Solutions for Inspection, Examination, Supervision of Policy Implementation and Handling of Law Violations for Non-Life Insurance Enterprises

The demand for expertise in the insurance sector as well as insurance market management when the operations of non-life insurance enterprises have their own technical characteristics. Therefore, to meet the management requirements for the non-life insurance business sector, the management agency needs to pay attention to and implement a strategy for developing high-quality human resources according to the following process:

- Forecast human resource needs to perform professional and managerial activities in each phase.

- Assess training needs for specialized departments, as a basis for developing professional and skills training programs to meet human resource quality.

- Regularly train and update, improve professional qualifications, working ability, convey work experience and professional ethics according to job requirements and demands.

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- Build a reasonable income and working environment compensation mechanism for employees.

Management staff of insurance companies in general and non-life insurance companies in particular.

* Modernize information technology facilities to serve state management.

Applying technology to insurance business is an inevitable trend of the insurance industry in the world and in Vietnam. In May 2015, the Prime Minister decided to make the insurance database one of six national databases that need to be prioritized for implementation to create a foundation for developing e-government. To implement this orientation, it is necessary to build monitoring management software and a system to connect data from insurance companies with management agencies. At the same time, it is necessary to build a centralized insurance data warehouse capable of storing historical data, updating promptly and comprehensively to serve the analysis, forecasting, and calculation of insurance premiums; build an analysis and forecasting model for management and monitoring indicators of insurance business activities.

This information technology system must meet the following criteria:

(i) The IT application system will be developed on a modern database platform, used for a long time, with the ability to develop, expand, provide sufficient, timely, and accurate information, meeting the management and supervision of insurance business activities of the management agency.

(ii) Allows management agencies to look up necessary information and data of DNBH, serving monitoring activities at any time.

(iii) Ability to automatically analyze reports and quickly warn of risks of insurance companies, helping management agencies promptly intervene in any fluctuations of insurance companies as well as the market.

(iv) There is a database system that shares information between management agencies and a system that publishes monitoring results to interested parties. Users at DNBH via the internet can access and exploit the system, and are provided with

function of entering data directly on the system or transferring data files in standard format to load data into the system.

To modernize the information technology system for non-life insurance management requires investment in money and also time to follow the recommended steps as follows:

- First of all, the management agency needs to put into operation a database for compulsory insurance products such as civil liability of motor vehicle owners to be able to manage according to insurance purchasers, limiting the situation of insurance fraud.

- Next, develop management software that is suitable for the scale and development of the market. The development of this software can be done by studying and referring to software that has been applied in a number of similar markets. Therefore, the Department of Insurance Management and Supervision needs to coordinate with the Department of Information Technology and Financial Statistics as well as insurance companies to develop software that is integrated and connected with the management agency according to the set goals.

- Update historical data of non-life insurance companies and clean data to meet the requirements of the management software. At the same time, develop regulations requiring non-life insurance companies on the format and time of submitting reports for management and market forecasting.

- Require insurance companies to build management and accounting software to ensure connection between insurance companies and management agencies according to a common structure to provide information to the market to promptly make management decisions.

- Unified regulations on procedures for regular and urgent information exchange between management agencies and insurance companies regarding: place of information reception; method of information receipt; information exchange mechanism; information security mechanism.

4.2.3. Solutions for inspection, examination, supervision of policy implementation and handling of law violations for non-life insurance enterprises

*Supplementing the authority of agencies to improve the effectiveness and sustainability of inspection and enforcement activities of State management

- Supplementing regulations on the use of independent auditors and independent experts to serve the requirements of inspection work. Accordingly, the state management agency of insurance business performing the function of specialized inspection of insurance business has the right to request the subject of insurance inspection to hire an independent auditing company, consulting company or expert to evaluate certain contents of the organization, operation and finance of the subject of inspection when deemed necessary.

- Amend and supplement regulations on inspection activities, handling of violations, settlement of complaints and denunciations in the insurance sector towards providing principles on inspection activities, handling of administrative violations, complaints and denunciations. In addition, specify the authority and measures to handle violations specific to the insurance sector.

* Gradually shift the monitoring method from compliance monitoring to risk-based monitoring

According to the trends and experiences of many countries, many countries have applied the CAMEL rating system (C- Capital: Capital; A - Asset quality: Asset quality; M - Management: Management; E - Earnings: Revenue; L- Liquidity: Liquidity) to evaluate the performance of insurance companies. The state management agency will evaluate each criterion and score each criterion. Based on the total score of each criterion, the supervisory agency will compare it with the corresponding ranking table so that the supervisory agency can take appropriate measures for each insurance company. The CAMEL rating system is considered an assessment method in the transition period from compliance monitoring to risk-based monitoring. In the current conditions, in addition to gradually converting legal regulations, the management agency should apply the CAMEL rating system.

Next, we will switch to a risk-based management and supervision model, promote administrative procedure reform, shift management and supervision activities from pre-inspection to post-inspection, enhance the proactiveness and responsibility of enterprises in administrative activities, use and management of capital resources, in accordance with the scale, scope and business characteristics of each enterprise. In addition, it is necessary to enhance the effectiveness of management and supervision work in the direction of flexibly combining remote management and supervision and on-site inspection, and increase dialogue with enterprises.

* Continue to improve the efficiency of remote monitoring operations

Remote monitoring is a frequent, effective and low-cost activity.

poor. Therefore, the Insurance Supervision and Administration Department needs to take the following steps:

(i) Continue to improve the monitoring indicator system: Currently, Circular 195/2014/TT - BTC is no longer effective and no new circular has been issued, so this is the time for the management agency to edit and supplement appropriate assessment indicators. Specifically:

- Additional indicator: ROA = Profit after tax/ Total assets

ROE = Net Profit / Owner's Equity

These two indicators help evaluate the efficiency of using total assets and equity. ROA shows how much profit after tax is generated for 1 dong of assets, ROE shows how much net profit is generated for 1 dong of equity.

- Add indicator: Leverage ratio = Total assets/Equity

This indicator shows how much equity can finance assets, helping to assess the financial capacity of the insurance company.

(ii) Determine the appropriate reference range of assessment indicators.

Each indicator presented in Circular 195/2014/TT - BTC has a range and scoring method in the appendix. However, according to the results of expert interviews, the reference ranges are not really suitable for the Vietnamese insurance market in recent times. Therefore, before issuing new regulations, the Ministry of Finance needs to study to

provide appropriate reference ranges for the system of indicators to have a real early warning effect. In addition, the management agency also periodically reviews the calculation and normal limits of the indicators and compares them with acceptable limits. In addition, the management agency needs to combine the results of all areas of risk assessment to determine the reference ranges of the indicators.

* Strengthen on-site inspection activities

In the inspection and supervision activities, it is necessary to combine remote monitoring and on-site inspection. If remote monitoring has a regular effect and is an early warning, on-site inspection has the effect of promptly detecting violations that have occurred in the business activities of DNBH.

Currently, the Department of Insurance Management and Supervision has an inspection and examination process and is carried out in general according to the prescribed steps within the provisions of the Inspection Law and guiding documents. However, due to the nature of insurance business activities, the inspection and examination process is often carried out in the following steps:

(i) Prepare and make decisions on inspection and examination: Based on the results of remote monitoring, select the insurance companies that need to conduct inspection and examination in a focused and key manner.

(ii) Conduct inspections and audits: Inspectors and auditors conduct assessments of data on the business performance of insurance companies submitted to the regulatory agency. Combined with risk assessment and information collection from internal controls and independent audits to detect violations of that company.

(iii) End of inspection and examination: The supervisor will draw conclusions on the inspection and examination content regarding the basis, cause, responsibility and propose handling measures.

With the general procedure of on-site inspection, the management agency needs to pay attention

The following contents to improve the effectiveness of State management:

- It is necessary to make specific and detailed plans about the order and procedures as well as the stages, departments and people that need to be included in those plans.

- The on-site inspection process is carried out by the management agency as a supporter to promote the activities of the insurance company, not as an audit or financial inspection to try to find violations for handling. The on-site inspection has the effect of pointing out violations to the insurance company to improve the health of the insurance company's activities and also demonstrates the effectiveness of state management.

- Strengthening on-site inspections does not mean inspecting as much as possible, but rather focusing on key points to save resources for management agencies while still achieving high efficiency.

* Improve the effectiveness of management of compliance with State regulations on risk assessment in non-life insurance companies.

Based on reports on business activities of non-personal insurance companies

The risk management body will develop risk management standards for the entire

market. In order to assess the impact of risks on the business activities of non-life insurance companies, the risk management agency will base on the nature and characteristics of each type of risk to quantify the level of risk to the business activities of non-life insurance companies. The risk management agency can also advise non-life insurance companies to comply with regulations on risk management and business operations to avoid being passive when business incidents occur.

Risk management should focus on the following main risk groups:

- Risk in the insurance underwriting process: This risk occurs in the first step before signing the insurance contract. Managing this risk requires considering compliance with the requirements of risk assessment techniques in insurance business activities. If this risk occurs, it will lead to the phenomenon that the level of insurance premium collected is not commensurate with the insured risk or in other words, the amount of premium collected does not guarantee compensation when a loss occurs.

- Risks related to insurance claims and compensation: This is the risk that occurs when a non-life insurance company pays compensation to a customer who is suspected of insurance fraud. Risk management needs to promptly detect fraud to ensure the financial health of a non-life insurance company.

- Risks in provisioning: Provisioning is a technical and complex requirement for non-life insurance companies. Technical reserves always account for a very large proportion of the capital of non-life insurance companies. Management agencies need to consider the size of technical reserves of non-life insurance companies. If the technical reserves are not sufficient, it can lead to insolvency. In addition, companies can use this capital to regulate the increase and decrease of capital, capital sources, liabilities and profits, causing a loss of honesty in financial reports.

4.3. SUPPORT SOLUTIONS

To implement the solutions presented above, it is necessary to have coordination between functional agencies and organizations in the economy.

4.3.1 For the National Assembly, the Government, Ministries and ministerial-level agencies

- The National Assembly, the Government, Ministries and ministerial-level agencies need to pay attention, provide guidance and promptly include in the law-making program when it is necessary to amend, supplement or develop legal documents related to the insurance market in general and the activities of non-life insurance enterprises in particular.

- Review regulations to ensure consistency and uniformity of related contents of non-life insurance business activities with other relevant legal documents such as the Civil Code, Penal Code, Investment Law, Competition Law, etc.

- The Government creates favorable conditions in terms of policies and mechanisms in upgrading the operating model of the State management apparatus as well as training to improve the qualifications of management staff.

State management to improve the effectiveness of state management of non-life insurance business activities.

- Relevant Ministries and ministerial-level agencies need to coordinate in developing and promulgating policies and organizing the implementation of those policies to create a comprehensive tool to regulate the business activities of non-life insurance enterprises.

4.3.2 For Vietnam Insurance Association

- Perfecting the operation apparatus of the Insurance Association to contribute to promoting the activities of non-life insurance companies, and at the same time representing the common voice of non-life insurance companies in the domestic and international markets. Special attention is paid to improving and specializing the quality of human resources of the Insurance Association; aiming to separate into two separate Insurance Associations: life and non-life.

- HHBH regularly organizes congresses to review and evaluate the activities and roles of the Executive Board, Inspection Board, and standing departments to closely develop goals and periodically orient operations, ensuring the promotion of the role of the extended arm of the management agency, and being an effective bridge between insurance companies in the market.

- The Association needs to regularly propagate and coordinate the development of cooperation rules against unfair competition among non-life insurance companies in the market, codes of conduct between member companies, and cooperation agreements on insurance operations.

- Strengthen the scope of cooperation in both breadth and depth between insurance companies in training, information exchange, business cooperation, risk assessment, insurance premium calculation, co-insurance, reinsurance, loss prevention and limitation, and use of insurance agents. In addition to the current life insurance agent data management system of the insurance center, move towards building and implementing a non-life insurance agent data management system, managing the compulsory civil liability insurance database of motor vehicle owners, etc. Develop a standard code of professional ethics applicable to insurance agents of insurance companies.

- Review and amend the Charter of the Insurance Association in the direction of encouraging insurance companies to join the Association, linking the rights and responsibilities of insurance companies with the Association to improve the quality of cooperation plans and propose practical common action programs. In addition, it is necessary to closely and regularly coordinate with the state management agency of insurance business and insurance companies to remove difficulties of insurance companies.

- Closely coordinate with state management agencies on insurance business, mass media to promote propaganda on insurance and state insurance policies, thereby disseminating knowledge about insurance widely in the community and raising awareness of insurance participation. With the characteristics of population, income and level of insurance participation in our country today, it proves that Vietnam is a potential market. In addition to promoting products of non-life insurance companies, the Association's propaganda will bring people objective information.

more accessible. In addition, this is also an information channel about crimes of profiteering and insurance fraud to improve knowledge and have a deterrent effect.

- State management agencies continue to review and enhance the role of the Vietnam Insurance Association in coordinating, managing, using and promoting Funds for social security purposes (Insured Person Protection Fund) and the database system serving the general insurance market (motor vehicle database).

- Implement training, organize capacity building training for insurance officers and employees, coordinate agent training for the market; strengthen cooperation with foreign insurance associations to implement staff exchange programs, internships at foreign insurance companies' headquarters.

- Actively expand relations with international insurance and reinsurance companies and regional insurance associations to increase opportunities for Vietnamese non-life insurance companies to expand their business activities abroad, improve financial capacity, attract foreign investment, transfer technology, promote training activities and exchange information and operational experience.

4.3.3 For non-life insurance companies

* Building corporate culture and professional ethics in non-life insurance companies while promoting the fight against insurance fraud.

- Building corporate culture and professional ethics in non-life insurance companies

The working environment greatly determines the loyalty of employees. To gain a foothold in the market, non-life insurance companies must not only build a scientific business process but also create their own culture to create a combined strength for the company. The directions to implement this solution are as follows:

(1) Develop appropriate recruitment policies to select people with both expertise and professional ethics suitable for each job position.

(2) Regular training to improve working skills and qualifications, cultivate professional ethics and communication culture in the enterprise and with customers.

(3) Strengthen human resources with preferential policies on income and job position so that employees can confidently contribute to the company to be worthy of the income they receive.

(4) In addition to the remuneration policy, it is necessary to pay attention to building a unique corporate culture, creating a friendly and professional working environment so that employees want to stay long-term to maximize their capacity and connect everyone together to create a strong collective.

- Strengthen the fight against insurance fraud

Insurance fraud and profiteering are the main causes of loss in compensation payments of non-life insurance companies, thereby increasing costs and reducing business efficiency of the company. In order to effectively combat insurance fraud, it is necessary to

There must be many measures from the State's legal policies, from the awareness of insurance participants and insurance companies. However, even in developed markets, where there is a strict and strict legal system, insurance fraud still exists and with more sophisticated tricks. Therefore, insurance companies need to join hands to come up with solutions not with the expectation of eliminating this phenomenon but with the aim of preventing and minimizing fraudulent behavior. Specifically:

- Comply with the business processes that have been developed and implemented by the insurance company;

- Minimize cash compensation for beneficiary organizations and individuals and send compensation notices directly to beneficiaries by post;

- Link the compensation assessment process to possible profiteering behaviors.

out when training employees on coping and handling skills;

- Strengthen management and strictly handle violations to benefit from insurance by officers, employees, and insurance agents within the scope of the enterprise's authority. It is possible to sign deposit contracts with agents to bind responsibilities and handle violations when agents collude with buyers to commit acts of profiteering.

* Build and perfect insurance business processes while strengthening the organization of internal inspection and control systems.

- Build and perfect business processes:

The business process of non-life insurance enterprises includes many stages from exploitation to compensation, in which the results of this stage are the basis for implementing other stages, so the development, completion, policies, mechanisms, and insurance business management processes are an objective requirement for non-life insurance enterprises. As an intermediary financial institution, non-life insurance enterprises carry out many contracts and payments within a period of time. Therefore, it is necessary to have a scientific and clear process for employees and insurance participants to understand and implement to ensure that all operations are easily resolved. In addition, the development and implementation of business processes also contributes to limiting insurance fraud. Experience from insurance companies in developed countries shows that they have built a quality management system according to international standards ISO 9000. This is truly a tool to help enterprises continuously improve their overall quality. To gradually improve the business process according to quality management standards, non-life insurance companies need to implement the following steps:

(1) Step-by-step business processes are built to relatively meet quality management standards in each business. Enterprises need to thoroughly disseminate them to all member companies, agents, and employees.

(2) For the exploitation stage: Before issuing an insurance application, it is necessary to conduct a risk assessment by combining past and present loss situations.

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