Final article: Issuing 20-year government bonds to insurance companies

(Baonghean) - Within the framework of the Vietnam - US Investment Promotion Conference held in the US in early July, a roundtable conference on insurance business according to international practices took place. Mr. Phung Ngoc Khanh, Director of the Department of Insurance Management and Supervision (Ministry of Finance) had a discussion with reporters attending the Conference about this issue. Nghe An Newspaper would like to introduce the content of the discussion.

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PV:Dear Director, what issues did the roundtable conference on insurance business according to international practices mention that are relevant to the main theme of this conference?

Comrade Phung Ngoc Khanh:As one of the official members of the Ministry of Finance delegation at this conference, we organized a roundtable conference on the insurance business sector that was agreed upon and approved by the unit's leaders right in the preparation period for the big conference. Participating in this roundtable conference were leaders of organizations and insurance companies in the United States such as the US-ASEAN Business Council, ACE Insurance Company, AIG Insurance Company, Metlife Insurance Company; insurance companies in Vietnam including BIV-Metlife Insurance Joint Venture Company, Prudential, AIA, Manulife and AIG. They are all enterprises holding trillions of dollars in investment capital, and many of them are owners of many other production, business and material service enterprises, not just capital business. That said, among US financial investors, investors operating in the insurance sector are all large investors, operating in a wide range of fields.

At the conference, the Insurance Management and Supervision Department listened carefully to the opinions of insurance companies, with basic contents on diversifying distribution channels, approving insurance products, reforming administrative procedures, and incentives from the State. Although organized in one afternoon, with a short preparation time, in my opinion, this roundtable conference went very well, and was highly appreciated by insurance companies for its methodical organization, professional leadership style, strong commitment of the leaders, and practical solutions, enhancing the trust of market participants.

PV:Yes, and are insurance companies very interested in diversifying distribution channels, sir?

Comrade Phung Ngoc Khanh:We should remember that our country has more than 61% of the population of working age, which is a great opportunity for insurance companies to use and train a team of highly qualified staff and insurance agents to promote the distribution of insurance products. At this meeting, insurance companies also raised the request to expand distribution channels. With the current regulated conditions for agents, the universal insurance product has been deployed by life insurance companies for nearly 8 years and has become a popular and mainstream product of many insurance companies, accounting for nearly half of the new exploitation results of the market. Therefore, insurance companies proposed that the Ministry of Finance allow to relax the regulation on 6 months of experience in insurance agency activities to be able to expand the distribution channel.

Since the beginning of 2015, there have been 2 conferences and workshops with insurance companies to directly listen to their opinions, discuss the direction of the management agency and appropriate solutions. Accordingly, right after the workshop held in Ho Chi Minh City at the end of May 2015, based on the proposal of insurance companies, the Ministry of Finance has organized the issuance of 20-year government bonds for the first time in Vietnam, for life insurance companies, with the amount of 6,000 billion VND, interest rate of 7.75%.

PV:You mentioned the reform of administrative procedures in the insurance sector. So what are the procedures that have immediate effects to help insurance companies reduce administrative procedures?

Comrade Phung Ngoc Khanh:For the life insurance sector, according to the provisions of Circular No. 194/2014/TT-BTC dated December 17, 2014 (effective from February 1, 2015), the approval period for life insurance products has been shortened from 30 days to 21 days. This administrative procedure reform has helped businesses promptly seize business opportunities and promote exploitation. The results are immediately reflected in the market, when in just 4 months since the Circular took effect, nearly 30 new insurance products have been approved by the Ministry of Finance, equivalent to 65% of the products approved in 2014. In the near future, some life insurance companies have proposed to shorten the product approval period from 21 days to 14 days. Regarding this issue, the Department of Insurance Management has requested insurance companies to coordinate with the Vietnam Insurance Association to develop model rules and terms applicable to the entire market to potentially reduce the time for approving insurance products.

For the non-life insurance sector, AIG proposed that the Ministry of Finance allow the approval of health insurance products in the direction of approving the system of insurance benefits to help businesses flexibly deploy and shorten the time to introduce insurance products to the market. The Department of Insurance Management fully supports and will synthesize when developing a Decree amending and supplementing a number of articles of Decree No. 45/2007/ND-CP. In addition, we understand that due to the nature of life insurance activities lasting many years, there may be lifetime insurance contracts for customers. Therefore, there are many archived documents. As the business scale gets larger and larger, the more customers there are, the more documents there are. According to current tax regulations, businesses are allowed to archive electronic documents. Therefore, the insurance enterprises have reflected their desire to be allowed by the Ministry of Finance (Department of Accounting Regime) to use electronic documents and store electronic documents. In case of inspection by state management agencies, the enterprises are responsible for printing all documents as required. The Department of Insurance Management has noted this opinion of the enterprises and will report to the leaders of the Ministry of Finance for consideration and early direction.

PV:What do foreign insurance companies expect in terms of incentives, support and assistance from the State, sir?

Comrade Phung Ngoc Khanh:According to the feedback from businesses at this roundtable conference in the United States, businesses noted that recently, the Government has had policies to support the development of new insurance products such as agricultural insurance, export credit insurance, pension insurance, and taxes on life insurance. However, according to international practice, to encourage workers to prepare resources when they reach retirement age, thereby contributing to reducing the burden on the budget and helping to stabilize social security, countries often allow tax incentives at a rate of % of the minimum monthly salary for contributions to voluntary pension insurance. Currently, in Vietnam, the deduction level is 1 million VND, equivalent to 33 USD/month, which has not encouraged workers to participate in pension insurance because the incentive level is very low, not commensurate with the income of workers. We, the Department of Social Insurance Management, have noted this opinion of businesses and will report to the leaders of the Ministry of Finance for consideration, consideration, and reporting to the Government.

At the conference, insurance companies highly appreciated the support of the Minister of Finance, leaders of the Ministry of Finance and leaders of the Insurance Management Department, the attention and facilitation for the development of the industry. In addition, at the first Vietnam - US Investment Promotion Conference, insurance companies recognized the orientation and support for businesses in investing in infrastructure, investing in long-term government bonds, in programs such as pension insurance, agricultural insurance, export credit insurance of Finance Minister Dinh Tien Dung, which demonstrated the strong commitment of the Vietnamese Government in facilitating the development of insurance companies, contributing back to the socio-economic development. This is also a great opportunity that insurance companies want to grasp.

PV:Thank you comrade!

Red River