|
New decree aims to rev up compulsory motor insurance
Deputy Director of the Finance Ministry’s Insurance Department, Pham Dinh Trong, spoke to Dau tu (Vietnam Investment Review) about the new decree regulating compulsory insurance for motor vehicles.
The Government’s Decree No15/1997 on compulsory insurance has been in effect for more than 10 years now. How many motor vehicle owners have joined the compulsory insurance so far?
There will also be details on punishments for violations. Owners of cars and motorbikes who don’t join compulsory insurance will be fined VND500,000 ($30) and VND100,000 ($6) respectively.
From 2003 to 2007, the number of cars joining compulsory insurance increased by 7.3 per cent annually while the number of motorbikes is at 15 per cent. The income from insurance increased by 23 per cent a year while compensation for insurance increased by 15 per cent. During this period, insurance companies solved compensation for over 120,000 accidents, amounting to VND1 trillion (US$66.6 million).
However, the number of motor vehicle owners to have signed on for insurance is still low when compared to the total number of motor vehicles on the road. Just 68 per cent of cars and 30 per cent of motorbikes have joined compulsory insurance so far.
Why are the numbers still so low?
All other countries in the world have regulated motor vehicle owners to join compulsory insurance, and almost all motorists obey the regulation. In Viet Nam, the number of owners joining compulsory insurance is still very low though we have had regulations on the matter.
There are many reasons for this. I think the core reason is that awareness on the importance of joining compulsory insurance among the people is still low and the punishments for not joining are not appropriate.
How will the Decree 103/2008, which will take effect from next month, solve these problems?
Compulsory insurance is one of the measures to ensure social welfare. Once accident happens, vehicle owners without financial ability will leave lifetime consequences for themselves and for the victims. If a motorist buys compulsory insurance, insurance companies will be in charge of compensating for the accident, helping vehicle owners and victims reduce financial losses by using the insurance fees collected from a pool of members.
In addition, insurance companies will also use the insurance fees to implement projects to prevent and limit accidents, such as building safe transport corridors and improving road signs.
It is obvious people don’t fully understand the benefits of this for people’s welfare and for all of society, so many haven’t thought about getting the insurance. This is partly because of the weakness of work on raising awareness on the matter during the recent time.
Decree No103/2008 will regulate, in detail, the responsibilities of sectors, especially the mass media and insurance companies, for pushing up dissemination about the benefits of compulsory insurance.
What else will the decree regulate apart from raising awareness?
There will also be details on punishments for violations. Owners of cars and motorbikes who don’t join compulsory insurance will be fined VND500,000 ($30) and VND100,000 ($6) respectively.
General directors, directors of insurance companies and the companies themselves will get an administrative fine of up to VND70 million ($4,200) if they fail to compensate insurance members.
There are about 22 million motorbikes on the road in Viet Nam. In the near future, more than 11 million motorbikes will join compulsory insurance in accordance to the new decree. Do you think this will cause an overload in insurance administration?
Of course, it doesn’t mean when the decree comes into effect next month that all motor vehicle owners will buy insurance immediately. So there will be no great overload. With 25 non-life insurance companies together with their 450 subsidiaries, branches and more than 30,000 agents nationwide, I think we can meet the demands of people signing up for the insurance.
Do you worry about competition among insurance companies in this potential market?
Competition in providing compulsory insurance services will of course happen. The Ministry of Finance encourages insurance companies to compete to provide the best services to the people. However, since this is compulsory insurance, it will be different to other kinds of insurance. Insurance companies will have to obey the ministry’s regulations on fees, clauses in the contracts, contracts and compensation levels. The ministry forbids all promotion activities in all forms.
VNN
|
