Vietnam eyes $4,000 fine for life insurers giving incorrect advice

The Ministry of Finance in Vietnam is proposing a decree that could see life insurance companies fined up to VNĐ100 million (about $4,000) for intentionally providing incorrect advice to consumers.

This move is part of a broader effort to address violations in the insurance industry and enhance consumer protection.

The decree, when implemented, will impose strict penalties for wrongful conduct, marking a significant shift from the current practice of issuing mere warnings for such offenses.

The focus of the proposed regulations is on the distribution of insurance products and services, particularly targeting practices like giving unclear or inaccurate product information, promising illegal benefits, advising clients to choose less competitive insurance terms, and employing unqualified brokers.

Trần Nguyên Đán, a member of the Vietnam Lawyers Association, suggests that severe violations should be considered criminal offenses.

This recommendation comes amidst growing concerns about misleading practices in bancassurance – the sale of insurance through banks.

Prime Minister Phạm Minh Chính recently called for a report on bancassurance following allegations of fraud, coercion, and misleading sales tactics.

Customers have reported being misled by bankers into purchasing life insurance products under the guise of high-interest banking products or being coerced to buy insurance to secure loans.

An anonymous employee from a state-owned bank in Ho Chi Minh City revealed that purchasing life insurance is often an unwritten precondition for loan approval.

Bancassurance has been a lucrative avenue for banks, generating significant income through fees and commissions. However, a recent investigation by the Ministry of Finance uncovered several violations, including insurers’ failure to provide direct advice to customers and misconduct by insurance agents and bank employees.

Vietnam, a key life insurance market in Asia, has seen substantial growth in recent years, prompting the need for tighter regulations. The Insurance Association of Vietnam recognizes this growth, underscoring the importance of stringent measures to ensure industry integrity and consumer protection. –