What are legal consequences of unilateral termination of insurance contracts in Vietnam?

1. What are legal consequences of unilateral termination of insurance contracts in Vietnam?

In Article 27 of the Law on Insurance Business 2022 (effective from January 1, 2023), legal consequences of unilateral termination of insurance contracts:

1. In case of unilateral termination of an insurance contract prescribed in clause 1 of Article 26 herein, the following actions shall be taken as follows:

a) 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;

b) 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;

c) 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.

2. When unilaterally terminating an insurance contract as provided in clause 2 and 3 of Article 26 herein, 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.

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

4. When unilaterally terminating an insurance contract as stipulated in clause 4 of Article 26 herein, 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.

2. What is transfer of insurance contracts in Vietnam? 

According to Article 28 of the Law on Insurance Business 2022 (effective from January 1, 2023), transfer of insurance contracts is as follows:

1. The policyholder shall have the right to transfer an insurance contract. In order to transfer a life insurance contract, the written consent must be obtained from the insured or the insured’s legal representative.

2. The transferee of the insurance contract must have insurable benefits and may inherit rights and obligations from the transferor.

3. The transfer of an insurance contract shall only come into effect when the policyholder sends the written notice of such transfer and the written consent is obtained from the insurer or the foreign non-life insurer’s branch, except when the transfer is made according to international practices or as agreed upon in the insurance contract.

Best Regards!