Regulation on changes in levels of insurable risks in Vietnam

Regulation on changes in levels of insurable risks in Vietnam (Internet image)

1. Regulation on changes in levels of insurable risks in Vietnam

Regulations on changes in levels of insurable risks in Vietnam according to Article 23 of the Law on Insurance Business 2022 are as follows:

- When there is a change in the factors forming the basis for calculating insurance premiums that leads to a reduction in the insured risks, the policyholder has the right to request the insurer, foreign non-life insurer's branch to implement one of the following measures based on the agreement in the insurance contract:

+ Reduce the insurance premium for the remaining duration of the insurance contract;

+ Increase the insured amount for the remaining duration of the insurance contract;

+ Extend the insurance period;

+ Expand the scope of insurance for the remaining duration of the insurance contract.

- In case the insurer, foreign non-life insurer's branch does not accept the request in Clause 1 of Article 23 of the Law on Insurance Business 2022, the policyholder has the right to unilaterally terminate the execution of the insurance contract but must immediately notify the insurer, foreign non-life insurer's branch in writing.

- When there is a change in the factors forming the basis for calculating insurance premiums that leads to an increase in the insured risks, the insurer, foreign non-life insurer's branch has the right to implement one of the following measures based on the agreement in the insurance contract:

+ Recalculate the insurance premium for the remaining duration of the insurance contract;

+ Reduce the insured amount for the remaining duration of the insurance contract;

+ Shorten the insurance period;

+ Narrow the scope of insurance for the remaining duration of the insurance contract.

- In case the policyholder does not accept the request in Clause 3 of Article 23 of the Law on Insurance Business 2022, the insurer, foreign non-life insurer's branch has the right to unilaterally terminate the execution of the insurance contract but must immediately notify the policyholder in writing.

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

According to Article 16 of the Law on Insurance Business 2022, the entering and execution of insurance contracts must comply with the basic principles of civil law and the following principles:

- The principle of absolute honesty: parties participating in the insurance contract must provide information, exercise their rights, and fulfill their obligations in the most honest manner, based on absolute mutual trust during the process of entering and executing the insurance contract;

- The principle of insurable interest: the policyholder must have an insurable interest appropriate to each type of insurance contract in accordance with the provisions of the Law on Insurance Business 2022;

- The principle of indemnity: the compensation amount received by the insured shall not exceed the actual loss in the insured event unless otherwise agreed in the insurance contract;

- The principle of subrogation: the insured is responsible for transferring to the insurer, foreign non-life insurer's branch the right to claim from a third party who caused the damage within the scope of the insurance compensation amount. This principle does not apply to life insurance contracts and health insurance contracts;

- The principle of fortuity: the insured risk must be unexpected and unforeseen.

3. Disclaimer clauses under the law in Vietnam

According to Article 19 of the Law on Insurance Business 2022, disclaimer clauses are regulated as follows:

- Disclaimer clauses stipulate cases where the insurer, foreign non-life insurer's branch is not required to indemnify or pay the insurance money.

- In cases where there are disclaimer clauses, the insurer, foreign non-life insurer's branch must clearly define these in the insurance contract, provide clear and complete explanations, and have evidence confirming that the policyholder has been fully explained and understood this content when entering the insurance contract.

- In the event of force majeure or objective obstacles leading to the policyholder's delay in notifying the insured event, the insurer, foreign non-life insurer's branch is not allowed to apply the disclaimer clause regarding the delay in notification.

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