The Insurance Management and Supervision Department (Ministry of Finance) has just announced the conclusion of the inspection of insurance sales activities through credit institutions and foreign banking branches of Cathay Life Insurance Vietnam Company Limited (Cathay Life Vietnam).
The inspection results showed many shortcomings in the implementation process, from determining insurance premiums, collecting fees, managing insurance agents to accounting for costs.
According to the conclusion, Cathay Life Vietnam will start selling insurance products through Indovina Bank Limited (IVB). In 2023, the company issued 33 insurance contracts through the banking insurance distribution channel (bancassurance), with insurance fee revenue reaching VND 22.3 billion, equivalent to 0.8% of the company's total insurance fee revenue.
Of which, newly exploited insurance fee revenue reached 19.6 billion VND, accounting for 2.1% of total new exploitation fee revenue.
Lack of transparency in providing product information
The inspection conclusion shows that Cathay Life Vietnam has not fully complied with regulations in the process of selling insurance through credit institutions. Some mixed insurance contracts are identified as not suitable for the subjects when the insurance buyer is a foreigner but does not meet the conditions according to the provisions of Vietnamese law.
There are 12 insurance contracts with a term of three years, with a total insurance premium of VND7.4 billion, but the insurance buyer is a foreigner residing in Taiwan, which is not in accordance with current legal conditions.
The process of offering insurance products through banks also has many shortcomings. The company has not ensured transparency in providing product information, causing customers to not fully understand the rights and obligations when participating in insurance. The confirmation of insurance contracts has not been implemented in accordance with regulations, in many cases there are not enough illustrative documents or customers do not sign confirmation on sales documents.
Another notable problem is that the welcome call process has not been strictly implemented. According to the conclusion, out of 33 insurance contracts sold through IVB, 12 customers are individuals or organizations in Vietnam but are not fully advised on the form of fee payment, leading to the risk of misunderstanding insurance benefits. There were 8 foreign customers who did not receive calls and email confirmation after the contract was issued.
Loose insurance agency management, unclear consultation
In addition to problems in product implementation, the inspection conclusion also pointed out problems in the management of Cathay Life Vietnam insurance agents. The company has cooperated with IVB to implement insurance but has not fully ensured the conditions for insurance agents to operate according to regulations.
IVB staff were trained from 2018 - 2019 but have not been updated with new knowledge according to the Law on Insurance Business 2022. The company has not also organized additional training on the latest legal regulations related to insurance business activities.
The inspection and supervision of insurance agents have not been fully implemented. According to the conclusion, Cathay Life Vietnam has not implemented periodic inspection measures to ensure the quality of consultation and compliance with IVB staff's procedures. In some cases, customers have reported unclear consultation but there are no specific handling measures.
Incorrect cost accounting
One of the notable issues in the inspection conclusion is the accounting of invalid expenses related to insurance sales activities through banks, with a total amount of 635.5 million VND.
Of which, the cost of insurance agent commissions is 328.4 million VND; the cost of supporting insurance agents is 203 million VND; the bonus for IVB bank employees is 104 million VND.
Some expenses do not have a clear basis, are not specifically regulated in the insurance agency contract, and do not have clear assessment criteria for the effectiveness of insurance agency operations.
Cathay Vietnam spent 203 million VND under the name of "supporting an insurance agent", however, this payment did not have a clear legal basis and was not specifically regulated in the insurance agency contract with IVB. Some bonuses for IVB employees with a total amount of 104 million VND also have no clear basis and do not comply with the bonus payment process according to regulations.
The inspection conclusion shows that Cathay Life Vietnam has not fully fulfilled its tax declaration obligations for some expenses related to insurance agents. The inspection agency requested the company to review all these expenses, adjust accounting and comply with legal regulations to avoid errors in financial management.
Proposal for financial and administrative handling
In response to a series of issues raised, the inspection agency proposed to handle the finances and administration of Cathay Life Vietnam. The company is required to review the entire insurance agency contract with IVB to ensure compliance with regulations. In addition, the tax authority will also check tax declaration for expenses that show signs of invalidity.
The Insurance Management and Supervision Department also proposed administrative sanctions against Cathay Life Vietnam for not complying with regulations on the implementation of insurance products, insurance agency management and cost accounting. The company needs to adjust the invalid expenditures and report to the management agency in the coming time.
