What is microinsurance? What benefits do microinsurance buyers enjoy in Vietnam?

Hello, Lawnet would like to answer as follows:

1. What is microinsurance?

According to the provisions of Clause 22, Article 4 of the Law on Insurance Business 2022, microinsurance refers to the insurance service meant for low-income individuals and families in order to offer them protection against life, health and property risks.

Characteristics of microinsurance products in Vietnam

According to the provisions of Article 144 of the Law on Insurance Business 2022, a microinsurance product shall have the following basic characteristics:

- It must be concise, easy to understand; needs to involve streamlined or simplified actuarial procedures; or requires no actuarial service.

- It merely includes insurance benefits to meet basic demands for protection against life, health and property risks for participants in coverage plans that last no more than 05 years;

- The sum insured per an insurance contract and annual costs of coverage for each insured person in a contract shall not exceed the maximum limit specified in the Government’s regulations.

Organization providing micro insurance products

According to the provisions of Clause 1, Article 2 of Decree 21/2023/ND-CP, entities providing microinsurance products, including:

- Non-life insurers, life insurers, health insurers (hereinafter referred to as “insurers”), and branches of foreign non-life insurers established and operating in Vietnam;

- Mutual microinsurance organizations established and operating in Vietnam.

Mutual providing microinsurance product refers to an entity that has legal personality, independent accounting regime; is founded by members or institutional representatives of members to render not-for-profit microinsurance product in order for members participating in insurance to offer mutual aid or support to each other according to the mechanism of voluntary contribution, financial autonomy and self-responsibility before law if such aid or support is restricted to their assets generated from microinsurance product. (According to Clause 23, Article 4 of the Law on Insurance Business 2022).

Thus, refers to the insurance service meant for low-income individuals and families in order to offer them protection against life, health and property risks Organizations providing microinsurance include insurance enterprises, branches of foreign insurance enterprises and mutual organizations providing microinsurance.

2. What benefits do microinsurance buyers enjoy in Vietnam?

According to the provisions of Article 4 and Article 5 of Decree 21/2023/ND-CP, micro insurance buyers enjoy the following benefits:

For microinsurance products provided by insurers and branches of foreign non-life insurers

- When launching their microinsurance products, insurers and branches of foreign non-life insurers shall be required to meet the requirements laid down in the Law on Insurance Business and its guiding documents, and the provisions of Article 3, Article 4 and Article 6 of Decree 21/2023/ND-CP.

- Life insurers may provide microinsurance products for protection against life and health risks with a maximum insurance term of 05 years.

- Non-life insurers and branches of foreign non-life insurers may provide:

= Microinsurance products for protection against life and health risks with a maximum insurance term of 01 year;

= Microinsurance products for protection against property risks with a maximum insurance term of 05 years.

- Health insurers may provide:

= Microinsurance products for protection against life risks with a maximum insurance term of 01 year;

= Microinsurance products for protection against health risks with a maximum insurance term of 05 years.

- Names of microinsurance products provided by insurers and branches of foreign non-life insurers must contain the phrase “Sản phẩm bảo hiểm vi mô” (“microinsurance product”) for distinguishing between their microinsurance products and other insurance products.

For microinsurance products provided by mutual microinsurance organizations

Mutual microinsurance organizations may only provide microinsurance products with a maximum insurance term of 01 year to meet demands of their members. Such microinsurance products cover one or some of the following insurance benefits:

- Health care benefit: partial or entire costs of inpatient treatment and surgery will be covered when the insured is hospitalized or undergoes surgery within the scope of insurance cover.

- Accident insurance benefit: an amount will be paid in proportion to the severity level of injuries incurred by the insured as agreed upon in the microinsurance contract when the insured suffers injuries in an accident within the scope of insurance cover.

- Death or total permanent disability (TPD) insurance benefit: the beneficiary will receive a payout under terms and conditions of the microinsurance contract when the insured passes away or suffers TPD within the scope of insurance cover.

- Funeral expense benefit: an amount of funeral allowance will be paid under terms and conditions of the microinsurance contract upon payment of death benefit.

- Property insurance benefit: the insurance indemnity will be paid under terms and conditions of the microinsurance contract when the insured property damage occurs due to the causes within the scope of insurance cover.

Thus, micro-insurance buyers enjoy benefits corresponding to micro-insurance products protecting the life and health risks they participate in for a certain period, including care benefits. health insurance, accident insurance, death/disability insurance, funeral benefits, property insurance.

Some notes when buying micro insurance

According to Article 3 of Decree 21/2023/ND-CP, the insurance amount and maximum premium of micro insurance products are prescribed as follows:

- The sum insured under a microinsurance contract for protection against life and health risks shall not exceed 05 times the annual per capita income for near poverty households in urban areas announced by the Government at the time of launching the microinsurance product.

- The sum insured under a microinsurance contract for protection against property risks shall exceed neither the market price of the insured property at the time of conclusion of the contract nor 05 times the annual per capita income for near poverty households in urban areas announced by the Government at the time of launching the microinsurance product.

- The annual insurance premiums of a microinsurance contract shall not exceed 5% of the annual per capita income for near poverty households in urban areas announced by the Government at the time of launching the microinsurance product. Insurance premiums must be appropriate for insurance benefits.