The Vietnamese Ministry of Finance has proposed a decree that could impose fines of up to VNĐ100 million on life insurance companies for providing “incorrect advice intentionally” as part of a broader effort to address violations in the insurance industry and to safeguard consumer interests.
The decree, once enacted, is set to enforce stringent penalties to deter improper practices within the industry. It will primarily target the distribution of insurance products and services, focusing on ensuring clarity and accuracy in product information.
Practices such as promising illegal benefits, advising clients to choose less competitive insurance terms, and employing unqualified brokers will face fines, moving beyond mere warnings.
According to a report from Vietnam News, Trần Nguyên Đán, a member of the Vietnam Lawyers Association, advocates for even tougher measures. He suggests that severe violations should be treated as criminal offences, reflecting the seriousness of these practices.
Vietnamese Prime Minister Phạm Minh Chính recently called for a report on bancassurance – the sale of insurance products through banks – which has been criticised for misleading customers, fraudulent practices, and coercive sales tactics.
Many customers have reported being misled by bankers, who allegedly misrepresented insurance products as high-interest banking products or coerced them into purchasing insurance to secure loans. An anonymous employee from a state-owned bank in HCM City disclosed that it is an “unwritten rule” for borrowers to purchase life insurance to obtain a loan.
Bancassurance has become a significant revenue stream for many banks through fees and commissions. However, a recent investigation by the Ministry of Finance uncovered various violations, including insurers failing to provide direct advice to customers and breaches of regulations by insurance agents and bank employees.
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