INSURANCE ENTERPRISES CAN ONLY ACTIVELY ADJUST INSURANCE FEES FOR COMPULSORY INSURANCE TYPES WITHIN 25%

Previously, detailed guidelines on compulsory motor vehicle owner's civil liability insurance, compulsory fire insurance and compulsory insurance in construction activities were stipulated by the Government in three separate Decrees including: Decree No. 03/2021/ND-CP issued on January 15, 2021 ("Decree 03"),  Decree 23/2018/ND-CP issued on 23/02/2018 ("Decree 119") and Decree 119/2015/ND-CP issued on 13/11/2015 ("Decree 119").

In order to create consistency and synchronization between regulations, on September 6, 2023, the Government promulgated Decree 67/2023/ND-CP stipulating three issues simultaneously on compulsory motor vehicle owners' civil liability insurance, compulsory fire insurance, and compulsory insurance in construction activities. Decree 67 provides more detail than previous decrees on the scope of the exemption from insurance liability, principles of insurance compensation, insurance premiums, and insurance compensation settlement dossiers as a basis for insurers and insurance buyers to fully exercise their rights,  obligations and responsibilities in accordance with the provisions of law. In this article, ATA Legal Services will analyze notable new regulations for each type of insurance and have an impact on businesses in the near future.

A. For compulsory motor vehicle owner's civil liability insurance

Compared to Decree 03, Decree 67 adjusts and supplements a number of rights and obligations of insurance enterprises as follows:

1. Insurers are actively considering adjusting the increase or decrease of premiums at a maximum of 15% on the premium rate.
2. Insurers may refuse to sell compulsory insurance in case the motor vehicle reaches the end of its prescribed useful life.
3. Insurers are not allowed to conduct promotional activities, or discount payments in any form.

Regarding insurance compensation liability, Decree 67 adjusts and supplements a number of provisions as follows:

1. The insurance period from 01 to 03 years is applicable to all types of vehicles (previously in Decree 03, the insurance term from 01 to 03 years was only applied to two-wheeled, three-wheeled motorcycles, motorcycles and vehicles with similar structures).
2. During the validity period on the insurance certificate, if there is a transfer of ownership of the motor vehicle, the former motor vehicle owner has the right to terminate the performance of the insurance contract and the insurer is responsible for refunding the premium paid to the policyholder corresponding to the remaining term of the insurance contract (Decree 03 stipulates when transferring car ownership, car buyers inherit insurance benefits from the old car owner). This provision is completely appropriate because this is a type of motor vehicle owner's civil liability insurance, attached to the owner's personal information.

B. Compulsory fire insurance

Compared to Decree 23, Decree 67 adjusts a number of contents on the rights and obligations of insurance enterprises as follows:

1. Similar to compulsory motor vehicle owner's civil liability insurance, insurers are adjusted to increase or decrease premiums up to 25% on top of premiums.
2. Decree 67 increases the maximum deduction of insurance compensation in case establishments at risk of fire or explosion fail to fully and timely comply with the recommendations in the minutes of fire safety inspection from 10% to 20% in order to improve the responsibilities of establishments, establishment owners in ensuring fire safety and fighting.

C. Compulsory insurance in construction activities

Previously, compulsory insurance in construction activities was regulated in Decree 119 and detailed guidance in Circular 329/2016/TT-BTC dated 26/12/2016 of the Ministry of Finance ("Circular 329"). Like the above compulsory insurance contracts, Decree 67 allows insurers to adjust up or down insurance premiums up to 25% on top of premiums for compulsory construction insurance during construction, compulsory professional liability insurance for construction consultancy, etc. compulsory insurance for construction workers on construction sites, compulsory civil liability insurance for third persons. In addition to the above provisions, Decree 67 also has some important contents as follows:

I. Compulsory construction insurance during construction

1. The responsibility to purchase compulsory insurance for works during the construction period under Decree 67 is clearly defined only to the Investor (previously the contractor was also obliged to purchase this insurance). Accordingly, in order to ensure the interests of investors, Decree 67 stipulates that compulsory insurance contracts entered into before September 6, 2023, take effect and the contract performance period will continue to comply with the previous regulations, unless the parties to the insurance contract agree on the amendment, supplementing contracts to conform to and to apply to this Decree 67.
2. Decree 67 has abolished the provision that insurance contracts can be terminated in case the policyholder fails to pay/fail to pay the insurance premium.

II. Compulsory professional liability insurance for construction consultancy

Decree 67 has more clearly and specifically stipulated cases of exemption from insurance liability such as: losses incurred due to the consulting contractor's intentional selection of construction methods, calculation, measurement, design and use of untested materials; the cost of redesigning or correcting drawings, plans, technical manuals or catalogs of technical manuals....

III. Compulsory insurance for construction workers on construction sites

Similar to the regulations on compulsory professional liability insurance for construction investment consultancy, Decree 67 also explains more clearly and specifically the cases of exemption from insurance liability in order to improve the contractor's liability to workers on construction sites.

In addition, in case of reducing the number of employees or changing the employee's job to reduce the insured risk, Decree 67 adds the condition that the insurer reimburses the construction contractor for the reduced premium corresponding to the remaining time of the insurance contract: by the time of reimbursement according to the regulations of the insurance contract, no claim has arisen or a complaint has arisen but the insurance is not paid by the insurance enterprise.

IV. Compulsory civil liability insurance for third persons

Decree 67 specifies the limitation of insurance liability, insurance coverage, exclusion of insurance liability, insurance duration, premium level, insurance deductible, principles, and records of insurance compensation that were not previously clarified in Decree 119 and Circular 329.

Decree 67 takes effect from September 6, 2023.