Elimination of unfair competition in the insurance market: Don’t be all talk but no action!

Securities Investment
06:22' CH - Tuesday, 22/08/2017

With a view to create equality and ensure financial transparency, the non-life insurance market continues to make great efforts to deal with the two inherent problems, namely non-technical competition (through lowering premiums) and insurance fraud. However, in fact, information on violations is still "hushed up".

Health insurance and motor vehicle insurance are thriving and potential business lines in the non-life insurance market, but there are still many issues such as unfair competition by lowering premium dramatically, loosening of terms and conditions, etc. which result in reduced underwriting profits; sharp increase of medical costs lead to high claims ratios, which makes it difficult to control the claim ratio of health insurance; prevalence of insurance fraud committed by customers and medical establishments which is difficult to control, etc.

In the first half of 2017, in the non-life insurance market, premium revenue from health insurance was estimated to reach VND5,269 billion, accounting for 28% of the market’s total revenue and increased by 24% over the same period of 2016; the claims ratio was at an estimate of 30% (excluding claims reserves), the corresponding amount of indemnity was VND1,594 billion.

Premium revenue from motor vehicle insurance was estimated at VND6,579 billion, accounting for 34% of the market’s total revenue and rising by 13% YOY. The estimated claims ratio was 43% (excluding claims reserves), the corresponding amount of indemnity was VND2,823 billion.

At the same time, despite the fact that property insurance continued to grow, non-technical competition (lowering premiums) still took place, especially for group 1 risk (premium revenue from property and casualty insurance was estimated to attain VND3,061 billion, accounting for 16% and climbing by 6%).

Earlier, at several meetings exclusive to leaders of non-life insurance enterprises, they agreed that when detecting enterprises committing acts of non-technical competition, individuals and groups may denounce such enterprises and send evidence thereof to the Insurance Association of Vietnam (IAV) which shall report to the Ministry of Finance as a basis for handling, or to the Boards of Directors/Members’ Councils of violating enterprises when such violations cause a reduction of profit or loss to such enterprises. However, in fact, no enterprise has shared information on their violations.

Recently, in a stronger move, leaders of non-life insurance enterprises jointly propose the Ministry of Finance to study the issuance of regulations requiring insurance enterprises to share policyholder information, whereby, to set up a common database for insurance fraud prevention purposes.

With respect to motor vehicle insurance only, in addition to finalizing the standard insurance wording, terms and conditions of motor vehicle insurance as a basis for reference and application, avoiding non-technical competition, leaders of insurance enterprises all proposed that it is necessary to continue accomplishing the regulations on insurance fraud prevention in motor vehicle insurance.

Concurrently, for electronic invoices, it is essential to be more proactive in developing risk prevention measures when customers use electronic invoices printed out for many times to file claims against insurers. At present, some enterprises limit risks by requiring seals of medical establishments to be affixed on invoices, or original declarations of medical expenses.

For insurance sales through credit institutions, insurance enterprises requested the Ministry of Finance to stipulate the expenses ratio for personal credit insurance through the personal credit channel (not exceeding 50%) in order to create a fair playground for insurance enterprises and ensure financial transparency.

According to state agencies and market participants, insurers should actively share information relating to insurance fraud cases (real cases, without specifying customer names), actively respond to other insurers when required to assist in dealing with any related issues, share information about medical establishments which colluding with customers to facilitate insurance fraud.

In addition, leaders of insurance enterprises also recommended that insurance enterprises should promote their coordination with the Vietnam Social Insurance to prevent insurance fraud in the coming time.

As stated by a representative of the Ministry of Finance, the Ministry is directing the concerned units to cooperate with the Vietnam Social Insurance in sharing information on its health insurance database so as to exchange experience in claim settlement and insurance fraud prevention.

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