Lawyer Nguyen Khac Thanh Dat (Hochiminh City Bar Association) assessed that the impact of the Covid-19 disease on Vietnam’s insurance market was much lower than other countries.
According to Nguyen Khac Thanh Dat, how did the Covid-19 epidemic affect Vietnam’s insurance market?
It was realisable that the Covid-19 epidemic had been affecting the socio-economic activities of Vietnam as well as the world, from tourism to culinary business, from activities of manufacturing and trading goods to many other types of services. For insurance operations, international analysts believed that non-life insurance had been severely affected, such as business operation maintenance insurance, or credit insurance in purchasing goods, and so on.
And life insurance, including health insurance, was certainly affected, but Dat believed that it could not be called serious. Specifically, for health insurance, any insurance sector that had exclusive rules would not be affected. In contrast, when insurance products did not have exclusions, the payment of insurance premiums for treatment might arise.
As for life insurance, in many countries and also in Vietnam, the death rate from Covid-19 compared to the total population was still lower than many other diseases. Therefore, Covid-19 did not severely affect the life insurance industry. The non-life insurance industry might suffer more impacts, but the overall view was negligible.
Compared to other countries, how was the impact of the disease on Vietnam’s insurance market?
According to Dat, in China, experts said that Covid-19′s effects on the insurance market were limited and manageable. In the US, a major market for health insurance, the cost of treating people infected was increasing. According to some documents, the total cost for treatment nationwide was forecast at about $30 billion. Even so, at this cost, health insurance companies still had no losses. In case the epidemic situation occurred under the most serious scenario, the cost could rise to $90 billion, which meant that the health insurance businesses must increase the cost of payment to customers.
Under this worst-case scenario, insurers still paid normal health insurance activities to treat Covid-19.
In Malaysia, according to the law here, all life insurance, health insurance or Islamic insurance (Takaful) had provisions that excepted for hospitalisation and treatment for infectious diseases and isolation. That meant, Covid-19 would be eliminated, but after the World Health Organization declared Covid-19 a global health emergency, the Malaysia Life Insurance Association (LIAM) and the Association Takaful Malaysia (MTA) stated that life insurers and Takaful operating companies would waive the contract exclusion. That was, they still paid participants.
In Singapore, 12 insurance enterprises provided free Covid-19 related insurance to customers from hospitalisation by day, week, including death. In Vietnam, Dat believed that the impact on the insurance market would be much lower than in other countries.
There was an opinion that an insurance company might rely on force majeure reasons to refuse to accept liability. What did the lawyer think about it?
According to Clause 1, Article 156 of the Civil Code, a force majeure event was an event that occurred objectively, beyond human control, which was unforeseen and irreparable, despite having applied all necessary measures and capabilities allowed. More specifically, there must be the following three conditions. The first was occurring objectively, outside of human control; the second was unforeseen; the third was irreparable despite having tried.
The current Law on Insurance Business did not regulate on force majeure events in insurance contract performance. However, this law specified in Clause 4, Article 12 that matters related to insurance contracts which were not specified in the chapter on insurance contracts of this law, would follow the provisions of the Civil Code and other provisions of relevant laws.
Legally, if based on the Civil Code, the insurance company might not pay the buyer in the event of a force majeure event. However, a force majeure event in a specific case required the review and determination of the court. Enterprise had no right to refuse to pay the contract unilaterally.
Another aspect of the problem was that insurance companies, especially life insurance, often had insurance through international reinsurance organisations.
In fact, reinsurance companies around the world still accepted normal reinsurance payments in case of risks caused by Covid-19 epidemic. Munich Re, for instance, was one of the world’s leading providers of reinsurance, key insurance and insurance-related risk solutions. They had posted on their website on March 20, 2020.
Accordingly, despite the global increase in the number of people infected and dying, the company did not currently think there would be great stress on the life and health insurance segment. Although a serious pandemic on a global scale was the greatest cumulative risk possible in this category, especially because the disease was of course not excluded from life and health insurance, the company currently did not think the severity was up to hundreds of thousands of deaths worldwide.
Even in the highly unlikely scenario in which this global pandemic was equivalent to a 200-year event (i.e., a once-in-a-lifetime 200-year disaster), claims for insurance benefits would be expected to range equal to the average natural disaster in accident-property reinsurance.
Therefore, the insurance enterprise had no basis to rely on force majeure reasons to refuse to pay participants.
