Cases of null and void insurance contracts in Vietnam

Cases of null and void insurance contracts in Vietnam (Internet image)

1. Cases of null and void insurance contracts in Vietnam

According to Article 25 of the Law on Insurance Business 2022, an insurance contract shall be made null and void in the following cases:

(1) The policyholder has no insurable interest at the time of conclusion of an insurance contract;

(2) No subject matter of insurance exists at the time of conclusion of an insurance contract;

(3) At the time of conclusion of the insurance contract, the policyholder has the knowledge of the policy event that occurs;

(4) Objectives and contents of an insurance contract are in contravention of prohibition clauses and social ethics;

(5) The insurer, the foreign non-life insurer’s branch and the policyholder enter into the fraudulent insurance policy;

(6) The policyholder is a minor; the person who is incapable of civil acts; the person who have cognitive and behavioral difficulties; the person whose capacity to perform civil acts is restricted;

(7) When being entered into, an insurance contract contains any confusion that causes one or more parties to fail to achieve the purposes of entering into that contract, unless the contractual purposes of the contracting parties have been achieved, or the contracting parties can take immediate remedial actions against such confusion to make the purposes of entering into the contract successfully achieved;

(8) The insurance contract is concluded by fraud, except as provided in Article 22 of the Law on Insurance Business 2022;

(9) The insurance contract is concluded under threat or pressure;

(10) The policyholder lives with health condition related to cognitive disability and impulse control disorder when entering into the insurance contract;

(11) The insurance contract is in contravention of regulations on presentation of insurance contracts laid down in Article 18 of the Law on Insurance Business 2022.

When an insurance contract is null and void, it is no longer in effect from the date of conclusion.

The insurer or the foreign non-life insurer’s branch and the policyholder shall be obliged to return what they have received to each other. The party at fault must be liable to pay compensation.

2. Unilateral termination of insurance contracts in Vietnam

Article 26 of the Law on Insurance Business 2022 stipulates unilateral termination of insurance contracts as follows:

The insurer, the foreign non-life insurer’s branch or the policyholder may unilaterally terminate the insurance contract in the following cases:

- The policyholder defaults on insurance premiums or does not pay insurance premiums in full by the agreed due date or after the extended due date;

- The insurer, the foreign non-life insurer’s branch or the policyholder does not accept the request for change in the level of insurable risk under Article 23 of the Law on Insurance Business 2022;

- The insured fails to apply safety measures to protect subject matters insured as provided in clause 3 of Article 55 of the Law on Insurance Business 2022;

- The policyholder disagrees to transfer the portfolio of insurance contracts prescribed in clause 4 of Article 92 of the Law on Insurance Business 2022.

3. Legal consequences of unilateral termination of insurance contracts in Vietnam

Pursuant to Article 27 of the Law on Insurance Business 2022, the legal consequences of unilateral termination of insurance contracts are as follows:

- In case of unilateral termination of an insurance contract prescribed in clause 1 of Article 26 of the Law on Insurance Business 2022, the following actions shall be taken as follows:

+ Insurance premiums remain to be paid in full by the policyholder till the time of unilateral termination of the insurance contract. This regulation shall not apply to life insurance contracts and health insurance contracts, except group insurance contracts;

+ When unilaterally terminating a life insurance contract or health insurance contract in this case, the insurer or the foreign non-life insurer’s branch shall be responsible for paying insurance to the insured if the policy event occurs before the time of unilateral termination of the insurance contract, and may deduct insurance premiums paid till the time of unilateral termination of the insurance contract;

+ When unilaterally terminating a property insurance contract, a property damage liability insurance contract or a liability insurance contract, the insurer or the foreign non-life insurer’s branch shall be responsible for indemnifying the insured if the policy event occurs before the time of unilateral termination of the insurance contract, and may deduct insurance premiums as agreed upon in the insurance contract.

- When unilaterally terminating an insurance contract as provided in clause 2 and 3 of Article 26 of the Law on Insurance Business 2022, the insurer or the foreign non-life insurer’s branch shall be responsible for refunding insurance premiums paid in advance for days left to the expiry date of the insurance contract as agreed upon in the insurance contract.

The insurer or the foreign non-life insurer’s branch shall be responsible for paying insurance indemnity or coverage as agreed upon in the insurance contract if the policy event occurs before the time of unilateral termination of the insurance contract.

- When unilaterally terminating a life insurance contract involving cash surrender value in the cases stipulated in clause 1 and 2 of Article 26 of the Law on Insurance Business 2022, the insurer shall be obliged to pay the policyholder the cash surrender value agreed in the insurance contract, unless otherwise agreed by contracting parties.

- When unilaterally terminating an insurance contract as stipulated in clause 4 of Article 26 of the Law on Insurance Business 2022, the policyholder may be refunded the cash surrender value or insurance premiums that he/she already pays in advance in proportion to the days left to the expiry date of the policy term, depending on specific types of insurance products.

Where the property value is less than technical provisions in the transferred portfolio of insurance contracts, the refund that the policyholder receives shall be calculated according to the proportion of property value to technical provisions in the transferred portfolio of insurance contracts.

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