Micro-insurance contributes to better social security and promotes comprehensive finance

Expect to increase the number of suppliers

Micro-insurance are products designed and provided for the poor, low-income, and disadvantaged people in society with the characteristics of low premium, a small amount of insurance, and simple and easy to understand. Micro-insurance often develops in developing countries and is considered an essential component of the country's comprehensive financial policy, contributing to implementing the state's social and security policies.

Therefore, right from consulting on insurance-related regulations of the amended Law on Insurance Business or Decree 21, many experts, National Assembly deputies, and businesses agreed with the need for clear legality of micro-insurance. According to the revised Law on Insurance Business, two entities are provided with micro-insurance products: insurance enterprises and mutual organizations.

Decree 21 has more specific regulations on organizations providing micro-insurance products. Accordingly, the organizations providing micro-insurance include non-life insurance enterprises, life insurance enterprises, health insurance enterprises, branches of foreign non-life insurance enterprises established and operating in Vietnam; and mutual organizations providing micro-insurance established and operating in Vietnam.

Decree 21 also stipulates that the financial management model of a mutual organization providing micro-insurance is similar to the financial management model of an insurance enterprise, including regulations on minimum establishment capital (VND10 billion), operating capital, and the requirement to maintain the operating capital not lower than the minimum established capital during the operation process, setting up professional reserves, setting aside the compulsory reserve fund until the fund's size reaches VND50 billion, financial investment, margin, and principles of revenue and expense recognition.

According to data of the World Bank (WB), in Southeast Asian countries, the proportion of people participating in micro-insurance accounts for more than 10% of the population on average and is on the rise. Therefore, experts estimated that the promulgation of Decree 21 would encourage insurance businesses and branches of foreign non-life insurance enterprises in Vietnam to provide micro-insurance products.

In fact, grasping the perfection of legal regulations on insurance, many insurance companies have tried to deploy the micro-insurance segment. Recently, Baoviet Insurance Corporation has launched the micro-insurance program Peaceful Joy – Happiness with a cost of only from VND44,000/person/year, but still ensure diversified and optimal medical benefits, such as maximum benefit up to VND78 million.

Previously, PVI Insurance Corporation completed cooperation agreements with many local farmers' associations to implement the Social Security and Welfare Program. Agriculture Bank Insurance Corporation (ABIC) has deployed the strategic product Bao An Credit - an insurance product associated with the Agribank. In addition, many businesses also said that they were researching to launch micro-product lines, designed to be concise and easy to understand, which can be combined with technology applications to spread quickly and conveniently.

Guaranteed to promote financial inclusion

According to Bao Viet Insurance Corporation, risks always cause economic losses, affecting income, life, production, and business. Meanwhile, the poor and low-income people are vulnerable groups, strongly affected by risks. Still, their access to commercial insurance products is limit ed because the premiums of commercial products are often higher than their financial ability.

Therefore, according to the provisions of Decree 21, the maximum premium of micro-insurance products is equal to 5% of the annual per capita income of the near-poor household in urban areas. The maximum insurance amount of micro-insurance products is equal to five times the annual per capita income of the near-poor household in urban areas.

In Decree No. 07/2021/ND-CP dated January 27, 2021, stipulating the multidimensional poverty line for the period 2021-2025, per capita income of near-poor households in urban areas is VND2 million/month, equivalent to an annual income per capita of VND24 million. Therefore, according to the calculation of the Ministry of Finance, the maximum insurance premium of micro-insurance products is about VND100,000/month, and the maximum insurance amount is VND120 million, suitable for micro-insurance products that have been piloted in the past time.

Thus, with the characteristics of low fees, simple, and understandable, people will have easier access to insurance products. Therefore, the development and provision of effective micro-insurance not only contributes to social security, hunger eradication, and poverty reduction, but also promotes financial inclusion, and develops the insurance market according to the goals set by the Government.