yet specified the supervisory method and
process and in fact only done mainly indirect supervision rarely perform
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