Decision No. 96/2007/QD-BTC on the issuance of the Rules for Implementing Joint Life Insurance Products

Pursuant to …;

Regarding the issuance of the Regulation on the Implementation of Joint Life Insurance Products

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THE MINISTER OF FINANCE

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

Pursuant to the Decree No. 45/2007/ND-CP dated March 27, 2007 of the Government guiding the implementation of certain provisions of the Law on Insurance Business;

Pursuant to the Decree No. 46/2007/ND-CP dated March 27, 2007 of the Government stipulating financial regulations for insurance enterprises and insurance brokerage enterprises;

Pursuant to the Decree No. 77/2003/ND-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Upon the proposal of the Director of the Insurance Department,

DECISION:

Article 1. Attached hereto is the Regulation on the Implementation of Joint Life Insurance Products under the investment-linked insurance business.

Article 2. The Standard Measurement Quality Control Department shall be responsible for organizing and guiding the implementation of the Regulations adopted herein.

Article 3. The Head of the Ministry's Office, the Director of the Insurance Department, the Chairman of the State Securities Commission, life insurance enterprises, organizations, individuals, and other relevant parties shall be responsible for implementing this Decision./.

REGULATIONS

JOINT LIFE INSURANCE PRODUCTS IMPLEMENTATION REGULATION

(Issued together with Decision No. 96/2007/QD-BTC dated November 23, 2007 of the Minister of Finance)

Chapter 1
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Regulation stipulates the implementation of joint life insurance products by life insurance enterprises and related organizations and individuals within the territory of the Socialist Republic of Vietnam.

Article 2. Characteristics of joint life insurance products

Joint life insurance (universal life) is an investment-linked insurance product and has the following characteristics:

1. The premium structure and insurance benefits are separated between the risk protection component and the investment component. The policyholder can flexibly determine the premium and the amount of insurance according to the terms of the insurance contract.

2. The policyholder enjoys the entire investment results from the joint fund of the insurance enterprise but not less than the minimum investment rate guaranteed by the insurance enterprise in the insurance contract.

3. The insurance enterprise receives the fees paid by the policyholder as agreed upon in the insurance contract.

Article 3. Universal Fund

The joint fund is formed from the premiums from joint life insurance contracts and is part of the master contract insurance fund. The assets of the joint fund are not divided but are collectively determined for all linked insurance contracts.

Article 4. Conditions for Insurance Enterprises Implementing Universal Life Insurance Products

When implementing joint life insurance products, life insurance enterprises must meet the following conditions:

1. The solvency margin of the life insurance enterprise must be greater than the minimum solvency margin of 100 billion VND.

Clause 2. There must be an appropriate information technology system to manage and control the universal fund carefully and effectively.

3. Insurance agents selling joint life insurance products must be recruited, trained, and utilized in accordance with the requirements stipulated in Article 19 of this Regulation.

4. The joint life insurance product must be approved by the Ministry of Finance.

Chapter 2
PRODUCT DESIGN

Article 5. Joint Life Insurance Products

Life insurance enterprises must comply with the provisions of this Chapter and the laws when designing joint life insurance products.

Article 6. Insurance Benefits of Joint-Linked Insurance

Clause 1. The insurance benefits under the universal life insurance contract include risk protection benefits and investment benefits.

Clause 2. Risk protection benefits:

a) The insurance company and the policyholder shall agree on the insurance benefits for risks but must ensure that the minimum insurance amount is not less than five times the first year's premium for periodic payment insurance contracts or not less than 125% of the single premium for single-payment insurance contracts.

b) The provisions regarding minimum benefits in case of death do not apply to additional premiums stipulated in Article 8 of this Regulation.

c) The insurance company may provide supplementary insurance products for joint-linked insurance products. The method of paying premiums for supplementary insurance products will be agreed upon by both parties when concluding the contract.

3. Investment Benefits: The policyholder shall benefit from the investment results of the joint-linked fund with the minimum investment rate specified in the insurance contract.

4. The insurance company and the policyholder may agree on the content and method of payment of insurance benefits when an insured event occurs as prescribed in Clause 2 and Clause 3 of this Article.

Article 7. Premiums

1. Insurance enterprises are only permitted to charge the types of fees specified below:

a) Initial fee is the total amount of money that insurance enterprises are allowed to deduct before the insurance premium is allocated to the joint fund.

b) Risk insurance fee is the fee for paying out risk insurance benefits as committed in the insurance contract.

c) Insurance contract management fee is the fee to cover costs related to maintaining the insurance contract and providing information related to the insurance contract to the policyholder.

d) Fund management fees are used to cover the costs of managing the joint-linked fund. In all cases, the investment return paid to the policyholder shall not be lower than the minimum investment rate committed in the insurance contract.

đ) The fee for terminating the insurance contract is a charge levied on the customer when terminating the contract before its expiration date to compensate for reasonable related expenses.

e) Other fees (if any) must be approved in writing by the Ministry of Finance.

2. The insurance company must accurately, fairly, and reasonably calculate the above fees to ensure they are consistent with the technical basis of the product approved by the Ministry of Finance and notified to the policyholder when concluding the contract.

3. The joint-linked insurance contract must clearly specify the above fees including the maximum rates applicable to the policyholder. The insurance company must publicly disclose all types of fees and the maximum rates applicable to the policyholder in product introduction materials and sales illustration documents.

4. During the contract execution period and within the maximum limits specified in the insurance contract, the insurance company may change the rates of various fees after notifying and agreeing in writing with the policyholder at least three months prior to the official change date.

Article 8. Additional Premiums

1. In addition to the premiums agreed upon in the insurance contract, the policyholder may pay additional premiums to participate in the joint-linked fund.

2. All additional premiums will be invested in the joint-linked fund after deducting an initial fee.

3. In each contract year, the total amount of additional premiums shall not exceed five times the first-year premium for periodic payment contracts or fifty percent of the initial premium for single-payment contracts.

Article 9. Surrender Value

The surrender value of a joint-linked insurance contract is determined as the value of that contract in the joint-linked fund on the date of termination of the insurance contract minus the termination fee of the insurance contract.

Article 10. Establishment and Management of Joint-Linked Funds

1. The insurance company establishes a joint-linked fund for all joint-linked insurance contracts of the company. The joint-linked fund must be separated from the owner's fund and other contract holder funds of the company.

2. Within sixty days from the date of conclusion of the first joint-linked insurance contract, the insurance company must ensure that the total value of the joint-linked fund is not less than 50 billion VND.

3. If the premiums allocated to the joint-linked fund do not meet the requirements stipulated in Clause 2 of this Article, the insurance company must use part of the owner's fund to form the initial assets of the joint-linked fund and enjoy the corresponding investment results based on the amount contributed to establish the joint-linked fund. The insurance company may be refunded a portion or the entire amount contributed if such refund complies with the requirements stipulated in Clause 2 of this Article.

4. The joint fund is managed and utilized for investment in accordance with the financial regulations applicable to insurance enterprises.

5. Premiums and additional premiums, after deducting initial fees, must be invested in accordance with the objectives of the joint-linked fund within sixty days from the date the insurance company receives the premiums.

Chapter 3
INSURANCE COMPANY'S OBLIGATION TO DISCLOSE INFORMATION

Article 11. Information on Joint-linked Insurance

1. The insurance company shall be responsible for accurately, fully, and promptly providing the policyholder with information related to joint-linked insurance contracts that have been concluded. The information provided to the policyholder must be consistent with the joint-linked insurance products approved by the Ministry of Finance.

2. The policyholder has the right to request the insurance company to provide full information and explain the terms and conditions of the insurance to understand the risks associated when concluding a joint-linked insurance contract.

3. The insurance company shall be responsible for publishing on its website the following documents:

a) Rules and terms of the insurance product approved by the Ministry of Finance;

b) Product introduction materials;

c) Sales illustration materials for typical cases;

d) Operation status of the joint linked fund.

Article 12. Product Introduction Documents

Product introduction materials compiled and used by the insurance company must comply with the provisions of the law and the following regulations:

1. Information in the product introduction materials must be accurate, objective, complete, truthful, and must be consistent with the joint linked insurance product approved by the Ministry of Finance.

2. In addition to general provisions in life insurance, product introduction materials for joint linked insurance must include the following minimum information:

a) Investment policies, objectives, and asset investment structure of the joint-linked fund;

b) Ratios and maximum levels of initial fees, risk insurance premiums, contract management fees, joint-linked fund management fees, contract cancellation fees, and other fees.

c) Minimum guaranteed interest rate committed to the buyer of insurance for the portion of the insurance premium allocated for investment in the joint linked fund;

d) Basis and periodic determination of investment benefits of the insurance contract from the joint linked fund;

d) Clear information for the policyholder to know that entering into a joint-linked insurance contract is a long-term commitment and that the policyholder should not cancel the insurance contract due to the high cancellation fees they may have to pay during the early period of the contract.

Article 13. Sales Illustration Documents

Sales illustration materials must comply with the provisions of the law and the following regulations:

1. Sales illustration documents for joint-linked insurance products must be provided to customers before concluding the insurance contract and must contain minimum information as set out in Appendix I of this Regulation.

2. The insurance company must clearly explain to the policyholder the benefits that the customer may receive upon concluding the insurance contract, including risk insurance benefits and benefits from the joint-linked fund.

3. Fees and maximum limits that the buyer of insurance must pay must be clearly presented based on the separation between insurance premiums for risk insurance benefits and other fees.

4. In cases where the joint-linked insurance contract includes supplementary insurance benefits, the insurance company must clearly present these supplementary benefits and their impact on the policyholder in the sales illustration documents.

5. Sales illustration materials must be clearly presented and easy to understand.

Article 14. Insurance Contracts

The joint-linked insurance contract must comply with the provisions of the law and contain all of the following information:

1. Investment policy, objectives, and asset investment structure of the joint-linked fund;

2. Specific rates, amounts, and maximum levels of fees related to the joint-linked insurance contract charged to customers;

3. The proportion of insurance premiums allocated for investment in the joint-linked fund;

4. Methods for determining investment benefits from the joint-linked fund;

5. Options for the insured party to change risk benefit rights, the proportion of insurance premiums allocated to the joint-linked fund, and the time for premium payment extension.

Article 15. Notification to Policyholders about Contract Status

Within ninety days from the end of the fiscal year or the contract year, the insurance company must notify the insured party in writing about the following contents:

1. The status of the insurance contract including the following information:

a) Risk protection benefits;

b) The return value at the beginning of the reporting year;

c) The return value at the end of the reporting year;

d) Detailed fees incurred during the year according to risk insurance premiums and other fees;

đ) Total premiums paid and the amount of premiums allocated to the joint-linked fund during the reporting year;

e) Investment results and the rate of return from the portion of premiums invested in the joint-linked fund.

2. The operation results of the joint-linked fund including the following contents:

a) A summary of the financial situation of the joint-linked fund according to the model in Appendix II of this Regulation;

b) The operation status of the joint-linked fund over the last five years or the actual existence period of the fund if the fund's operational period is less than five years;

d) Details of investment benefits already distributed and expected to be given to the policyholder in the reporting year.

đ) Confirmation by an independent auditing company regarding the above information.

Chapter 4
PAYMENT CAPABILITY AND OPERATIONAL RESERVE

Article 16. Solvency

1. The insurance company must always maintain its payment capability in accordance with the provisions of the law.

2. The minimum solvency margin for joint-linked insurance contracts is 4% of the operational reserve plus 0.3% of the amount of risk-insured sums.

3. The solvency margin of the insurance company must exceed the minimum solvency margin by one hundred billion dong.

Article 17. Provisioning for Business Operations

1. The insurance company must establish an operational reserve as follows:

a) Risk insurance provision: the larger amount between the provision calculated based on the unearned premium method or the provision calculated based on the cash flow method to cover all future costs throughout the contract term.

b) Claim provision: extracted on a case-by-case basis with the amount of provision calculated based on the statistical amount of insurance payments required for each claim submitted to the insurance company but unresolved by the end of the fiscal year.

c) Business operations provision for the joint-linked portion: the return value of the contract in the joint-linked fund. The return value of the joint-linked insurance contract must ensure the commitments under the insurance contract.

d) Additional solvency provision (resilience reserve). This provision is used to ensure the company's commitments to customers as agreed in the insurance contract when there is significant market investment volatility.

2. The insurance company’s actuary is responsible for determining the methods, bases, and data for business operations provisions to always ensure commitments to policyholders in accordance with widely recognized principles and calculation methods internationally.

Chapter 5
CUSTOMER NEED ANALYSIS, INSURANCE AGENT CONDITIONS AND COMMISSIONS

Article 18. Customer Needs Analysis

Prior to entering into an insurance contract, the insurance enterprise must conduct a customer needs analysis and must obtain confirmation from the customer regarding their clear understanding of the insurance product they intend to purchase, a clear recognition of the insurance benefits, investment rights, and investment risks that they may encounter when participating in joint-linked insurance products, and the fees charged by the insurance enterprise.

Article 19. Requirements for Insurance Agents

1. To implement joint-linked insurance products, the insurance enterprise must ensure the selection of insurance agents who meet the following conditions:

a) Having at least six months of experience in operating as an insurance agent or having worked for at least two years in the financial, banking, or insurance sectors, or having graduated from a college or higher institution in the fields of finance, banking, or insurance;

b) Not violating the ethical code of conduct for insurance agents during their practice.

2. Insurance agents must undergo specialized training on joint-linked insurance products for a minimum of twenty-four hours and must be issued a certificate of completion by the insurance enterprise before being permitted to sell joint-linked insurance.

3. The insurance enterprise shall bear full responsibility for any errors caused by its agents that harm the legitimate rights and interests of the policy buyer. Insurance agents have the obligation to compensate the enterprise for any amounts paid to the policy buyer due to the agent's fault.

Article 20. Insurance Commission

The insurance commission for joint-linked insurance products shall be implemented according to the provisions of the law with the maximum commission rate that the insurance enterprise is allowed to pay to insurance agents for each insurance contract as stipulated in Appendix III of this Regulation.

Chapter 6
OTHER PROVISIONS

Article 21. Approval of Insurance Products

1. The insurance enterprise must obtain approval from the Ministry of Finance for joint-linked insurance products before implementation.

2. The application for approval of joint-linked insurance products must be prepared in accordance with the law and include the implementation plan for joint-linked products, including the following contents:

a) A summary of the main content of the proposed joint-linked insurance product to be implemented;

b) The investment policy that the insurance enterprise intends to apply to assets within the joint fund;

c) The basis for allocating insurance fees and costs;

d) Content and training program for insurance agents on joint-linked insurance products planned for implementation;

đ) Information about actuaries, investment specialists, and other outsourced advisory services;

e) Information about the qualifications, capabilities, and professional experience of staff responsible for investments;

g) A written commitment accompanied by detailed explanations regarding the insurance enterprise's compliance with the conditions set forth in Article 4 of this Regulation.

Article 22. Obligations of Insurance Enterprises

1. Insurance enterprises operating joint-linked insurance products must comply with the provisions of this Regulation and other relevant laws.

2. Based on this Regulation and other relevant laws, insurance enterprises shall establish operational procedures for implementing joint-linked insurance products that are suitable to their conditions, characteristics, and operational regulations.

3. Insurance enterprises shall compile information on the operation of joint-linked insurance products within their organization to report to the Ministry of Finance according to the current reporting system. Insurance enterprises have the responsibility to cooperate and report the actual situation of implementing joint-linked insurance products as required by the Ministry of Finance.

4. Annually, the enterprise's calculation experts shall be responsible for evaluating the compliance with this Regulation by the insurance enterprise during the operation of joint-linked insurance products.

Article 23. Transitional Provisions

1. Within sixty days from the date this Regulation takes effect, insurance enterprises currently implementing joint-linked insurance products must complete procedures to ensure compliance with the provisions of this Regulation.

2. For joint-linked insurance contracts entered into prior to the effective date of this Regulation, the insurance enterprise and the policy buyer shall act in accordance with the law at the time of contract formation and the terms agreed upon in the contract. The insurance enterprise must inform the policy buyer about the status of the contract in accordance with Article 15 of this Regulation.

Article 24. Handling of violations

Insurance enterprises, insurance agents, organizations, and individuals related to this Regulation who violate its provisions will be subject to legal sanctions.

Article 25. Supervision by the Ministry of Finance

1. Insurance enterprises, insurance agents, organizations and individuals related to the business of joint life insurance products shall be subject to supervision by the Ministry of Finance in accordance with the provisions of the law.

2. The Insurance Department shall have the responsibility to periodically assess the implementation of joint life insurance products every quarter; coordinate with relevant units to report to the Minister of Finance for amendments and supplements to this Regulation in line with practical needs.

DEPUTY MINISTER

DEPUTY MINISTER

(signed)

Tran Xuan Ha

Appendix I

SALES MATERIALS
(issued together with the Implementation Regulation of Joint Life Insurance Products)

1. BASIC INFORMATION

1. Information about the insurance enterprise:

- Enterprise name - License number

- Business field - Registered capital

- Head office - Contact address

(address, telephone number, fax number...)

2. Information about the policyholder and insured person

- Full name - Age

- Gender - Occupation

- ID card/passport number - Contact address

3. Information about the insurance agent

- Full name - Agent code

- Contact address - Office location

4. Information about the insurance product and supplementary products (if any)

- Product name - Insurance period

- Risk insurance benefits - Premium

- Premium payment method - Regular premium payment period

1. DETAILED INFORMATION

2. Insurance benefits

Basic benefits must be clearly distinguished between guaranteed benefits and non-guaranteed benefits, specifically as follows:

1.1. Risk insurance benefits: GUARANTEED BENEFITS

- Death benefit: the amount of money paid by the insurance enterprise to the beneficiary in the event of the death of the insured person

- Other risk insurance benefits (if any)

- Benefits of supplementary insurance products (if any)

1.2. Investment benefits :

a) GUARANTEED BENEFITS

- Benefits based on the minimum investment return rate committed to the policyholder

b) NON-GUARANTEED BENEFITS

1.3. Other benefits (if any)

2. Premium allocation mechanism:

- The insurance enterprise must clearly illustrate the ratio of premiums allocated to risk insurance benefits and benefits from the joint fund.

- The insurance enterprise must clearly illustrate the fees stipulated in Article 7 of the Implementation Regulation of Joint Life Insurance Products and the maximum limits that will be applied, such as:

+ Initial fee

+ Risk insurance fee

+ Contract management fee

+ Fund management fee

+ Policy cancellation fee

3. Expected investment rate

3.1. The insurance enterprise may use a maximum investment rate of 8% to demonstrate the range of income fluctuations of the joint fund.

3.2. The insurance enterprise must clearly state:

- The investment rate may increase or decrease

- In all cases, the enterprise guarantees the minimum investment rate committed in the insurance contract.

III. EXAMPLE OF PREMIUM ALLOCATION AND INSURANCE BENEFITS

Contract yearTotal premiums paidRelated feesRisk insurance premiumAllocated to joint fundGuaranteed benefitsGUARANTEED BENEFITNon-guaranteed benefitsDeath benefit feeSupplementary product feeDeath benefitSupplementary benefitJoint fund benefit(guaranteed investment rate)123456789...

Seal Registration Certificate

OPERATIONS OF THE JOINT FUND

(issued together with the Implementation Regulation of Joint Life Insurance Products)

Insurance enterprise Reporting year:

I. PREMIUMS AND VALUE OF THE JOINT FUND IN THE YEAR

Total premiums paid in the year: ...

Premiums allocated to risk insurance benefits: ...

Related expenses: ...

Total premiums invested in the joint fund: ...

Value of the joint fund at the beginning of the year: ...

Value of the joint fund at the end of the year: ...

Investment rate of the joint fund: ...

II. REPORT ON ASSETS OF JOINT FUNDS

AssetsValue at the beginning of the yearChange during the yearValue at the end of the year-Cash-Investment portfolio (detailed list)-Other assetsTotal assets

III. REPORT ON INCOME AND EXPENSES OF JOINT FUNDS

ItemPrevious yearCurrent yearNotesIncome: detailed income from investment activities according to the appropriate portfolioTotal incomeExpenses: detailed expenses according to the appropriate portfolioTotal expensesDifference between income and expensesIncome paid to policyholdersActual investment rateInvestment rate paid to policyholders

Appendix III

TABLE OF MAXIMUM COMMISSION RATES APPLICABLE TO JOINT LIFE INSURANCE PRODUCTS
(issued together with the Implementation Regulation of Joint Life Insurance Products)

Unit: %