Decree No. 118/2003/ND-CP on administrative penalties for violations in the insurance business sector

DECREE OF THE GOVERNMENT

Rules on administrative penalties for violations in the insurance business sector

________________________

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Insurance Business Law dated December 9, 2000;

Based on the Administrative Violation Handling Ordinance dated July 2, 2002;

At the proposal of the Minister of Finance,

DECREE:

PART I
GENERAL PROVISIONS

Article 1. Object regulated and scope of application

1. Administrative penalties for violations in the insurance business sector shall be applied to individuals, agencies, organizations ("individuals, organizations") who intentionally or negligently violate legal provisions governing insurance activities that are not criminal offenses and which must be subject to administrative penalties under the law.

2. This Decree applies to:

a) Individuals, organizations committing administrative violations in the insurance business sector as stipulated in Chapter II of this Decree.

b) Foreign individuals, organizations operating within the territory of Vietnam committing administrative violations in the insurance business sector as stipulated in this Decree, except where international treaties to which Vietnam is a party provide otherwise.

Article 2. Principles of Penalty Imposition

1. All administrative violations in the insurance business sector must be detected promptly and stopped immediately. Administrative penalty proceedings in the insurance business sector must be conducted swiftly, impartially, and thoroughly; all consequences caused by administrative violations must be remedied in accordance with the law.

2. The imposition of administrative penalties for violations in the insurance business sector shall be carried out by persons authorized pursuant to this Decree.

3. A single administrative violation in the insurance business sector shall only be subject to one administrative penalty. Organizations, individuals committing multiple administrative violations shall be penalized for each individual violation.

4. Administrative penalties for violations in the insurance business sector must be based on the nature and degree of the violation, the identity of the violator, and mitigating or aggravating circumstances specified in Articles 8 and 9 of the Administrative Violation Handling Ordinance to determine appropriate forms and measures of punishment.

Article 3. Statute of Limitations for Administrative Penalties

1. The statute of limitations for administrative penalties in the insurance business sector is two years, counted from the date when an individual or organization commits an administrative violation in the insurance business sector. If the period exceeds the aforementioned time limit, no penalty will be imposed but the remedial measures provided for in points a and d, Clause 3, Article 12 of the Administrative Violation Handling Ordinance will still apply.

2. For individuals who have been indicted, prosecuted, or had a case brought to trial under criminal procedures, but subsequently have a decision to terminate the investigation or close the case where the violation has characteristics of an administrative offense, they shall be subject to administrative penalties; the statute of limitations for administrative penalties is three months, counted from the date the authority responsible for imposing penalties receives the decision to terminate the investigation and the case file.

3. Within the periods specified in Clauses 1 and 2 of this Article, if an individual or organization continues to commit administrative violations or deliberately evades or obstructs the imposition of penalties, the statute of limitations for administrative penalties specified in Clauses 1 and 2 of this Article will not apply; the statute of limitations for administrative penalties will be recalculated from the date of the new administrative violation or the date the evasion or obstruction ends.

Article 4. Time limit considered as not having been administratively penalized

1. An individual or organization subject to an administrative penalty, if they do not reoffend within one year from the date the penalty decision is fully executed or from the date the penalty decision ceases to be effective, shall be considered as not having been subject to an administrative penalty.

2. An individual subject to other administrative measures, if more than two years have passed since the completion of the execution of the decision on such measures, shall be considered as not having been subject to such measures.

Chapter II

VIOLATIONS AND FORMS OF PENALTIES AND AMOUNTS OF PENALTIES

Section 1

ADMINISTRATIVE VIOLATIONS REGARDING MANAGEMENT AND USE OF LICENSES

Article 5. Violations of regulations concerning management and use of Licenses for Establishment and Operation, Representative Office License

1. Warning or a fine of VND 1,000,000 to VND 5,000,000 shall be imposed for any of the following acts:

a) Not announcing or announcing false information about the scope of operations as prescribed by relevant laws;

b) Not operating within twelve months from the date the License was issued;

c) Delaying the announcement beyond the prescribed deadline for changes already approved as stipulated in Article 69 of the Insurance Business Law.

2. A fine of VND 1,000,000 to VND 3,000,000 shall be imposed for the act of renting, lending Licenses for Establishment and Operation or Representative Office License.

3. A fine of VND 2,000,000 to VND 5,000,000 shall be imposed for any of the following acts:

a) Renting, borrowing, transferring Licenses for Establishment and Operation or Representative Office License;

b) Altering, tampering with Licenses for Establishment and Operation or Representative Office License;

c) Operating or conducting business outside the scope recorded in Licenses for Establishment and Operation or Representative Office License;

d) Continuing to operate or conduct business after being suspended or having their Licenses for Establishment and Operation or Representative Office License revoked.

4. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed for any of the following acts:

a) Conducting insurance or insurance brokerage business without a License;

b) Accepting insurance brokerage services from foreign insurance brokerage companies not permitted to operate in Vietnam.

5. Additional forms of punishment

Revocation of the right to use Licenses for Establishment and Operation, Representative Office License for the administrative violations stipulated in point b, Clause 1; Clause 2; point b and point c, Clause 3 of this Article.

6. Apply remedial measures

Order to announce the scope of operations or correct false announcements regarding the scope of operations for the administrative violations stipulated in point a, Clause 1 of this Article.

Article 6. Violations of regulations concerning office locations, establishment, dissolution of insurance companies, insurance brokerage companies

1. A fine of VND 1,000,000 to VND 5,000,000 shall be imposed for the act of opening, closing operations, changing the location of the main office, branch, representative office of insurance companies, insurance brokerage companies without prior written approval from the Ministry of Finance.

2. A fine of VND 15,000,000 to VND 20,000,000 shall be imposed for the act of splitting, separating, merging, consolidating, purchasing, dissolving, converting the form of insurance companies, insurance brokerage companies without prior written approval from the Ministry of Finance.

3. Additional forms of punishment:

Revocation of the right to use Licenses for Establishment and Operation for the administrative violations stipulated in Clauses 1 and 2 of this Article.

4. AApply remedial measures

Restore the initial state that was altered due to administrative violations as stipulated in Clauses 1 and 2 of this Article.

Article 7. Violations concerning management, operation, and supervision

Impose a fine of from VND 1,000,000 to VND 3,000,000 for changing the Chairman of the Board of Directors or General Director (Director) without prior written approval from the Ministry of Finance.

Article 8. Violations concerning changes to name, capital, content, and scope of operations

1. Impose a fine of from VND 3,000,000 to VND 5,000,000 for changing the name of an insurance company or insurance brokerage company without written approval from the Ministry of Finance.

2. Impose a fine of from VND 10,000,000 to VND 15,000,000 for making changes to any of the following without written approval from the Ministry of Finance:

a) Registered capital;

b) Content, scope, and duration of operations;

c) Transfer of shares or equity contributions representing 10% or more of the registered capital.

3. Apply measures to mitigate consequences:

a) Restore the initial state that was altered due to administrative violations as stipulated in Clauses 1 and 2 of this Article;

b) Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clauses 1 and 2 of this Article.

Article 9. Violations concerning the transfer of insurance contracts

1. Impose a fine of from VND 10,000,000 to VND 15,000,000 for any of the following actions:

a) Conducting the transfer of insurance contracts when not meeting all conditions for transfer as prescribed by law;

b) Conducting the transfer of insurance contracts without prior written approval from the Ministry of Finance;

c) Not publishing and notifying the transferee of the insurance contract transfer in writing as required by law.

2. AApply remedial measures

a) Restore the initial state that was altered due to administrative violations as stipulated in Clause 1 of this Article;

b) Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Section 2

ADMINISTRATIVE VIOLATIONS CONCERNING INSURANCE OPERATIONS

Article 10. CUnfair competition

1. Impose a fine of from VND 10,000,000 to VND 20,000,000 on individuals or organizations for any of the following actions:

a) Providing false information or advertising about the content, scope of operations, and insurance conditions that harm the legitimate rights and interests of the insured party or other insurance companies;

b) Competing for customers through obstructive, enticing, bribing, or threatening methods against employees or customers of other insurance companies, insurance agents, or insurance brokers;

c) Engaging in illegal promotions;

d) Agreeing to limit competition causing damage to the interests of the insured party.

2. AApply measures to mitigate consequences:

a) Compel correction according to the form and procedure prescribed by law for administrative violations as stipulated in Point a, Clause 1 of this Article;

b) Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Article 11. Forced conclusion of insurance contracts contrary to the law

1. Issue a warning or impose a fine of from VND 2,000,000 to VND 5,000,000 for forcing the purchase of insurance or the use of insurance brokerage services under any form.

2. AApply measures to mitigate consequences:

a) Restore the initial state that was altered due to administrative violations as stipulated in Clause 1 of this Article;

b) Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Article 12. Violations concerning mandatory insurance

1. Issue a warning or impose a fine of from VND 2,000,000 to VND 5,000,000 for any of the following actions:

a) An insurance company authorized to conduct mandatory insurance refuses to sell mandatory insurance to individuals or organizations seeking such insurance;

b) An insurance brokerage company fails to fulfill its obligation to purchase professional liability insurance for its brokerage activities at an insurance company operating in Vietnam.

2. AApply measures to mitigate consequences:

Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Article 13. Violations concerning compulsory reinsurance

1. Issue a warning or impose a fine of from VND 2,000,000 to VND 5,000,000 on individuals or organizations for any of the following actions:

a) An insurance company fails to fulfill its obligation to reinsure compulsorily as prescribed by law;

b) Refuses to accept compulsory reinsurance in full or in part as prescribed by law.

2. AApply measures to mitigate consequences:

Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Article 14. Participating in insurance abroad contrary to the law

Impose a fine of from VND 5,000,000 to VND 10,000,000 on individuals or organizations for any of the following actions:

1. Purchasing insurance from an overseas insurance company without a presence in Vietnam or from an overseas insurance company conducting business in Vietnam contrary to the law;

2. EForcing other individuals or organizations to participate in insurance abroad contrary to the law.

Article 15. Acts of fraud in participating in insurance, indemnity, payment of insurance, and resolution of insurance complaints

1. Issue a warning or impose a fine of from VND 1,000,000 to VND 5,000,000 on individuals or organizations for fraudulent acts to obtain indemnity or insurance payments.

2. Impose a fine of from VND 2,000,000 to VND 10,000,000 on employees of insurance companies, insurance agents, or insurance brokerage companies for any of the following actions:

a) Requesting beneficiaries to pay remuneration or other material benefits illegally during the process of indemnification or insurance payment;

b) Colluding with beneficiaries to illegally resolve indemnity or insurance payment.

3. AApply measures to mitigate consequences:

Restore the initial state that was altered due to administrative violations as stipulated in Clauses 1 and 2 of this Article.

Article 16. Violations concerning the confidentiality of insurance business operations

Issue a warning or impose a fine of from VND 2,000,000 to VND 5,000,000 on insurance companies, employees, or insurance agents for disclosing confidential information related to the conclusion, performance, or termination of insurance contracts.

Article 17. Violations concerning the use of terms, rules, premium rates, and commissions in insurance

1. Impose a fine of from VND 5,000,000 to VND 10,000,000 for any of the following actions:

a) An insurance company uses rules, terms that have not been registered with the Ministry of Finance or does not comply with the rules, terms, and insurance premium schedules approved and issued by the Ministry of Finance;

b) An insurance company pays insurance commissions higher than the prescribed ratio or pays insurance commissions to incorrect recipients as stipulated by law;

c) An insurance intermediary provides advice and introduces to the buyer of insurance rules, terms, and insurance premium schedules that have not been issued, approved by the Ministry of Finance or have not been registered with the Ministry of Finance;

2. AApply measures to mitigate consequences:

a) Compel restoration to the original state altered due to administrative violations as specified in Clause 1 of this Article;

b) Suspend operations for a period; narrow down the content, scope, and geographical area of operations for administrative violations as stipulated in Clause 1 of this Article.

Article 18. Violation of regulations on recruitment, training, use, and activities of insurance agents;

1. Issue a warning or impose a fine of from VND 2,000,000 to VND 5,000,000 for any of the following actions:

a) Failure to comply with regulations on training insurance agents, recruiting and using insurance agents who do not meet the conditions for engaging in insurance agency activities, without an agent certificate, and without signing an insurance agency contract;

b) Individuals engaging in insurance agency activities without meeting the conditions stipulated in Article 86 of the Insurance Business Law;

c) Insurance agents provide false information with the intent to deceive the buyer of insurance;

2. AApply remedial measures

Compel restoration to the original state altered due to administrative violations as specified in Clause 1 of this Article;

Section 3

ADMINISTRATIVE VIOLATIONS REGARDING FINANCIAL REGULATIONS AND ACCOUNTING

ACCOUNTING AND FINANCIAL REPORTS

Article 19. Violation of provisions on capital and collateral deposit

1. Warning penalty for any of the following acts:

a) Failure to ensure the progress of capital contribution as stipulated in the charter;

b) Failure to pay the full collateral deposit or failure to pay the collateral deposit as required by law;

2. Fine from 10,000,000 VND to 20,000,000 VND for any of the following acts:

a) Failure to maintain the minimum authorized capital contribution level;

b) Using the collateral deposit contrary to the provisions of the law;

3. AApply measures to mitigate consequences:

a) Compel supplementary authorized capital contribution at least equal to the statutory capital requirement for administrative violations as specified in point a, Clause 2 of this Article;

b) Compel supplementary collateral deposit or payment of collateral deposit according to the provisions of the law;

c) Compel recovery of the amount of collateral deposit used contrary to the provisions of the law for administrative violations as specified in point b, Clause 2 of this Article;

d) Suspend operations for a period; narrow down the scope, content, and geographical area of operations for administrative violations as specified in Clause 1 and Clause 2 of this Article;

Article 20. Violation of provisions on mandatory reserves, establishment, management, and use of business reserves

1. Warning penalty for the act of failing to register the method of establishing business reserves with the Ministry of Finance by insurance companies;

2. Fine from 20,000,000 VND to 30,000,000 VND for any of the following acts:

a) Failure to establish or insufficiently establish business reserves as required;

b) Failure to comply with the established method of business reserve establishment registered with the Ministry of Finance;

c) Failure to establish or insufficiently establish mandatory reserves as required;

d) Using the mandatory reserve fund and business reserve fund contrary to the provisions of the law;

3. AApply measures to mitigate consequences:

a) Compel full establishment of business reserves and mandatory reserves according to the law for administrative violations as specified in point a, b, c, Clause 2 of this Article;

b) Recover the amount of business reserves and mandatory reserves used contrary to the provisions of the law for administrative violations as specified in point d, Clause 2 of this Article;

c) Suspend operations for a period; narrow down the scope, content, and geographical area of operations for administrative violations as specified in Clause 1 and Clause 2 of this Article;

Article 21. Violation of provisions on capital investment

1. Fine from 20,000,000 VND to 30,000,000 VND for any of the following acts:

a) Investing outside the permitted fields as stipulated by law;

b) Exceeding the permitted ratio in each investment portfolio;

c) Using business reserve funds to invest abroad;

d) Using investment funds contrary to the provisions of the law;

2. AApply measures to mitigate consequences:

a) Compel restoration of investment activities according to the provisions of the law;

b) Recover the amount invested contrary to the provisions of the law for administrative violations as specified in point d, Clause 1 of this Article;

c) Suspend operations for a period; narrow down the scope, content, and geographical area of operations for administrative violations as specified in Clause 1 of this Article;

Article 22. Violation of financial safety regulations in the operation of insurance companies

1. Fine from 20,000,000 VND to 30,000,000 VND for any of the following acts:

a) Failure to promptly report to the Ministry of Finance when the company has a risk of losing its ability to pay;

b) Failure to strictly adhere to the deadline for developing and implementing plans to restore the ability to pay, consolidate organization and operations of the company;

c) Failure to implement the requirements of the Ministry of Finance regarding restoring the ability to pay;

2. Fine from 50,000,000 VND to 70,000,000 VND for insurance companies failing to maintain their ability to pay at any time during their operations;

3. AApply measures to mitigate consequences:

a) Compel restoration of the ability to pay according to the law for administrative violations as specified in Clause 1 and Clause 2 of this Article;

b) Suspend operations for a period; narrow down the scope, content, and geographical area of operations for administrative violations as specified in Clause 1 and Clause 2 of this Article;

Article 23. Violations in managing information and reporting insurance business activities

Acts of violation and handling of administrative violations in accounting systems, reports, and provision of information related to insurance business activities shall be carried out according to the regulations on administrative penalties in the field of accounting;

Article 24. Violation of regulations on inspection, examination, and supervision by competent state agencies

1. Warning penalty for delaying, evading, or failing to provide documents and data as requested by the inspection agency, inspection team, or competent state agency during inspections, examinations, and supervision; or using tactics to oppose inspectors or officials of the competent state agency while performing their duties;

2. A fine of from VND 2,000,000 to VND 5,000,000 shall be imposed for any of the following acts:

a) Failure to comply with the decision of the inspection agency or competent state agency;

b) Interfering with the handling process of the inspection agency or competent state agency;

c) Concealing, altering vouchers, ledgers, or changing evidence while being inspected.

d) Acting on one's own initiative to remove, move, or engage in other actions that alter the sealed status of: warehouses, funds, ledgers, accounting documents, insurance files, or objects under seal or temporary detention.

3. AApply measures to mitigate consequences:

Suspension of operations for a limited period; reduction in the scope, content, and area of operation for administrative violations as stipulated in Clause 1 and Clause 2 of this Article.

Chapter III

AUTHORITY TO ISSUE ADMINISTRATIVE VIOLATION DECISIONS AND VIOLATION RECORDS

IN THE FIELD OF INSURANCE BUSINESS 

Article 25. Authority to impose administrative penalties in the field of insurance business

1. The Chairman of the People's Committee at the provincial level and the Chairman of the People's Committee at the district level within their respective jurisdictions as prescribed in Articles 29 and 30 of the Administrative Violations Handling Ordinance have the authority to impose administrative penalties in the field of insurance business.

2. Inspectors of the Ministry of Finance and inspectors of the Department of Finance while performing their duties have the authority to:

a) To issue warnings;

b) Aapply remedial measures for consequences as prescribed in this Decree, except for the measure of suspending operations for a limited period; reducing the scope, content, and area of operation for administrative violations as prescribed in this Decree.

3. The Inspector General of the Department of Finance has the authority to:

a) To issue warnings;

b) To impose fines up to VND 20,000,000;

c) Aapply other remedial measures for consequences as prescribed in this Decree, except for the measure of suspending operations for a limited period; reducing the scope, content, and area of operation for administrative violations as prescribed in this Decree.

4. The Inspector General of the Ministry of Finance has the authority to:

a) To issue warnings;

b) Impose fines up to the maximum amount prescribed in this Decree;

c) Aapply additional forms of administrative penalties and remedial measures for consequences as prescribed in this Decree.

Chapter IV

PROCEDURES FOR IMPOSING PENALTIES, ENFORCING DECISIONS ON PENALTIES, AND APPEALS

Article 26. Procedures for imposing administrative penalties in the field of insurance business

Procedures for imposing administrative penalties in the field of insurance business shall be carried out in accordance with the provisions of Chapter VI of the Administrative Violations Handling Ordinance dated July 2, 2002.

Article 27. Enforcement of decisions on administrative penalties in the field of insurance business

Enforcement of decisions on administrative penalties in the field of insurance business shall be carried out in accordance with the provisions of Article 66 of the Administrative Violations Handling Ordinance dated July 2, 2002.

Article 28. Imposing administrative penalties on acts of resisting public officials in the field of insurance business

Imposing administrative penalties on individuals who resist public officials in the field of insurance business shall be carried out in accordance with the laws on administrative penalties in the field of public security and social order.

Article 29. Rewards and disciplinary actions

1. Individuals and organizations that have achievements in combating and preventing administrative violations in the field of insurance business shall be considered for rewards according to the general regulations of the State.

2. Those with the authority to handle administrative violations in the field of insurance business who conceal administrative violations in the field of insurance business or fail to comply with the regulations on administrative penalties in the field of insurance business as prescribed in this Decree shall be subject to disciplinary action or criminal responsibility, if damage is caused, they must compensate according to the law.

Article 30. Time limit for enforcing penalty decisions

Decisions on administrative penalties in the field of insurance business become invalid after one year from the date of issuance; in cases where individuals or organizations being penalized deliberately evade or delay, the time limit prescribed in this Article shall not be applied.

Article 31. Appeals and complaints

Appeals and complaints against decisions on administrative penalties in the field of insurance business and the resolution of such appeals and complaints shall be carried out in accordance with the laws on appeals and complaints.

Chapter V

IMPLEMENTING PROVISIONS

Article 32. Implementation

The Minister of Finance is responsible for guiding, inspecting, and supervising the implementation of this Decree.

Article 33. Implementation Provisions

1. This Decree shall take effect fifteen days after its publication in the Official Gazette.

2. Ministers, heads of agencies equivalent to Ministries, heads of government agencies, and Chairpersons of provincial People's Committees and centrally governed city People's Committees are responsible for enforcing this Decree./.