Motorcycle Insurance: Low Compensation, Sky-High Commissions for Agents

Mr. Phung Ngoc Khanh, Director of the Department of Insurance Management and Supervision, Ministry of Finance, said that after more than 10 years of implementing Decree No. 103/2008/ND-CP on compulsory civil liability insurance (TNDS) for motor vehicle owners, the number of motor vehicles participating in this type of insurance reached 110.3 million (of which, the number of motorbikes was about 93.5 million).

In 2019 alone, the total revenue from compulsory motorbike insurance premiums was VND829 billion, the amount of compensation was VND50 billion. Thus, the compensation rate on total revenue was 6%, this is only the initial statistics.

Some insurance companies are paying general agents commissions of up to 50%-60%.

Mr. Tran Nguyen Dan, Director of the Academy of Insurance and Financial Risk Management, assessed that this level is a record low compared to the compensation rate of 40-70% of other types of non-life insurance. If it is low due to few accidents, it is good news, but if it is because people do not receive compensation, this is very sad.

With a compensation rate of just under 10% and high profits, in reality some insurance companies are paying commissions to general agents of up to 50%-60%, exceeding the maximum of 20% as prescribed by the Ministry of Finance.

In fact, the general agents are paid high commissions, so they “give” insurance certificates to people who are not professional and not properly trained to sell them. This is the reason why insurance sellers sit all over the sidewalks without fully advising buyers, and many buyers do not know the difference between compulsory insurance and voluntary insurance. In addition, they are not specifically advised about their rights and how to get insurance when an accident occurs, but mainly buy it to deal with it.

Mr. Tran Nguyen Dan commented that buying insurance is necessary for accident victims to be compensated, especially when the car owner is poor and cannot afford to pay. However, insurance companies have many mistakes right from the sales stage and there are problems in the compensation processing stage, making this type of insurance not practical.

According to the plan of the Ministry of Finance, in order to bring insurance sales activities into a framework, respect the rights and interests of traffic participants when purchasing compulsory insurance, in May 2020, the Ministry will inspect business activities and strictly punish violations related to insurance prices.

At the same time, it will coordinate with relevant ministries and branches to develop a Decree to replace Decree No. 103/2008/ND-CP to perfect the compulsory civil liability insurance regime for motor vehicle owners in a new direction, suitable to reality.

Previously, after traffic police nationwide launched a campaign to handle traffic participants who violated regulations on motor vehicles, many people rushed to buy insurance. The high demand caused businesses to compete for customers, offering many prices below the regulations, specifically many places sold 50,000 VND/card/year, 20,000 VND/card/year, while the regulation of the Ministry of Finance is 66,000 VND/year./.