Insurance firms tackle remediation process

Last month’s investigation within the domestic life insurance industry has provided an opportunity for affected insurers to openly address related issues.

MB Ageas Life, one of the four life insurance companies inspected by the Ministry of Finance (MoF) in relation to bancassurance operations, took swift action following the inspection’s conclusion last month. In mid-July, the firm announced it had already paid the additional taxes, an important requirement from the audit, while pledging to rectify all issues identified during the inspection within the month.

Insurance firms tackle remediation process, Source: mbageas.life

The company’s representatives said that they had promptly reviewed and addressed the problems identified by the inspection. As proof, MB Ageas Life had submitted its remediation plan to the MoF ahead of the required deadline in August. This quick turnaround suggested that most issues pointed out by the inspection had been addressed.

The previous year saw MB Ageas Life eliminate all costs related to the implementation of competition programmes for branches and employees of organisational agents before the inspection took place. Furthermore, the company assured that it had immediately stopped the implementation of such programmes following the inspection and was committed to completing all remedial measures within the month.

“MB Ageas Life recognises that audits conducted by relevant state authorities present an opportunity to identify persistent issues that a business might otherwise fully struggle to recognise. These findings serve as a foundation for the company to develop and strengthen its operational and management systems,” the firm noted in its statement.

“This approach has enhanced service quality and ensured alignment with the 2022 insurance business law amendments, thereby bolstering corporate governance standards,” it said.

Another company scrutinised during the inspection was Prudential Vietnam, with the MoF pinpointing issues in its advisory services and in the accounting of expenses for its bancassurance channel.

The MoF recommended that the CEO of Prudential Vietnam handle the financial treatment for the 2021 fiscal year by deducting expenses to determine the corporate income tax exceeding $740,000. The MoF also advised the company to review its implementation of credit insurance product fees (decreasing term life insurance with Bao Tin Hung Gia), ensuring that they were in accordance with approved fees.

Responding to the inspection’s findings, Prudential Vietnam CEO Phuong Tien Minh said that the issues related to agent quality management raised were already dealt with by the company’s internal regulations in 2021. “This event will serve as an opportunity for Prudential Vietnam to refine its internal procedures to ensure legal compliance, pledging to focus on service quality and healthy, sustainable growth in bancassurance,” he said.

BIDV MetLife was also highlighted for accounting irregularities in relation to bancassurance operations, with a total sum exceeding VND7.25 billion (over $302,000). However, the inspection report confirmed that the procedures established by BIDV MetLife for insurance agency operations, particularly those distributed via BIDV, were basically compliant with legal regulations.

Sun Life Vietnam, another insurer involved in the recent inspection, was highlighted for numerous instances where its insurance agents and bank employees did not comply with regulations during the bancassurance process.

Inaccuracies were noted in their accounting of decreased revenue for some insurance contracts requiring cancellation, and in accounting for expenses and revenue related to bancassurance activities in 2021, leading to incorrect determination of corporate income tax. The total amount involved exceeded $1.04 million.

In response, Sun Life Vietnam acknowledged the MoF’s efforts in reviewing, assessing, and making recommendations to improve their business operations.

Despite the affected insurance companies emphasising that the inspection was a thematic examination of bancassurance operations, part of the MoF’s regular 2022 audit plan, the Insurance Association of Vietnam confirmed that it was unrelated to recent customer complaints regarding bancassurance sales.

“Even those not involved in the inspection have taken steps to improve their management practices. The industry appears to be heeding this wake-up call and making strides towards improved transparency and accountability,” it stated.

Further scrutiny urged to prevent unethical insurance schemes A Ministry of Finance inspection has unveiled a concerning landscape of regulatory non-compliance and disturbingly high contract termination rates in the life insurance industry, indicating the pressing need for enhanced sector oversight and ethical sales practices.

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