VIETNAM - LIFE INSURANCE – WHAT YOU MUST KNOW:

OVERVIEW

Life Insurance Industry in Vietnam was established with 5 life insurers in the late 1990s and has extended

to 17 insurers as of mid-2015, with approximately 300 products and 300,000 agents. The market (new

business premium income) has been growing by more than 25% p.a. in recent years, in which the year on

year growth in mid- 2.016 was above 33.4% compared to the same period of last year.[1]

The insurance

market continuous to grow. The insurers have overcome difficulties and challenges, seized the

opportunity, continued to restructure and improve the competitiveness and management to complete the

objectives in 2016 with the results as follows. The total premium written in the first 10 months of 2016 is

estimated to gain VND 69,123 billion (increased by 22% against 2015) in which life insurance reached

VND 38,839 billion (increased by 30.62% against 2015)[2]

This shows the high and efficient growth off

the insurance industry and the active response to all basic insurance demand of the Vietnamese society.

In the context of this fast growing market and the increasing demand for support from life insurers so far,

the life insurance regulator (the Insurance Supervisory Authority under the Ministry of finance) has done

a great job in creating favorable conditions and providing the necessary resources to support the industry

to grow and thus, for the life insurers to better perform. Yet, there remain challenges to the market that the

concerned stakeholders should jointly address with the Ministry of Finance to ensure that the market

continues to grow at its full potential.

ISSUANCE OF COMPLETE REGULATIONS ON E-COMMERCE FOR FINANCIAL

SERVICES DISTRIBUTION

Relevant Ministries: Government, Ministry of Finance (MOF), Ministry of Industry and Trade (MOIT)

Issue description

The Government recently issued its Decree 73/2016/ND--CP (Decree 73)[3]

, effective since F July 2016,

providing guidelines for implementation of Law on Insurance Business. This appears to be an important

and major move of the Government reforming its governance over insurance business following last

attempts nearly 11 years ago. The new regulations is on one hand a consolidated version of former twin

Decrees 45/2007/ND-CP[4]

and 46/2007/ND-CP[5]

(both issued in 2007) enabling a more horizontal

approach, and at the same time introduce new requirements, amongst other, on important areas, namely

corporate governance, legal capital, investment regime, re-insurance and distribution.

Decree 73 improves and streamlines legal framework and addresses practical issues for the development

of the market. With this issuance, it is noted that one of the most challenging technical hurdle arising from

Decision 35/2015/QD-TTg[6]

of the Prime Minister (highlighted in last issue) in connection with product

approval has been duly addressed. The Ministry of Finance shall now appear as the one-gate-to-all

regulator who shall approve products and coordinate with Ministry of Industry and Trade on registration

of the same. This evidences a great effort of regulators toward development of regulatory framework and

execution thereof.

It's noted further that for the first time electronic transaction is regarded as a distribution channel for

purposes of soliciting insurance coverage. Though e-commerce has been established in Vietnam since

2005 and further guided in 2013, there are no specific regulations enabling distribution of insurance via e-

commerce vehicles. However, in practice, due to the society demand, foreign insurance companies have

developed both traditional method and tested its E-commerce with main products to facilitate the fast and

convenient distribution.[7]

Potential gains/concerns for Vietnam

According to the Decision 193/QD-TTg of the Prime Minister dated 15!0 February 2012 on Vietnam's

insurance market development strategy in the 2011-2020 period, the application of technology shall be

one of the basic measure to expand the insurance business. It is expected that the new solution of

application of electronic technologies can promote faster development of the sector with the aim to reach

the target percentage of online sales of 3 – 4% of GDP, by 2020. Furthermore, according to Ministry of

Industry and Trade, the revenue gained from e-Commerce of Vietnam has reached USD 5 billion in

2016[8]

which is 5% total revenue of domestic retail distribution of goods and services. In 202.0, the e-

Commerce turnover of Business to Consumers (B2C) transactions are forecasted to increase 20%

annually, reaching 10 billion and accounting 5% of total domestic distribution[9]

. Applying e-Commerce

is now the social trend in society's daily life and it includes also life insurance. This new move shall be a

major milestone moving forward for insurance business to reach a wider audience faster in Vietnam,

especially the young and dynamic generation. However, until now, there is no complete specific

regulation providing on the e-distribution of the insurance services, including life insurance.

Recommendations

We would like to recommend that the Government coordinates with the Ministry of Finance (as mainly in

charge and Ministry of Industry and Trade, etc. to facilitate issuing a complete detailed regulation on this

new channel, recognizing its advantages of wide coverage and convenience for transaction. We would

also like to note that in the limes of integration and upcoming FTAs, e.g. EVFTA to be implemented in

2018, the increase of the trade in goods and services will boost Vietnam's economy, therefore, Vietnam

needs a clear, complete structured financial regulations to prepare and fully gain the benefits from such

FTAs.

***

Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any

questions or want to know more details on the above. Oliver Massmann is the General Director of Duane

Morris Vietnam LLC.

Thank you!