5 new important points on compulsory insurance of cars and motorbikes from March 01, 2021 in Vietnam

Decree No. 03/2021/NĐ-CP compulsory civil liability insurance of motor vehicle users officially takes effect from March 01, 2021. There are some new important points on compulsory insurance of cars and motorbikes mentioned in the Decree No. 03/2021/NĐ-CP, including:

1. Increase the compulsory civil liability insurance duration of motor vehicle users

Specifically, the duration of the compulsory civil liability insurance of motor vehicle users are prescribed at Article 9 of the Decree No. 03/2021/NĐ-CP of the Vietnam Government as follows:

(1) For motorcycles, motorized tricycles, mopeds (including electric motorbikes) and similar vehicles according to the Law on Road Traffic of Vietnam, the minimum insurance duration is 1 year and the maximum insurance duration is 3 years;

(2) For remaining motor vehicles, the minimum insurance duration is 1 year and the maximum insurance duration shall conform to a valid period of periodic technical safety and environmental protection inspection which has more than 1 year of valid period;

(3) For following cases, insurance duration shall be less than 1 year: Foreign motor vehicles which temporarily import for re-export participate in traffic within Socialist Republic of Vietnam territory for less than 1 year; service life of motor vehicles is less than 1 year as per the law; temporarily registered motor vehicles according to regulations of Ministry of Public Security of Vietnam;

(4) In case motor vehicle users who have multiple vehicles participating in insurance at different times in a year wish to unify insurance participation time in the following year, insurance duration of these vehicles may be less than 1 year and equal to the remaining valid period of the first contract concluded in that year. Insurance duration of the following year for insurance contracts and certificates of insurance which have been unified in terms of participation time shall conform to the above (1) and (2).

Previously, according to the Decree No. 103/2008/NĐ-CP and Circular No. 22/2016/TT-BTC, the expiration of the Certificate of Compulsory Insurance shall be 01 year, however, it shall be less than 01 year for some cases as prescribed by law.

Thus, from March 01, 2021, when the Decree No. 03/2021/NĐ-CP of the Vietnam Government officially takes effect, the duration of the compulsory civil liability insurance of motor vehicle users will be increased to 03 years (except for some special cases, the insurance period is limited to 1 year or less than 1 year).

2. Change in compensation rate for compulsory motor vehicle insurance

Pursuant to Article 14 of the Decree No. 03/2021/NĐ-CP of the Vietnam Government, if accidents within insurance liabilities occur, insurance enterprises must reimburse insurance beneficiaries for the payment that has been made or will be made to the accident victims by the insurance beneficiaries. In case insurance beneficiaries decease or lack legal capacity according to judicial decisions, insurance enterprises shall directly compensate the accident victims, victims’ heirs (in case the victims have deceased) or victims’ representatives (in case the victims lack legal capacity according to judicial decisions or are under 6 years of age).

Within 3 working days after being notified by insurance buyers or insurance beneficiaries about accidents, insurance enterprises must pay advance compensation for damage to health and lives. The advance level is from 10-70% of the insurance liability level as prescribed by law.

Specific compensation for health and lives according to the Decree No. 03/2021/NĐ-CP of the Vietnam Government is as following:

- Specific compensation for health and lives is determined for each type of injury and casualty under Schedule for health and life compensation under Annex I attached to this Decree or according to agreement (if any) between insurance beneficiaries and victims or victims’ heirs (in case the victims have deceased) or victims’ representatives (in case the victims lack legal capacity according to judicial decisions or are under 16 years of age) but must not exceed the amount specified under Annex I attached to this Decree. 

Note: In case judicial decisions are made, judicial decisions shall prevail as long as the amount specified under Annex I attached to this Decree is not exceeded.

- In case multiple motor vehicles constitute to health or life damage, compensation amount shall be determined by levels of fault of insurance beneficiaries as long as total compensation amount must not exceed insurance liabilities.

- In case of accidents which are entirely caused by third party as determined by competent authorities, health and life insurance for the third party shall equal 50% of the amount specified under Annex I attached to this Decree or agreement (if any) between insurance beneficiaries or victims’ heirs (in case victims have deceased) or victims’ representatives (in case victims lack legal capacity according to judicial decisions or are under 6 years of age) but must not exceed 50% of the amount specified under Annex I attached to this Decree.

Thus, from March 1, 2021, insurance enterprises will not pay insurance with a specific amount (VND 100 million/person/accident or VND 50 million/accident) as currently prescribed in the Decree No. 103/2008/NĐ-CP, it is instead determined according to each type of injury and damage according to the Schedule for health and life compensation under Annex I attached to Decree No. 03/2021/NĐ-CP or according to agreement (if any) between insurance beneficiaries and victims but must not exceed the insurance liability amount.

3. More cases of cars and motorbikes not receiving insurance compensation

Specifically, according to the Decree No. 03/2021/NĐ-CP of the Vietnam Government, insurance enterprises shall not compensate for following cases:

(1) Damage done intentionally by motor vehicle users, motor vehicle operators or victims of the accidents.

(2) Vehicle operators intentionally fleeing the scene after committing accidents without exercising civil responsibilities of motor vehicle users. Vehicle operators intentionally fleeing the scene after committing accidents and exercising civil responsibilities of motor vehicle users shall not be included under insurance exclusion.

(3) Operators who are not within adequate age range to operate motor vehicles as per road traffic laws; operators who do not carry legitimate, proper driving license (driving license with template number at the back inconsistent with the latest template number in information system for managing driving license) issued by competent authorities at the time of accidents or carry inappropriate driving license when operating motor vehicles which require specific driving license.  In case driving license of operators are revoked or suspended, the operators are considered to be not carrying driving license.

(4) Damage that causes indirect consequences including: reduced commercial value, damage related to use and utilization of damaged assets.

(5) Damage to assets caused by operators who have alcohol in breath or blood, or use narcotics or other prohibited stimulants as per the law.

(6) Damage to assets which are lost or stolen as a result of the accidents.

(7) Damage to special assets including: gold, silver, precious stones, financial instruments namely money, antiques, precious fine arts, and cadavers.

(8) War, acts of terrorism, earthquake.

Thus, from March 01, 2021, in addition to the cases specified previously in the Decree No. 103/2008/NĐ-CP, in the near future, other cases such as underage drivers or over the age limit for motor vehicle operation as prescribed by law on road traffic, drivers who operate vehicles with alcohol in their blood or breath, using drugs and stimulants prohibited by law, will not be compensated by the insurance company.

4. Insurance enterprises can issue electrical certificate of insurance

Pursuant to the Decree No. 03/2021/NĐ-CP of the Vietnam Government, certificates of compulsory civil liability insurance of motor vehicle users are proof of concluding compulsory civil liability insurance contracts between motor vehicle users and insurance enterprises. Each motor vehicle shall be issued with 1 certificate of insurance.

Upon purchasing compulsory civil liability insurance of motor vehicle users, motor vehicle users shall be issued with certificates of insurance by insurance enterprises.  Insurance enterprises shall only issue certificates of insurance for motor vehicle users if the motor vehicle users have adequately paid insurance premiums or agreed with the insurance enterprises on deadline for paying insurance premiums according to the Ministry of Finance of Vietnam.

When issuing an electronic certificate of insurance, the insurance enterprise must comply with regulations of the Law on E-transactions of Vietnam and documents guiding the implementation. Concurrently, an electronic certificate of insurance must comply with the current provisions and include adequate details as prescribed (This is a completely new content specified in the new Decree No. 03/2021/ND-CP that currently Decree No. 103/2008/ND-CP and Decree No. 214/2013/ND-CP do not mention).

Thus, from March 1, 2021, people can use the electronic certificate of insurance when participating in traffic without having to have a paper as current.

5. Insurance premiums can be increased by up to 15% of insurance premiums

According to the Decree No. 03/2021/NĐ-CP of the Vietnam Government, the insurance premiums refer to payment made by motor vehicle users to insurance enterprises when purchasing compulsory civil liability insurance of motor vehicle users.

The Ministry of Finance of Vietnam shall prescribe insurance premiums on the basis of statistical figures to ensure payment capacity of insurance enterprises corresponding to insurance requirements, insurance liabilities and level of risks by type of motor vehicles and use purposes.

Based on accident records of each motor vehicle and insurance enterprises’ risk tolerance capacity, insurance enterprises shall consider and increase insurance premiums. Insurance premiums can be increased by up to 15% of insurance premiums prescribed by the Ministry of Finance of Vietnam (This is a completely new content of the Decree No. 03/2021/ND-CP).

Currently, the Decree No. 103/2008/NĐ-CP and Circular No. 22/2016/TT-BTC do not mention that insurance enterprises shall consider and increase insurance premiums.

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