Circular No. 144/1999/TT-BTC on the commission system for life insurance

CIRCULAR

Regulations on insurance commission for life insurance

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Pursuant to Decree No. 100/CP dated December 18, 1993 of the Government on insurance business and Decree No. 74/CP dated June 14, 1997 amending and supplementing certain provisions of Decree No. 100/CP dated December 18, 1993 of the Government on insurance business;

Pursuant to Circular No. 76 TC/TCNH dated October 25, 1995 of the Ministry of Finance on insurance commission system and Circular No. 02 TC/TCNH dated January 4, 1996 guiding amendments and supplements to the implementation of the insurance commission system;

The Ministry of Finance stipulates the insurance commission system for life insurance as follows:

I. GENERAL PROVISIONS

1. The subjects to which this Circular applies are insurance enterprises, insurance brokerage organizations permitted to establish and legally operate life insurance business in Vietnam; agents and collaborators who have signed agency or collaboration contracts with insurance enterprises.

2. Life insurance business includes the following basic types:

2.1 Term insurance is a type of life insurance characterized by the payment of a lump sum amount when the insured person dies within a specified period as stipulated in the insurance contract.

2.2 Pure endowment insurance is a type of life insurance characterized by the payment of a lump sum amount when the insured person survives until the end of the insurance term as stipulated in the insurance contract.

2.3 Endowment insurance is a type of life insurance characterized by the payment of a lump sum amount when the insured person dies during the insurance term or survives until the end of the insurance term as stipulated in the insurance contract.

2.4 Whole life insurance is a type of life insurance characterized by the payment of a lump sum amount when the insured person dies at any time as stipulated in the insurance contract.

2.5 Annuity is a type of life insurance characterized by the periodic payment of a lump sum amount as stipulated in the insurance contract.

2.6 Group life insurance is the provision of life insurance services to a group of people with a common relationship.

3. Other human insurance is a type of insurance covering risks related to individuals (personal accident insurance, surgical expense insurance, medical assistance insurance...).

II. SPECIFIC PROVISIONS

1. Subjects entitled to receive insurance commission for life insurance:

1.1 Insurance agents and collaborators as prescribed by the current regulations of the Ministry of Finance on agency and collaboration activities.

1.2 Insurance brokerage organizations as prescribed by the current regulations of the Government on insurance business.

2. Subjects not entitled to receive insurance commission for life insurance:

- Organizations and individuals not permitted to sign agency, collaboration, or brokerage contracts according to Vietnamese law.

- Organizations and individuals directly purchasing insurance.

- Employees of the insurance enterprise itself.

- Insurance agents and collaborators who have not signed exploitation contracts for life insurance with the insurance enterprise.

3. Commission rate for insurance:

3.1 For individual life insurance and group life insurance:

Insurance enterprises must base on the maximum commission rate table applicable to various types of life insurance as stipulated in the Appendix attached to this Circular to establish the commission rate for each life insurance product of the enterprise.

3.2 For other human insurance with a term of one year or less: The maximum commission rate is 10% of the total insurance premium.

3.3 For life insurance not covered under Point 2, Section I of this Circular and other human insurance with a term exceeding one year, the insurance enterprise must submit the proposed commission rate to the Ministry of Finance for approval before implementation.

4. Regarding the level of commission payment and accounting:

4.1 Regarding the level of commission payment: Based on the total insurance premium and the stipulated life insurance commission rate, the insurance enterprise must issue payment vouchers according to the current regulations to pay the commission to the entitled subjects.

The level of life insurance commission paid to the entitled subjects and the commission used for agent management can only be paid within the maximum rate stipulated in the commission rate table in the Appendix of this Circular.

4.2 Regarding the accounting of commission payments: The insurance enterprise's expenditure on life insurance commissions shall be recorded as direct operating costs.

At the end of the fiscal year, the insurance enterprise may carry forward any remaining unspent commission for use in subsequent years.

5. Use of commission:

The insurance enterprise may use life insurance commission to directly pay agents, collaborators, and insurance brokerage organizations after they provide services to the enterprise to cover expenses such as initial sales costs (customer research, persuasion, and introduction), premium collection costs, contract monitoring costs, and customer retention efforts.

Additionally, the insurance enterprise may use life insurance commission to support agent management, including payments to agent managers, incentives for exceeding revenue targets, contract volume targets, and maintaining high retention rates; costs for implementing welfare policies and stabilizing agent income.

6. Inspection work:

The Ministry of Finance is responsible for inspecting and supervising the implementation of the life insurance commission system along with the inspection and supervision of the operations of insurance enterprises and insurance brokerage organizations according to current laws.

III. IMPLEMENTATION

1. This Circular takes effect fifteen days from the date of signature and replaces previous documents on the life insurance commission system.

2. Based on the content of this Circular, insurance enterprises shall develop their own commission regulations for life insurance activities that comply with the Circular and submit them to the Ministry of Finance for management and oversight.

3. Any violation of the life insurance commission system stipulated in this Circular will be handled according to current laws.

During the implementation process, if there are difficulties or obstacles, insurance enterprises shall promptly reflect them to the Ministry of Finance for consideration and resolution.