New Amendment Set to Alter Vietnam’s Insurance Market
Oct. 15 – Vietnam’s draft law on the amendments and supplements to the Business Insurance Law will be submitted to the Vietnamese National Assembly for approval at the body’s next meeting, to be held from October 20 to November 27.
According to the Ministry of Finance, these amendments will create a healthy insurance market by heightening the power of regulatory bodies.
One issue up for debate is whether or not to apply open bidding procedures on insurance products. Having insurers bid for claimants exposes the insurance market to more competition. By contrast, under the captive insurance model, a subsidiary of a company will typically serve as the sole insurer for its parent and possibly for other companies in the parent company’s industry. While doing so has many benefits for those who are fortunate enough to hold a plan with a captive insurer, the practice may present barriers to entry into the insurance market for smaller insurance companies and keep premiums high.
Under the proposed change, all groups and corporations will be forced to use public bidding procedures.
Vu Van Thang, deputy director of the Petro Vietnam Insurance Company, believes that putting insurance for tender, as this law proposes, will ultimately be beneficial as certain domestic insurance companies currently lack the resources to participate in the market. Though, one concern is that public bidding may lengthen the bidding process and be more costly than captive insurance.
However, other insurance exports emphasize that bidding procedures are necessary as at least 30 percent of insurance fees will be reduced. According to the National Assembly’s Economic Committee, insurance services have not been regulated over the past few years and that such practices have led to a lack of transparency in the insurance market.
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