Issue 020323 – Insurance Contracts

Dear Valued Clients, 

Currently, insurance is one of the services that are developing strongly and demonstrating its role in social life. Especially, since the outbreak of the Covid-19 pandemic until now, the demand for insurance participation of people has been increasing. However, not everyone knows clearly the terms of the insurance contract as prescribed by the law.

Therefore, in this Legal Article, we would like to summarize the information about insurance contracts in accordance with the provisions of the Law on Insurance Business No. 08/2022/QH15 of the National Assembly dated June 16, 2022 (“Law on Insurance Business 2022”).

1. Definition

An insurance contract refers to an arrangement between a policyholder and an insurer or a foreign non-life insurer’s branch or a mutual providing microinsurance product whereunder the policyholder is bound to pay insurance premiums; the insurer, the foreign non-life insurer’s branch or the mutual providing microinsurance service is bound to pay indemnity or insurance benefits or coverage under contractual terms and conditions.

2. Principles of conclusion and execution of insurance contracts

Conclusion and implementation of insurance contracts must adhere to the fundamental principles in civil law and the following principles:

(i)      Principle of utmost good faith: Parties to an insurance contract must provide information and implement contractual rights and obligations in a most honest and trustful manner, and must place absolute mutual trust in each other during the period of conclusion and implementation of insurance contracts; 

(ii)      Principle of insurable interest: Policyholders must be entitled to the insurable benefit varying according to specific types of insurance contract under Law on Insurance Business 2022;

(iii)     Principle of indemnity: The amount of coverage or indemnity that the insured can get shall not exceed the actual loss incurred in a policy event unless otherwise agreed upon in the insurance contract;

(iv)     Principle of subrogation: the insured shall be responsible for giving the insurer or foreign non-life insurer the right to claim the amount of loss from the third party responsible for such loss if such amount falls within the permissible loss limit. This principle shall not apply to life and health insurance contracts;

(v)     Principle of unpredictable risk: in order for a risk to be covered or insured against, it must be a sudden or unanticipated one.

3. Types of the Insurance Contracts

According to the provisions of Article 15.1 of Law on Insurance Business 2022, insurance contracts include the following types:

(i)     Life insurance contract;

(ii)     Health insurance contract;

(iii)    Property insurance contract;

(iv)    Property damage liability insurance contract;

(v)     Liability insurance contract.

In which, the insurance contract is mentioned in items (iii), (iv), and (v) belonging to a type of non-life insurance. 

4. Contents of insurance contracts

Normally, an insurance contract will have the following main contents:

(i)     The policyholder, the insured, the beneficiary (if any), the insurer or the foreign non-life insurer’s branch;

(ii)     Subject matter insured;

(iii)     Sum insured or value of property insured or covered property value or insurance policy limit;

(iv)     Scope of insurance coverage and insurance benefits; insurance rules, terms, and conditions;

(v)      Rights and obligations of the insurer, the foreign non-life insurer’s branch, and the policyholder;

(vi)     Insurance policy period, date of entry into force of the insurance contract;

(vii)    Insurance premium, premium payment option;

(viii)    Insurance coverage and payment option;

(ix)     Dispute resolution method.

5. Presentation and proof of the conclusion of insurance contracts

Insurance contracts must be made in writing. Proof of conclusion of an insurance contract shall comprise an insurance contract, certificate of insurance, insurance policy, or others prescribed in law.

6. Disclaimer clauses

Disclaimer clauses shall prescribe cases in which insurers or foreign non-life insurers’ branches can refuse to pay claims and insurance.

According to the provisions of Article 19.2 of Law on Insurance Business 2022, in the presence of clauses on disclaimer of insured liability, insurers, and foreign non-life insurers’ branches must clearly elaborate them in insurance contracts, give explicit, adequate explanations and evidence about the fact that insurers have already received full and clear explanations of these disclaimer clauses by insurers and foreign non-life insurers’ branches when concluding insurance contracts.

Where any force majeure event or circumstantial obstacle results in the policyholder’s late notice of any policy event, the insurer or foreign non-life insurer’s branch is not allowed to apply disclaimer clauses.

7. Interpretation of insurance contracts

Where any insurance contract has vague terms and conditions that are open to misinterpretation, they may be explained to the policyholder’s advantage.

We hope you find this article useful look forward to working with you in the future.

Kind regards,

ENT Law LLC        

The full version of this Legal Update can be found here.