Life insurers under fire over policy deficiencies
Life insurers under fire over policy deficiencies
Vietnam is working to urgently address shortcomings in the cross-selling activities of life insurance policies, highlighting concerns over advisory quality and the need for comprehensive market inspections.
The National Assembly (NA) has called on the government to urgently deal with deficiencies in corporate bond investment advisory, brokerage, and cross-selling of life insurance policies during loan approval processes.
Of particular concern is the comprehensive inspection of the life insurance market, with a specific focus on investment-linked insurance. The resolution comes following widespread incidents of banks fraudulently selling insurance policies under false pretences, which have shaken confidence in the insurance industry.
The explicit inclusion of a comprehensive inspection of the life insurance market in the parliamentary resolution has sparked considerable public interest.
Currently, there are 19 life insurance companies operating in Vietnam, including major players such as Bao Viet Life Insurance Corporation, Prudential Vietnam, Manulife Vietnam, AIA Vietnam, and Chubb Life Insurance.
According to the Insurance Association of Vietnam (IAV), all insurers have submitted reports to the Insurance Supervisory Authority on their review of insurance agency contracts and efforts to improve control over agency activities. This aims to enhance customer service quality and ensure compliance with the Law on Insurance Business.
Ngo Trung Dung, deputy secretary-general of the IAV, said that recent incidents in the life insurance industry have led to all life insurers taking collective action, reviewing, adjusting, and even reforming their activities and processes.
“Lessons and experiences from similar incidents around the world are being analysed and applied to improve the quality and rebuild trust with customers and regulatory authorities. The IVA and insurers are actively reviewing and amending the code of conduct for insurance agencies, applying strict penalties for violations. These actions seek to improve the quality of life insurance, restore customer trust, and strengthen regulatory oversight in the industry,” he said.
The first five months of 2023 have proven to be a difficult period for the life insurance market, with total premium revenue estimated at VND93.18 trillion ($3.88 billion), a decline of nearly 1.5 per cent compared to the same period last year.
This stands in contrast to previous years, which consistently saw double-digit growth.
A recently-released survey by Vietnam Report noted, “Market confidence is currently at its lowest level in 30 years. Prolonged instances of incorrect advice and deliberate obfuscation by insurance advisors have caused significant difficulties for policyholders, eroding trust in the insurance sector.”
Manulife Vietnam, previously ranked eighth among the top reputable life insurance companies in 2022, is absent from this year’s list. Instead, Mirae Asset Prévoir Life Insurance Co., Ltd. has made its debut entry into the rankings.
Inspections conducted by the IAV in 2022 uncovered approximately 3,100 cases of agent misconduct across 14 offence categories. These cases involved false advertising and misrepresentation of insurance products and services.
The quality of advisory personnel within life insurance companies has raised concerns, particularly in the bancassurance channel, where advisors tend to provide superficial advice, emphasising short-term benefits while neglecting to explain risks and exclusion clauses associated with investment-linked insurance products.
Experts recommend that customers conduct thorough research, engage in discussions with advisors, and resolve any doubts before signing insurance contracts. They suggest exploring multiple product options and insurance companies to find the most suitable coverage, thereby mitigating future insurance disputes.
Companies have been implementing many measures such as increased training programmes for bancassurance advisors and the enforcement of stringent penalties for employee misconduct.
Additionally, the NA plans to issue a decree with stricter regulations on insurance business operations, including requirements for qualifications and certifications of advisory personnel at banks.
These regulations may encompass university degrees specialising in insurance, professional certifications, and a minimum of three trained staff members with appropriate insurance agency licences in every branch of relevant financial institutions.
