Circular No. 76-TC/TCNH stipulates the commission system for insurance

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 76-TC/TCNH ON OCTOBER 25, 1995 REGULATING THE COMMISSION SYSTEM FOR INSURANCE

Implementing Decree No. 100-CP dated December 18, 1993 of the Government on insurance business, to strengthen the State's management over insurance activities, the Ministry of Finance hereby regulates the commission system for insurance as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. This Circular applies to insurance enterprises, insurance brokerage organizations, and insurance agents permitted to operate in Vietnam.

2. Insurance commission is the amount of money paid by an insurance enterprise to the person who brings insurance services or reinsurance services to it.

- The insurance commission includes:

+ Agent commission: is the amount of money paid by an insurance enterprise to an insurance agent based on the agency contract.

+ Collaborator commission: is the amount of money paid by an insurance enterprise to an insurance collaborator organization based on the collaboration contract.

+ Brokerage fee: is the amount of money paid by an insurance enterprise to an insurance brokerage organization based on the agreement between both parties.

- The insurance commission also includes the reinsurance commission, which is the amount of money paid by an insurance enterprise to another insurance enterprise that has reinsured its risks based on the reinsurance contract.

3. The Ministry of Finance shall uniformly manage the rate of insurance commissions. The payment and accounting of insurance commissions shall be carried out according to the current financial management regime.

4. Insurance enterprises may only pay insurance commissions to the eligible recipients from the actual premiums and reinsurance premiums collected.

II. SPECIFIC PROVISIONS

1. The eligible recipients of insurance commissions include:

a. Insurance agents: are individuals meeting the conditions stipulated in Article 19 of Decree No. 100-CP dated December 18, 1993 of the Government on insurance business. Insurance enterprises must organize their network of insurance agents and register the number and list of agents with the Ministry of Finance as prescribed in Point 1, Section II, Circular No. 46-TC/CĐTC dated May 30, 1994 of the Ministry of Finance guiding the implementation of Decree No. 100-CP. Insurance enterprises are only allowed to pay insurance commissions to agents who have signed an agency contract.

b. Insurance collaborator organizations: are legal entities providing services to insurance enterprises based on collaboration contracts.

c. Insurance brokerage organizations: are legal entities acting as intermediaries between those seeking insurance and insurance enterprises to receive brokerage fees.

d. Insurance enterprises, in the case of arranging reinsurance contracts.

2. Insurance commissions shall not be paid to the following entities:

- Organizations and individuals bringing services to insurance enterprises but not permitted by law to engage in lawful business operations in Vietnam.

- Organizations and individuals directly purchasing insurance.

- Employees of the insurance enterprise itself.

3. The level of commission payments:

a. The level of commission payments: shall be implemented according to the commission ratio table applicable to each type of insurance business. (Attached to this Circular)

The commission ratio specified in this Circular is the maximum commission ratio that insurance enterprises are permitted to pay to agents, insurance collaborator organizations, insurance brokerage organizations, and insurance enterprises (in the case of arranging reinsurance contracts) when they actually bring insurance services.

Based on business practice, insurance enterprises may adjust the commission ratios among different types of insurance services within the same insurance business but may not adjust the commission ratios between different insurance businesses.

b. The level of reinsurance commission payments:

- The mandatory reinsurance commission level must be applied according to the regulations of the Ministry of Finance regarding the implementation of the mandatory reinsurance system.

- Other cases allow insurance enterprises to implement based on the reinsurance contract.

4. Accounting system:

Commission payments made in accordance with this Circular are considered part of the premium structure and are recorded as insurance business expenses.

5. Inspection work:

The Ministry of Finance will inspect the implementation of the insurance commission system together with the supervision of other aspects of insurance enterprises' and insurance brokerage organizations' business activities according to current laws.

III. IMPLEMENTATION PROVISIONS

Insurance enterprises permitted to operate in Vietnam must immediately review the insurance commission system currently in place at their units, make necessary amendments, and comply with the provisions of this Circular.

Any violations of the insurance commission system prescribed in this Circular will be handled according to current laws depending on the severity of the violation.

This Circular takes effect from January 1, 1996. Previous regulations inconsistent with this Circular are abolished.

During implementation, if there are difficulties or obstacles, please promptly report them to the Ministry of Finance for consideration and resolution.

TABLE OF MAXIMUM COMMISSION RATES FOR INSURANCE APPLICABLE TO VARIOUS TYPES OF INSURANCE BUSINESS
(Annexed to Circular No. 76-TC/TCNH dated October 25, 1995 of the Ministry of Finance)

No. Type of Business Commission Rate (%)

1 Voluntary health insurance and personal accident insurance 10

2 Property insurance and damage insurance 0.3

3 Goods transportation insurance by road, sea, river, rail, and air 2

4 Hull insurance and liability insurance of vessels 2.5

5 General liability insurance 4

6 Aviation insurance 0.5

7 Motor vehicle insurance 5

8 Fire insurance 5

9 Credit insurance and financial risk insurance 5

10 Business interruption insurance 10

11 Agricultural insurance 10

12 Compulsory insurance business 3

Article 12 Compulsory insurance transactions 3