Issue of February 2025 – Decree No. 174/2024/ND-CP regulating administrative penalties in the field of insurance business

Dear Valued Clients,

On December 30, 2024, the Government issued Decree No. 174/2024/NĐ-CP (“Decree 174”) on administrative penalties in the insurance business sector. This Decree officially takes effect on February 15, 2025, replacing and supplementing several important regulations to enhance transparency and efficiency in the management and supervision of insurance activities.

In this Legal Update, we will analyze the key new points and significant legal impacts of Decree 174, thereby helping enterprise promptly grasp and comply with the new legal regulations.

1. Regulations on penalties for violations of mandatory insurance requirements by non-life insurance enterprises and branches of foreign non-life insurance enterprises

According to Article 75.3 of Decree No. 67/2023/ND-CP, insurance enterprises are responsible for establishing and maintaining a 24/7 hotline to promptly receive accident and loss reports, provide guidance, and address inquiries from policyholders, insured individuals, and relevant parties regarding mandatory insurance matters. Calls to the hotline must be recorded to ensure the rights of policyholders and insured individuals.

In order to enhance enforcement effectiveness, Decree 174 has introduced penalties ranging from VND 30,000,000 to VND 50,000,000 for non-life insurance enterprises and branches of foreign non-life insurance enterprises that fail to establish and maintain a hotline to promptly receive accident and loss information, provide guidance, and address inquiries from policyholders, insured persons, and relevant parties regarding matters related to compulsory insurance, as stipulated in Article 75.3 of Decree No. 67/2023/NĐ-CP[1].

Thus, non-life insurance enterprises and branches of foreign non-life insurance enterprises are obligated to ensure the continuous operation of their hotlines. If clients are unable to reach the enterprise’s hotline, the enterprise may be subject to penalties as stipulated by law.

2. Regulations on penalties for violations of insurance product provision regulations

Decree 174 also clearly stipulates penalties for violations of regulations on the provision of insurance products. Accordingly, from February 15, 2025, insurance enterprises and branches of foreign non-life insurance enterprises will be subject to fines ranging from VND 60,000,000 to VND 100,000,000 if they commit any of the following violations[2]:

(i)    Failing to provide the policyholder with documents during the conclusion of the insurance contract as required by law, as stipulated in Article 20.2(a) of the Law on Insurance Business No. 08/2022/QH15;

(ii)   Failing to clearly and fully explain to the policyholder the insurance benefits, exclusion clauses, rights, and obligations of the policyholder when entering into the insurance contract as required by law, as stipulated in Article 20.2(b) of the Law on Insurance Business No. 08/2022/QH15;

(iii)   Failing to provide the policyholder with proof of the conclusion of the insurance contract as required by law, as stipulated in Article 18 of the Law on Insurance Business No. 08/2022/QH15;

(iv)   Threatening or coercing the conclusion of an insurance contract, as stipulated in Article 9.5 of the Law on Insurance Business No. 08/2022/QH15.

Additionally, Decree 174 also sets out remedial measures, requiring insurance enterprises to[3]: (i) provide the policyholder with documents related to the conclusion of insurance contracts that have not yet expired at the time the violation is detected; (ii) clearly and fully explain to the policyholder the insurance benefits, exclusions of insurance liability, as well as the rights and obligations of the policyholder under insurance contracts that have not yet expired at the time the violation is detected; and (iii) provide the policyholder with proof of the conclusion of insurance contracts that have not yet expired at the time the violation is detected.

3. Regulations on penalties for violations of insurance compensation and payment regulations

Article 15 of Decree 174 clearly states that the act of colluding with the beneficiary of insurance benefits to settle insurance compensation and pay insurance money illegally; the act of forging documents and intentionally falsifying information to refuse compensation and pay insurance money when the insurance event has occurred; the act of forging documents and intentionally falsifying information in the claim file and paying insurance money; the act of self-inflicted damage to one’s own property and health to enjoy insurance benefits, except in cases where the law provides otherwise and is not yet serious enough to warrant criminal prosecution, shall be subject to the following fines:

(i)    A fine ranging from VND 20,000,000 to VND 40,000,000 for violations where the misappropriated amount is less than VND 10,000,000 or the damage caused is less than VND 20,000,000.

(ii)   A fine ranging from VND 40,000,000 to VND 60,000,000 for violations where the misappropriated amount is between VND 10,000,000 and under VND 15,000,000, or the damage caused is between VND 20,000,000 and under VND 30,000,000.

(iii)   A fine ranging from VND 80,000,000 to VND 100,000,000 for violations where the misappropriated amount is between VND 15,000,000 and under VND 20,000,000, or the damage caused is between VND 30,000,000 and under VND 50,000,000.

For commercial entities committing insurance fraud as specified in Article 213.1 of the 2015 Penal Code (amended and supplemented in 2017), if the misappropriated amount is under VND 200,000,000 or the damage caused is under VND 400,000,000, and the act does not constitute a criminal offense, the penalty is a fine ranging from VND 160,000,000 to VND 200,000,000. Additionally, the violating entity is required to return the misappropriated amount.

4. Advertising life insurance products in violation of legal regulations

Article 17 of Decree 174 stipulates penalties for violations related to the operation of life insurance and health insurance by insurance enterprises, branches of foreign non-life insurance enterprises, and mutual organizations providing microinsurance. Specifically, a fine ranging from VND 80,000,000 to VND 100,000,000 shall be imposed for the following violations:

a.    Insurance rules, terms, and conditions that do not comply with legal regulations;

b.    Summary documents of the rules, terms, and conditions of life insurance and health insurance products that do not comply with legal regulations;

c.    Sales illustration documents for life insurance products that do not comply with legal regulations;

d.    Insurance applications and questionnaires related to insured risks and insured subjects of life and health insurance products that do not comply with legal regulations;

e.    Introduction materials for life and health insurance products that do not comply with legal regulations;

f.     Information and advertisements about life insurance products that do not comply with legal regulations;

g.    Failure to comply with legal regulations on investment-linked insurance, pension insurance, and health insurance.

As usual, we hope you find this Legal Update helpful and look forward to working with you in the upcoming time.

Kind regards,

ENT Law LLC

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

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[1] Article 19.1(đ) Decree 174.

[2] Article 16.2 Decree 174.

[3] Article 16.3(b); Article 16.3(c); Article 16.3(d) of Decree 174.