Insurance is a “bosom-friend” in business which helps enterprises be less concerned about risks to property and human resource. However, the problem of profit maximization and risk minimization in obtaining insurance policies still causes “headaches” for the enterprise-buyers.

Know the rules to win the game, enterprises need to follow up the following important proposals to amend the prevailing Law on Insurance Business, which the Ministry of Finance has been drafting and collecting the public’s opinion in the first quarter of 2021.

Changes in handling of violation of information provision responsibility

Currently, if an insurance buyer intentionally provides false information or fails to provide statutory information, the insurance company (the insurer) is entitled to unilaterally suspend the insurance policy. In the near future, according to the draft Law, the handling of such violation may be changed, based on the moment of awareness of the buyer’s violation.

Specifically, in case such violation is spotted before the insured event, the insurer will have the right to amend the contract within 10 days; and if the buyer does not agree to the amendment within 10 days upon receipt, the insurer is entitled to cancel the contract and refund the insurance fees to the buyer. In case it is spotted after the insured event, the insurer may (1) cancel the contract, refuse to indemnify and not be obliged to refund the fees/indemnity (if the insurer does not agree to insure any longer), or (2) amend the contract (if the insurer still agrees to insure).

Additionally, the draft Law no longer maintains prevailing provisions regarding the buyer’s right to unilaterally suspend the contact and claim compensation if the insurer intentionally provides false information.

Thus, for handling of the other party’s violation of information provision, the buyer may become “penniless” while the insurance company may have greater ability. If these proposals are passed, the buyer should provide information in accordance with the law, for avoidance of becoming vulnerable upon occurrence of violation.

Requirements on buyer for damage notice and loss remedy of insured property

Prompt notice to the insurer upon occurrence of damage is a statutory obligation of the buyer in property insurance. If the buyer fails to comply, the draft Law introduces a provision that the insurer may reduce the premium and compensation. However, the buyer should note that they may object to this reduction if it is not provided in the insurance policy or if the insurer has known the insured event by other means.

Moreover, for avoidance of insurance profiteering, in addition to prohibition of abandonment of insured assets after losses arise, the buyer would be required by the draft Law to perform the responsibility of prevention and minimization of losses by all necessary measures (save for otherwise as agreed by the parties). This provision clearly will place an additional burden of remedy on the buyers’ shoulders when the losses occur.

New type of personal insurance: group insurance

Life insurance and health insurance have gradually become the popular benefits for the employees, especially in large companies. In the coming time, the enterprises will be likely to receive advantages from the group insurance as expectedly provided by the draft Law.

Not only are enterprises relieved from the burden of time and procedures by obtaining insurance for many employees in one contract at the same time, they also could easily terminate insurance policy for each employee who leaves. Furthermore, in contrast to ordinary insurance, the employee in group insurance is entitled to unilaterally designate beneficiary upon the death.

Insurance arbitration – new mechanism to resolve insurance disputes

In addition to typical dispute resolution methods (negotiation, mediation, lawsuit at court), the draft Law proposes a new mechanism to resolve insurance disputes: Insurance Arbitration. Similar to commercial arbitration, insurance arbitration is applied with prior agreement of the parties. An arbitrator must have at least 10-15 years of work experience in insurance sphere to become a member of the Arbitration Tribunal which issues an award to answer the respective dispute.