Principles of conclusion and execution of insurance contracts in Vietnam

Principles of conclusion and execution of insurance contracts in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Principles of conclusion and execution of insurance contracts in Vietnam

According to Article 16 of the Law on Insurance Business 2022, conclusion and implementation of insurance contracts must adhere to the fundamental principles in civil law and the following principles:

- Principle of utmost good faith: Parties to an insurance contract must provide information and implement contractual rights and obligations in a most honest and trustful manner, and must place the absolute mutual trust in each other during the period of conclusion and implementation of insurance contracts; 

- Principle of insurable interest: Policyholders must be entitled to the insurable benefit varying according to specific types of insurance contract under the Law on Insurance Business 2022;

- Principle of indemnity: The amount of coverage or indemnity that the insured can get shall not exceed the actual loss incurred in a policy event, unless otherwise agreed upon in the insurance contract;

- Principle of subrogation: the insured shall be responsible for giving the insurer or foreign non-life insurer the right to claim the amount of loss from the third party responsible for such loss if such amount falls within the permissible loss limit. This principle shall not apply to life and health insurance contracts;

- Principle of unpredictable risk: in order for a risk to be covered or insured against, it must be a sudden or unanticipated one.

2. Contents of insurance contracts in Vietnam

Contents of insurance contracts according to Article 17 the Law on Insurance Business 2022 is as follows:

- An insurance contract must include but not limited to the followings:

= The policyholder, the insured, the beneficiary (if any), the insurer or the foreign non-life insurer's branch;

= Subject matter insured;

= Sum insured or value of property insured or covered property value or insurance policy limit;

= Scope of insurance coverage and insurance benefits; insurance rules, terms and conditions;

=Rights and obligations of the insurer, the foreign non-life insurer’s branch and the policyholder;

= Insurance policy period, date of entry into force of the insurance contract;

= Insurance premium, premium payment option;

= Insurance coverage and payment option;

= Dispute resolution method.

- Minister of Finance shall elaborate on clause 1 of Article 17 the Law on Insurance Business 2022 with respect to life and health insurance contracts.

3. Regulations on null and void insurance contracts in Vietnam

Regulations on null and void insurance contracts according to Article 25 of the Law on Insurance Business 2022 are as follows:

- An insurance contract shall be made null and void in the following cases:

= The policyholder has no insurable interest at the time of conclusion of an insurance contract;

= No subject matter of insurance exists at the time of conclusion of an insurance contract;

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

= Objectives and contents of an insurance contract are in contravention of prohibition clauses and social ethics;

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

= 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;

= 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;

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

= The insurance contract is concluded under threat or pressure;

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

= The insurance contract is in contravention of regulations on presentation of insurance contracts laid down in Article 18 herein.

- 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.

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