New regulations of Vietnam on insurance rules, conditions, and terms

New regulations of Vietnam on insurance rules, conditions, and terms
Lê Trương Quốc Đạt

On November 2, 2023, the Minister of Finance of Vietnam promulgated Circular No. 67/2023/TT-BTC guiding the Law on Insurance Business 2022 and Decree No. 46/2023/ND-CP.

New regulations of Vietnam on insurance rules, conditions, and terms

According to the Circular, insurance rules, conditions, and terms are a component of an insurance contract and shall meet the requirements prescribed in Clause 2 Article 87 of the Law on Insurance Business 2022 and the following regulations: 

(1) In case insurance rules, conditions, and terms stipulate benefits for permanent injury or impairment: 

- Benefits for permanent injury or impairment shall be paid in one of the following cases: 

+ The insured loses or is completely paralyzed and cannot restore the functions of both arms, both legs, one arm and one leg, both eyes, one arm and one eye, or one leg and one eye. In the mentioned cases, losing, being completely paralyzed, and being unable to restore the functions of arms mean the complete loss, complete paralysis, and irreversible loss of hand function from the wrist up; losing, being completely paralyzed, and being unable to restore the functions of legs mean the complete loss, complete paralysis, and irreversible loss of leg function from the ankle up; losing, being completely paralyzed, and being unable to restore the functions of eyes mean the complete loss of eye functions or complete blindness; 

+ The insured suffers a body injury of at least 81% as confirmed by a health authority, a Medical Evaluation Board of the province or centrally affiliated city, or a legal medical evaluation organization approved by the insurer or a branch of the foreign non-life insurer.

- Certification of the insured’s complete loss of body parts (arms, legs, or eyes) may be performed immediately after the occurrence of the insured event or the completion of the treatment. 

The certification of complete paralysis, irreversible loss of functions of body parts, complete blindness, or at least 81% body injury shall be performed no sooner than 180 days from the date of occurrence of the insured event or the date of diagnosis of the medical condition.

- The insurer or branch of the foreign non-life insurer may have additional regulations on other cases to increase the benefits for permanent injury or impairment for the insured compared to the cases prescribed in Point a and Point b of this Clause. 

(2) In case insurance rules, conditions, and terms stipulate a waiting period (the period during which certain health insurance benefits will not be paid by the insurer or the branch of the foreign non-life insurer for insured events): 

- A waiting period starts from the start date of the insurance policy period or the date of the latest restoration of the effect of the contract;

- Waiting periods shall not apply to cases of accidents; 

- Regarding cases of illness, the maximum waiting period is 90 days. Regarding cases where the insurer accepts insurance for pre-existing conditions, the maximum waiting period is 1 year; 

- Regarding maternity benefits, the maximum waiting period is 270 days; 

- In case of implementing a product with a waiting period in addition to the waiting period prescribed in Point c and Point d of this Clause, the insurer or the branch of the foreign non-life insurer shall provide explanations in the documents presenting measures and grounds to charge fees for insurance products. 

(3) In case insurance rules, conditions, and terms stipulate pre-existing conditions: 

- Pre-existing conditions mean any disease or impairment of the insured diagnosed or treated by a doctor before the effective date or the date of restoration of the effect (latest) of an insurance contract. In case the insurer or branch of the foreign non-life insurer adds more specific signs or symptoms, it is only permitted to consider signs and symptoms that start within 36 months before the effective date or the date of restoration of the effect (latest) of the insurance contract if the acknowledgment of such signs and symptoms will cause the insurer or branch of the foreign non-life insurer to not accept the insurance or the restoration of the effect of the insurance contract or to accept conditional insurance or conditional restoration of the effect of the insurance contract;

- The determination of pre-existing conditions shall be based on the medical records stored at legally established hospitals or health facilities, medical documents promulgated by the Ministry of Health of Vietnam and competent authorities, or information declared by the insured or the policyholder on the application for insurance or additional information sheet.

(4) In case insurance rules, conditions, and terms of a life insurance contract stipulate the advance from the surrender value:

- The interest rate for the advance from the surrender value shall not exceed the cumulative interest rate disclosed by the insurer to the clients plus 2%.  In case of not disclosing the cumulative interest rate, the interest rate for the advance from the surrender value shall not exceed the investment interest rate of the fund the policyholder does not participate in for profit-sharing in the preceding fiscal year plus 2%.

- In case insurance rules, conditions, and terms permit the policyholder to stop paying insurance premiums and use the surrender value to maintain the effectiveness of the contract, comply with Clause 4 Article 37 of the Law on Insurance Business 2022. 

- The advance from the surrender value shall not apply to joint-invested products and pensions. 

(5) Insurance rules, conditions, and terms of a joint invested insurance contract and a pension insurance contract shall specify: 

- Investment policies; investment objectives; structure of property investment of universal life insurance funds (regarding joint-invested insurance products), voluntary pension funds (regarding pension insurance products); quotas or limits for investment in each list of investment property of each unit-linked insurance fund (regarding unit-linked insurance products); 

- Purchases and sales of units of the unit-linked insurance funds and periodic pricing of units of the unit-linked insurance funds (regarding unit-linked insurance products); 

- Regulations concerning transfers between unit-linked insurance funds (regarding unit-linked insurance products); 

- Cases, where the insurer may apply measures to protect and increase the benefits of the policyholder, include contributions to the unit-linked insurance fund for the transfer of property to another unit-linked insurance fund with the same investment objectives; changes to the name of the unit-linked insurance fund; division or merger of existing units of the unit-linked insurance fund; termination of the pricing of units of the unit-linked insurance fund and transactions concerning insurance contracts in case the stock exchange authority invested in by the unit-linked insurance fund is suspended from making transactions; other measures as requested by competent state authorities and prescribed by laws.

The insurer shall send notifications to its clients before the application of the mentioned measures. 

(6) In case insurance rules, conditions, and terms stipulate the restoration of the effect of a contract: 

- Such rules, conditions, and terms shall stipulate the conditions for the restoration of the effect of the contract and the deadline, period, and application for restoring the effect of the contract;

- The restoration of the effect of a life insurance contract shall comply with Clause 3 Article 37 of the Law on Insurance Business 2022. 

(7) Regarding insurance rules, conditions, and terms prescribed in Point a Clause 6 Article 32 of Decree No. 46/2023/ND-CP, the insurer shall make reviews and adjustments to ensure compliance with the mentioned regulations from July 1, 2025.  

Circular No. 67/2023/TT-BTC comes into force as of November 2, 2023. 

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