Microinsurance is a form of insurance product offer coverage to low-income households or to individuals who have little savings. It is tailored specifically for lower valued assets and compensation for illness, injury, or death. These are disadvantaged ones who are sensitive to risks that need insurance but do not have access to conventional commercial insurance products. The characteristics of microinsurance are low premiums, small insurance amounts, and simple and easy to understand. To increase the percentage of people participating in this type of insurance, encourage insurance businesses and branches of foreign non-life insurance enterprises in Vietnam to provide micro-insurance products, contributing to the implementation of the policy on social security of the Party and State, most recently the Government issued Decree 21/2023/ND-CP dated May 5, 2023 (“Decree 21”) detailing microinsurance with some notable contents as follows:
1. Specific regulations on the deployment of micro-insurance products (“MIP”)
In order to ensure an appropriate and accessible level of insurance participation for a specific target group, Decree 21 stipulates the maximum amount of insurance premiums and fees for MIP. In addition, the term of providing micro-insurance products is specified and more limited than commercial insurance. Specifically:
|
No. |
Microinsurance products (MIP) |
Maximum amount of insurance |
Maximum fees |
Duration of insurance |
|
1 |
Microinsurance products protect life and health risks |
Not exceeding 05 times the annual per capita income of the near-poor household in urban areas as prescribed by the Government at the time of product implementation [1]. |
Do not exceed 5% of the annual per capita income of the near-poor line in urban areas. |
- MIP provided by life insurance enterprises: Term not exceeding 05 years; - MIP provided by non-life insurers, branches of foreign non-life insurers: Term from 01 year or less; - MIP provided by health insurers: + Term of 01 year or less for micro-insurance products that protect life risks; + Term of 01 year or less for micro-insurance products that protect life risks; - MIP provided by a mutual microinsurance organization: Term from 01 year or less. |
|
2 |
Microinsurance products protect property risks |
- Agreement in insurance contract; - Must not exceed the market value of the insured property at the time of enrollment. |
Not exceeding 5% of the annual per capita income of the near-poor line in urban areas. |
- MIP provided by non-life insurers, branches of foreign non-life insurers: The term does not exceed 5 years; - MIP provided by a mutual microinsurance organization: Term from 01 year or less. |
2. Regulations on conditions for establishment and operation of mutual micro-insurance organizations
According to the provisions of the Law on Insurance Business 2022, a mutual micro-insurance organization is established for members to support and help each other among on the principle of voluntary, financial autonomy and take responsibility before the law within the scope of assets formed from microinsurance activities. While conventional insurers provide insurance to their customers, a mutual micro-insurance organization provides microinsurance to its own members. In other words, the clients of mutual microinsurance is, at the same time, owners of such organization.
a. Conditions of establishment:
According to the provisions of Decree 21, when established, a mutual organization providing microinsurance must meet the following specific conditions:
* Legal capital requirements:
Mutual micro-insurance organization must have an established capital in Vietnam Dong not less than 10 billion VND. Compared with the capital requirement of VND 300 billion for a non-life insurance business and health insurance and a capital of VND 300 billion for a health insurance business providing micro-insurance, the legal capital requirement apply for of the mutual microinsurance organisation are considered low capital level.
* Conditions on personnel:
Comparing standards and conditions of personnel, it can be seen that the regulated condition for mutual micro-insurance organizations micro-insurance on personnel are relatively simple compared to those applied to common insurance enterprises.
|
Personnel |
Insurance enterprises |
Mutual micro-insurance organisation |
|
General Director (Director) |
- Having a university degree or higher majoring insurance or a university degree or higher in another major and an insurance certificate (in case there is no university degree majoring insurance); - Having at least 5 years of working experience in the fields of insurance, finance and banking, of which at least 3 years are held as a manager or controller of an insurance enterprise or reinsurance enterprise. , foreign branch. |
- Having a university degree or higher majoring insurance, finance, banking. If case of having a university degree or higher in another major, general director (director) must have an insurance training certificate issued by an domestic of abroad insurance training institution lawfully established; - At least 3 years of working experience in the insurance industry. |
|
Chairman of Board of Director |
- Have a university degree or higher; - Having at least 05 years directly working in the fields of insurance, finance, banking or having at least 03 years holding a position as a manager, executive or controller at an enterprise operating in the insurance sector or finance or banking sector. |
* Conditions for the Charter:
The draft charter is required to be consistent with the operational objectives of the mutual microinsurance organization providing microinsurance and the provisions of Article 8 of Decree No. 21/2023/ND-CP.
b. Operating conditions:
During its operation, a mutual microinsurance organization must maintain at least 1,000 members participating in microinsurance after 06 months from the time of issuance of the License for establishment and operation. Mutual microinsurance organizations must report to the Ministry of Finance if this minimum number of members cannot be maintained within six months and may have their license revoked if this situation continues within six months from the time of reporting.
Decree 21 takes effect from May 5, 2023.
[1] According to Decree 07/2021/ND-CP on multidimensional poverty line, replacing Decision 59/2015/QD-TTg stipulating from 2022, households with per capita income per month from 2,000,000 VND or less in urban areas and 1,500,000 VND or less in rural areas and a shortage of less than 3 indicators measuring the extent of basic social service deficiency are considered near-poor households.
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