As mentioned above, insurance intermediaries in Vietnam include agents and brokers.

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1 Vietnam TILLEKE & GIBBINS CONSULTANTS Aaron Le Marquer 1. Insurance intermediation activities 1.1 Is the distribution of insurance products (hereinafter referred to as insurance intermediation activities or insurance intermediation ) limited to insurance intermediaries in your country? Under Article 17 of Decree 45, 1 insurance companies in Vietnam may distribute products directly, through tender, or through insurance agents or insurance brokers. Therefore, insurance products may be distributed through insurance intermediaries which include insurance agents or insurance brokers under Vietnamese law. 1.2 What does the term insurance intermediation include? Is there any definition set forth by statutory or case law? In any case, please indicate which activities/services are included in the above definition, for example, presentation or proposal of insurance products, assistance or consultancy aimed at drafting the agreement. Are collaboration activities that relate to the administration or execution of the contracts drafted, even in the case of accidents, included in the definition? Does the drafting of contracts or insurance agreements in a collective form on behalf of insured individuals also form part of insurance intermediation activities? As mentioned above, insurance intermediaries in Vietnam include agents and brokers. Under Article 85 of the Law on Insurance Business 2000 (as amended, 2010) (the LOIB ), 2 insurance companies may authorise agents to provide the following services: making introduction and sale offer of insurance; arranging the conclusion of insurance contracts; collecting insurance premiums; arranging the payment of indemnities or insurance money when insured events occur; and carrying out other activities relating to the performance of insurance contracts. Under Article 90 of the LOIB, insurance brokers may provide the following services: providing information on insurance types, conditions, terms, premiums and/or insurance companies to insurance buyers; advising insurance buyers on the evaluation of risks, selection of insurance 1 2 Decree No. 45/2007/ND-CP of the Government dated 27 March 2007 providing in detail the implementation of some articles of the Law on Insurance Business ( Decree 45 ). The Law on Insurance Business dated 9 December 2000 with its amendment dated 24 November

2 types, conditions, terms, premium rate index and insurance companies; negotiating and arranging the conclusion of insurance contracts between insurance companies and insurance buyers; and performing other jobs relating to the performance of insurance contracts at the request of insurance buyers. 1.3 Are insurance intermediation activities allowed as ancillary activities to other professional activities (eg, travel or rent-a-car services, etc) and to what extent? Furthermore, are there exceptions that allow actors, other than insurance intermediaries, to carry out insurance intermediation activities? Is it a matter related, for example, to the risk covered, the duration or the cost of the policy premium, etc? Vietnamese laws do not define insurance intermediation activities to be an ancillary business. Only insurance agents and insurance brokers are allowed to provide the relevant services mentioned in 1.2 above. In providing their services, insurance agents and insurance brokers must satisfy statutory conditions as mentioned in 2.1 below. 2. Insurance intermediaries requirements 2.1 In order to act as an insurance intermediary, is there need for an authorisation and/or to be enrolled in a register? If yes, what are the requirements to be authorised/enrolled in the register as an insurance intermediary (individual or legal entities, integrity and/or professional requirements, etc)? Briefly explain how it works. The requirements applicable to each intermediary are as follows: Insurance agents An insurance agent can be an individual or a legal entity. They must be authorised by a licensed insurance company through an insurance agency contract. 3 In providing insurance agency services, an individual agent must satisfy the following conditions: 4 a) being a Vietnamese citizen and residing permanently in Vietnam; b) being 18 years of age or older, having full capacity for civil acts, and being of good standing; and c) possessing an insurance agency certificate granted by a training institution approved by the Ministry of Finance (the MOF ). A corporate agent must satisfy the following conditions: 5 a) being lawfully established and operating in Vietnam; and Art. 84 of the LOIB. Ibid, Art Art of the LOIB. 2

3 b) ensuring that the staff who directly provide insurance agency services satisfy the conditions set out above for individual agents. Insurance brokers DOMESTIC INSURANCE BROKERS Domestic insurance brokers must be licensed by the MOF and only legal entities, not individuals, may act as insurance brokers. Domestic insurance brokers may be in the form of a joint stock company or a limited liability company. Regarding joint stock companies, they must: 6 (d) have paid-up charter capital of not less than the required legal capital of VND 4bn (approximately US$184,000); 7 complete and submit application dossiers for establishment and operation licences; have administrative and executive personnel who have the capabilities for insurance business; and have sufficient financial capacity and evidence to prove the lawful sources of finance when contributing capital to establish such insurance brokerage company. Regarding limited liability companies, in addition to the requirements set out above for joint stock companies, they must: 8 be companies established in the finance, banking, and/or insurance areas; and have conducted business profitably for three consecutive fiscal years prior to the year of submitting an application file for company establishment. FOREIGN INSURANCE BROKERS Foreign brokerage insurers may establish a limited liability company (or a joint stock company, though this form is not clearly provided under Vietnamese laws) in the form of a wholly foreign-owned company or a joint venture with one or more Vietnamese parties to engage in brokerage businesses in Vietnam. To set up a wholly foreignowned or a joint venture insurance brokerage company, a foreign insurer/broker must: 9 satisfy the conditions applicable to domestic joint stock insurance brokerage companies as mentioned above; be operating lawfully and of good standing; Ibid, Art. 63; Art. 6 of Decree 45. Art. 4 of Decree No. 46/2007/ND-CP of the Government dated 27 March 2007 regulating financial regime of insurance companies and insurance brokerage companies ( Decree 46 ). Art. 39 of Decree No. 123/2011/ND-CP of the Government dated 28 December 2011 providing in detail the implementation of some articles of the LOIB and amending some articles of Decree 45 ( Decree 123 ). Art. 106 of the LOIB; Article 6 of Decree

4 (d) (e) (f) have obtained all necessary licences and approvals for the provision of brokerage insurance in its home country; have been lawfully operating in the insurance business for ten years or more; have conducted business profitably for three consecutive fiscal years prior to the year of submitting an application file for company establishment; and have not committed a serious breach of the law on insurance brokerage business or of other laws of its home country for a period of three consecutive years prior to the year of submitting an application file for company establishment. 2.2 In what form can anyone access and verify the registration/authorisation or verify the fact that the insurance intermediary is a professional (eg, via the web)? No such service is currently available in Vietnam. It is reported that the Association of Vietnamese Insurers (AVI) is operating a database that records insurance agents and agents on the blacklist. However, this database is not available to the public. In addition, on the web pages of big insurance companies such as Prudential (Vietnam), Ace Life (Vietnam), Bao Viet and Bao Minh, readers may find the list of official corporate agents of the insurance companies. Those insurance companies also maintain a telephone hotline to provide information for interested persons. 2.3 Are insurance intermediaries with a registered office in another country allowed to operate in your country and how (eg, under the right of establishment or freedom to provide services in your country, as in the EU)? If yes, under what conditions? In such a case, are they bound by the same obligations as the insurance intermediaries with a registered office in your country? Please describe. Under Article 3 of Decree 123, insurance intermediaries with registered offices in another country are allowed to operate in Vietnam if their home country has signed commercial treaties on the provision of such services (hereinafter referred to as cross-border insurance brokerage services ) with Vietnam. Insurance intermediaries that provide cross-border insurance brokerage services in Vietnam may only act as brokers for licensed foreign insurance companies or branches of foreign non-life insurance businesses in Vietnam. On a related note, the users of cross-border insurance services are foreigners working in Vietnam and businesses established in Vietnam with over 49 per cent of the charter capital owned by foreign investors. 10 Also, cross-border insurance services are not applicable to life insurance and health insurance. 11 Conditions for providing cross-border insurance brokerage services in Vietnam 12 A foreign insurance broker must meet a number of statutory conditions in the provision of brokerage services. The broker must: hold a licence for cross-border brokerage insurance services expected to be Art. 5 of Decree 123. Ibid, Art Ibid., Art. 4. 4

5 provided in Vietnam granted by its home country; (d) (e) (f) have operated lawfully for at least ten years as of the time of providing crossborder insurance brokerage services in Vietnam; be certified in writing by the home country that it has not committed any breaches of regulations on insurance brokerage and other legal regulations of that country for three consecutive years prior to the year of providing crossborder insurance services in Vietnam; have a total asset value equivalent to at least US$100m in the fiscal year preceding the year of providing cross-border insurance brokerage services in Vietnam; have made profits for three consecutive fiscal years prior to the year of providing cross-border insurance brokerage services in Vietnam; and have been insured for its professional liability. A foreign insurance broker providing cross-border insurance brokerage services in Vietnam has the following general obligations: 13 to provide documents proving its satisfaction of the conditions stated above for foreign insurance companies or licensed branches of foreign non-life insurance businesses in Vietnam; within 120 days after the end of a fiscal year, to send the MOF its financial statement of the preceding year certified by an independent audit organisation and a written certification by the home country that it has not breached any legal regulations; and to pay taxes and fulfil other financial obligations related to its cross-border insurance brokerage service provision in Vietnam (if any). 3. Different types of insurance intermediaries 3.1 Please list the different types of insurance intermediaries acting in your country such as agents, brokers, banks, financial intermediaries or financial advisers. As mentioned above, Vietnamese law allows two forms of insurance intermediaries: (i) agents; and (ii) brokers. In practice, some Vietnam-based banks register to provide insurance agency services to cross-sell insurance products. In addition, other trading firms also register as insurance agents and/or brokers. 3.2 Do insurance intermediaries need to enter into a written contract with the insurers (or receive a mandate from the insurers)? Vietnamese insurance laws require an insurance agency contract between an insurer and an agent to include the following terms (so the contract is understood to be in writing): 14 name and address of the parties; Ibid, Art. 6. Art. 87 of the LOIB. 5

6 (d) (e) (f) scope of authority of the agent; insurance agency commission; rights and obligations of each party; term; and clauses on dispute resolution. There are no requirements for the formality and contents of contracts for insurance brokerage. However, in practice, insurance brokerage contracts are made in writing. 3.3 Can an insurance intermediary enter into a contract with the insurers (or receive a mandate from the insurer) and in turn enter into one or more agreements with other insurance intermediaries (the so-called horizontal distribution)? Vietnamese law is silent on this issue. To our knowledge, there is no such practice in the market. 3.4 The insurance intermediaries more in detail: The agent Does the role of insurance agent exist in your country? If yes, describe the agent s functions. Yes, it does. Please see our response to item 1 above In particular, does an agent act on behalf of the insurer or the insured? Who pays the agent s remuneration? To what kind of remuneration is the agent entitled? He acts on behalf of the insurer. The insurer pays his remuneration (referred to as commission under Vietnamese law). The commission amount, calculation and method of commission payment are required to be included in the relevant insurance agency contract If an agent acts on behalf of the insurer, describe the type of work relationship with the insurer (eg, subordinate, para-subordinate or freelance, self-employed etc). Does the principal-agent model exist, that is, is one appointed by the insurer to manage a particular branch or subsidiary? Vietnamese law does not clearly define the relationship between the insurer and the agent. It seems to us that the relationship between the parties is a principalagent relationship. Article 84 of the LOIB defines an agent as an individual or entity who has the authority given by an insurer under the insurance agency contract. Article 88 provides that where an agent breaches the insurance agency contract, causing damage to the insured, then the insurance company is responsible to the insured. However, the insurance company may demand the agent to indemnify the insurance amount that the insurance company has paid the insured What type of organisation does the agent have? Can he have staff working for him (eg, sub-agents)? 6

7 The agent can be an individual or a company and may have staff (eg, secretaries, etc) to assist him/it in providing the services. Vietnamese insurance law does not have the concept of sub-agents Is the relationship between the insurer and the agent regulated by a collective bargaining agreement? If yes, what does it mainly cover? Can the relationship be exclusive to a particular area? Is the remuneration established by the collective bargaining agreement? Can the provisions be waived by the parties mutual agreement? No, it seems there is no collective bargaining agreement. An insurer and an agent are legally required to enter into an insurance agency contract. The law is silent on whether the parties may agree upon the exclusive area of the agent. However, this happens in practice. The remuneration/commission must be stated in the insurance agency contract. It seems the parties may not agree upon the waiver of default provisions mentioned in 3.2 above Does the termination of the work relationship between the agent and insurer provide for the agent s obligation to return the portfolio of contracts? In such a case, would the agent be entitled to an indemnity? Since an agent in Vietnam cannot sign the insurance contract on behalf of the insurer, the insurer normally keeps the original contract. The agent keeps a copy of the contract in order to perform his/her services such as the collection of premiums or payment of the insurance amounts on behalf of the insurer. It is worth noting that an insurance agency contract normally contains a provision on the return of the copies of the contracts and other documents to the insurer upon termination The broker Please describe the broker s services. In general terms, do the services consist of intermediation or are they similar to consultancy/advisory activities? Is the broker an independent actor? See 1.2 and 2.1 above Who pays for the broker s remuneration (please specify case by case for the different services, if any)? Is the broker allowed to retrocede a portion of his remuneration to the insurer or to the insured? The insurer pays the broker s commissions. The commissions are calculated into the insurance premiums. The law is silent on the possibility of a retrocession by a broker and this practice is not common in Vietnam Banks, financial intermediaries, financial advisers and others allowed to act as insurance intermediaries Can banks, financial intermediaries and/or financial advisers act as insurance intermediaries? Banks, financial intermediaries and/or financial advisers cannot act as insurance intermediaries in Vietnam unless they satisfy the statutory conditions set out in 2.1 above, register and are licensed as insurance intermediaries Please define a financial intermediary. Are there particular requisites for the profession of financial intermediary? Does the financial intermediary have 7

8 to be enrolled in another register (eg, a register of financial intermediaries)? There is no statutory definition of a financial intermediary in Vietnamese law. Financial intermediaries may be understood to include banks, financial companies and insurance companies. Banks and financial companies are required to obtain a licence from the State Bank of Vietnam, and to register their operation with the provincial department of planning and investment. 15 As a result, their names are recorded at the State Bank of Vietnam and the local department of planning and investment. Insurance companies are required to obtain a licence from the MOF. They are also required to register their operation with the provincial department of planning and investment where its head office is located Please define a financial adviser. Are there particular requisites for the profession of financial adviser? Does the financial adviser have to be enrolled in another register (eg, a register of financial advisers)? There is no statutory definition of a financial adviser in Vietnamese law. A financial adviser may be understood to mean a person who provides financial consultancy service, which is one of the services that commercial banks or accounting firms are providing in Vietnam. As mentioned above, a Vietnam-based bank must obtain a licence from the State Bank and register its operations with the provincial department of investment and planning where the bank s head office is located. Individuals and companies may provide accounting services. Individuals who wish to provide accounting services must obtain the accounting practice certificate or the certificate of auditors issued by the MOF and must be enrolled on the list maintained by the Vietnam Association of Accountants and Auditors (VAA). Companies must have at least two persons who have obtained the certificate of accounting practice or the certificate of auditors. Among these two persons, the director/general director of the company must have obtained such certificate(s) for at least two years. A company must register its incorporation with the provincial department of planning and investment Can financial intermediaries and/or financial advisers distribute any insurance and/or financial products? If yes, under what conditions or with what limitations? Financial intermediaries and/or financial advisers may provide insurance agency and/or brokerage services subject to the conditions applicable to agents or brokers mentioned in 2.1 above. For the provision of financial products, they may provide the products or services as specified in their relevant licences With reference to insurance intermediaries other than agents, brokers, banks, financial intermediaries and financial advisers, as indicated under question 2.1 above (if any), please describe what kind of products they can distribute and under what conditions. Vietnamese law recognises only agents and brokers as insurance intermediaries. 15 Art. 22 and 24 of the Law on Credit Institutions dated 16 June

9 4. Rules of conduct and responsibilities 4.1 Are there rules of conduct that insurance intermediaries should comply with (eg, duties in relation to the obligation of utmost care, correctness, utmost good faith, information, adequacy, transparency, conflict of interests, filing of documentation, separate accounting or other accounting obligations)? Please describe the above duties, specifying if they apply to all the different insurance intermediaries (agents, brokers, banks, financial intermediaries, financial advisers, etc) and whether the content differs with particular reference to responsibility according to the type of actor/activity and person (insurer or insured) receiving the activity. Yes, there are some general rules available. Vietnamese insurance laws provide that agents must not commit the following acts: 16 (d) (e) providing false information or advertisements about the contents and scope of operation of insurers, or about the insurance conditions and terms that harm the lawful rights and interests of insurance buyers; preventing insurance buyers from providing information related to insurance contracts, or persuading insurance buyers and the insured to omit details related to insurance contracts; attracting customers by obstructing, enticing, bribing, or threatening the employees or customers of other insurers, foreign branches, insurance agents, or insurance brokerage enterprises; engaging in illegal promotions such as promising to reduce or refund the insurance premium, or promising other benefits that the insurer does not provide for customers; and/or persuading insurance buyers to rescind their current insurance contracts so that they can buy new insurance contracts. In regard to insurance brokers, they must: 17 act honestly; not disclose or supply information causing damage to the insurance buyers; and compensate for damages to insurance buyers arising from the brokerage activities [due to the brokers violations]. 4.2 Does the insurance intermediary represent the insurer? By way of example, is the agent also the insurer s representative vis-à-vis the customer, and if so, does this also apply during trial before a court? Is there a matter of imputation of knowledge? What happens when a broker has information on matters relevant to the insurer s decision to insure which the broker fails to disclose to the insurer? Is the insured deemed to have breached its duty of disclosure in such circumstances? In which cases can the insurance intermediary be Art of Circular No. 124/2012/TT-BTC of the Ministry of Finance guiding the implementation of Decree 45 and Decree 123. Art of the LOIB. 9

10 accountable for the contracts he executed on behalf of the insurer? In Vietnam, an insurance agent represents his/her insurer within the scope stated in Item 1.2 above. The insurer is responsible for any damage caused to the insured by the agent s breach of the insurance agency contract. However, the insurer may demand the insurance agent to indemnify it for damages it has paid to the insured due to the agent s violations (see ). 18 In practice, insurers take the ultimate responsibility before the insured. Agents do not appear in court on behalf of the insurers. Regarding the issue of the imputed knowledge, it depends on the relevant agreements among the parties, that is, the insurance contract between the insurer and the buyer/insured, and the brokerage contract between the broker and the buyer/insured, or between the broker and the insurer. As a matter of practice in Vietnam, neither the insurance agents nor the insurance brokers execute the insurance contracts on behalf of the insurers. 4.3 Is the insurer jointly liable for damages caused by the insurance intermediary, appointed by the same, when executing intermediary activities? Who is liable vis-à-vis the insured person? Is it always the intermediary or the insurer? See 4.2 above. 4.4 Are there particular regulations or specific forms of compensation for damages caused to the insured person? No, there aren t. However, the LOIB provides some general provisions for the payment as follows: an insurance company must pay insurance money to the beneficiary in time or the indemnity to the insured when the insured event occurs; 19 the time limit for claiming the insurance money or indemnity under insurance contracts is one year from the date the insured event occurs. The time when a force majeure event occurs is not counted into the time limit for claiming the insurance money or indemnities; 20 and upon the occurrence of an insured event, the insurance company must pay the insurance money or indemnity within the time limit as agreed upon in the insurance contract. In the absence of an agreement on such time limit, the insurance company must pay the insurance money or indemnity within 15 days from the date of receiving complete and valid dossiers claiming insurance money or indemnity Supervision and sanctions 5.1 Regardless of the requirement of an authorisation and/or enrolment, are insurance intermediaries subject to the control of supervisory bodies? Does the supervisory body have powers/duties of prudential supervision on the Art. 88 of the LOIB. Ibid., Art Ibid., Art Ibid., Art

11 insurance intermediary s activities, and if so, in what way does it act? Insurance intermediaries are subject to the control of the Insurance Supervisory Authority, a subordinate body under the MOF, and the MOF itself. These are the two key regulatory bodies that oversee the licensing of insurance businesses and activities in Vietnam. The Insurance Supervisory Authority and the MOF have broad powers in conducting their state management functions in insurance business in Vietnam (including insurers, reinsurers, agents and brokers) such as drafting laws and regulations, granting licences, conducting inspections of business activities and dealing with any breaches of insurance laws. 5.2 Are there fines for violations of the insurance intermediaries obligations? If yes, please describe. The sanctions applicable to each type of insurance intermediary in Vietnam are as follows: Insurance agents Under Article 24 of Decree 98, 22 an insurance agent who commits any of the following acts is subject to a fine of between VND 20,000,000 and VND 30,000,000 (approximately US$917 US$1,376): acting as an agent for an insurer without the written approval of such insurer; preventing the insurance buyer from providing information related to the insurance contract or inciting the insurance buyer or the insured not to declare details related to the insurance contract; or providing insurance agency services without an agency contract(s) or after the agency contract expires. An agent is subject to a fine of between VND 60,000,000 and VND 70,000,000 (US$2,752 US$3,211) for any of the following violations: (d) providing insurance agency services without satisfying the operational conditions as prescribed by law; performing tasks beyond the operational contents of an agent as prescribed by law; performing tasks that are not authorised according to the insurance agent contract; or on behalf of the insurance buyer, negotiating an insurance contract with the insurer while also acting as the agent of such insurer. A violating insurance agent may also receive additional penalties, including a suspension of the certificate of insurance agent for a period up to three months or a suspension of operation of a corporate insurance agent for a period up to three 22 Decree No. 98/2013/ND-CP of the Government dated 28 August 2013 providing for sanctions toward administrative violations in domains of insurance business and lottery business ( Decree 98 ). 11

12 months, and/or a compulsory return of illegal profits. [Local] insurance brokers Local insurance brokers include domestic brokers and foreign-invested insurance brokers in Vietnam. The main sanctions applicable to local insurance brokers are as follows: 23 a fine of between VND 20,000,000 and VND 30,000,000 (approximately US$917 US$1,376) for the act of preventing the insurance buyer and the insured from providing information related to the insurance contract, or inciting the insurance buyer or the insured to not declare details related to the insurance contract. a fine of between VND 40,000,000 and VND 50,000,000 (US$1,834 US$2,293) for any of following violations: (i) (ii) (iii) advising clients to buy insurance from an insurer with terms and conditions which are less competitive than those of another insurer in order to earn higher commissions; providing insurance buyers with rules, terms and insurance premiums of insurance products not in accordance with the provisions of law; or failing to reach a written agreement with the insurance buyer, or having a written agreement that does not specify the scope of insurance brokerage as prescribed by law. A fine of between VND 50,000,000 and VND 60,000,000 (approximately US$2,293 US$2,752) for any of following violations: (i) (ii) collaborating with other organisations and individuals in one or multiple stages of an initial insurance brokerage process, unless otherwise prescribed by law; or employing people without proper certificates in insurance business as prescribed by law. A violating insurance broker may also be imposed additional penalties, including a suspension of operation up to three months and/or a compulsory return of illegal profits. Cross-border brokers The sanctions applicable to foreign insurance brokers who provide cross-border insurance brokerage services are as follows: 24 A fine of between VND 20,000,000 and VND 30,000,000 (approximately US$917 US$1,376) for the following acts: (i) failing to keep and provide documents proving the provision of insurance brokerage services across the border in Vietnam satisfy conditions as prescribed by law; or 23 Art. 23 of Decree Art. 21 of Decree

13 (ii) failing to send financial statement of the previous year to the MOF or sending it but not in compliance with the law. a fine of between VND 50,000,000 and VND 60,000,000 (approximately US$2,293 US$2,752) for the act of failing to provide documents proving satisfaction of the conditions for providing cross-border insurance brokerage services as prescribed by law. A fine of between VND 180,000,000 and VND 200,000,000 (approximately US$8,256 US$9,170) for the act of failing to satisfy the statutory conditions for the provision of the cross-border insurance brokerage services as prescribed by law. A violating cross-border insurance broker may also receive additional penalties, including a suspension of operation for up to three months 5.3 Do sanctions also apply to foreign intermediaries who operate in your country? Yes, they do. Please refer to our response in 5.2 above. 5.4 Is there a consultation procedure with the insurance intermediary before the fine is applied? Yes, there is. If the violating party is subject to the sanction of a suspension of the relevant licence(s) or certificate(s) or a suspension of operation for a definite time or subject to a fine of at least VND 15,000,000 (for individuals) (approximately US$688) or VND 30,000,000 (approximately US$1,376) (for companies), he/she/it is entitled to submit an explanation letter to the competent authorities. The competent authorities are responsible to consider the explanations of the applicant before applying the relevant sanctions Could the application of more fines, or the breach of particular regulations, result in the revocation of the authorisation, or in the intermediary being struck off the register (if any), or in the prohibition to act as an insurance intermediary? If yes, which are the most relevant circumstances? Yes, it could. See 5.2 above. 25 Art of the Law on Handling Administrative Violations dated 20 June