Prudential Insurance incorrectly charged 112 thousand contracts

41% of contracts sold through banking channels are canceled or become invalid after the first year.

According to the recently announced Inspection Conclusion of the Ministry of Finance, Prudential Vietnam Life Insurance Company Limited (Prudential Insurance) is a 100% foreign-owned enterprise, established in Vietnam in 2011. The company's fields of operation are life insurance, health insurance, reinsurance, fund management, and capital investment in accordance with the law.

In 2021, Prudential Insurance began selling insurance through 7 banking credit institutions (bancass). The premium revenue through the bancass channel of Prudential Insurance recorded in the 2021 financial report was more than VND 6.1 trillion, equivalent to 21.48% of total premium revenue. Newly exploited insurance premium revenue through the bancass channel reached more than VND 3.7 trillion, equivalent to 54.89% of total newly exploited premium revenue. The company accounted for the total payment costs to insurance agents which are banks, credit institutions, and foreign bank branches of more than VND 1,972 trillion.

Prudential insurance calculated the cost incorrectly, 112 thousand insurance contracts were incorrectly accounted for, more than 740 billion VND, image 1 — Prudential Insurance has been operating in Vietnam since 2011.

Also in 2021, Prudential Insurance issued more than 94,000 new insurance contracts through the bancassurance channel. Notably, the first-year contract retention rate for insurance contracts exploited through the bancassurance channel (based on insurance premiums) was 59%, corresponding to the first-year cancellation and invalidation rate of 41%.

Regarding customer care, Prudential Insurance has made more than 76,000 welcome calls (a process of contacting customers within 21 days of consideration), but only 76.4% of calls were connected to customers. Of which, nearly 6.4 thousand calls had feedback related to contracts and insurance consulting content. Through processes such as "Anonymous Purchase" and "Complaint Resolution", Prudential Insurance has also discovered violations by 31 agents and 61 bank employees in agency activities.

Although there are procedures to check the activities of agents, through sample inspection, the inspectors still discovered 39 cases of insurance agents and bank employees who did not comply with regulations in the process of implementing insurance sales. These include issues that are not in accordance with regulations such as implementing procedures for implementing insurance sales; Managing insurance premium collection; Consulting on insurance products, collecting customer information, etc.

Inaccurate billing of over 112k insurance contracts

Through inspection, the competent authority determined that the company applied incorrect insurance premium calculation factors according to the technical basis and fee schedule approved by the Ministry of Finance. This led to incorrect calculations of the insurance premium amount of more than 112,000 insurance contracts under the term life insurance product with decreasing amount (Bao Tin Hung Gia) in 2021, violating the provisions of Clause 6, Article 39 of Decree No. 73/2016/ND-CP of the Government.

In addition, the company issued a promotional notice No. PD05042021 dated March 29, 2021 to the Department of Industry and Trade of Da Nang with the content of cash promotions for customers, which is not in accordance with the provisions of Clause 6, Article 39 of Decree No. 73/2016/ND-CP of the Government.

Prudential insurance calculated the premium incorrectly, 112 thousand insurance contracts were incorrectly accounted for, more than 740 billion VND, image 2 — Introduction to term life insurance on Prudential Insurance website.

In addition, Prudential Insurance has accounted for expenses related to bancassurance activities as deductible expenses when determining taxable income for corporate income tax (CIT) in 2021, which is not in accordance with the law on insurance business and tax law, with a total amount of more than VND 740 billion. The amounts accounted for in violation of regulations include:

The company paid initial support costs and cooperation fees for bank agents with a total amount of more than 4 trillion VND, of which the accounting as deductible expenses when determining taxable income for corporate income tax in 2021 was more than 44 billion VND;

Marketing support costs paid to the bank's organizing agent totaled more than VND 342 billion;

Direct bonuses to bank employees for introducing and selling insurance products for the Company, totaling more than 57 billion VND;

Payment of fixed allowances and bonuses to individual insurance agents in violation of regulations with a total amount of more than 296 billion VND.

In response to the issues specified in the Inspection Conclusion, the Ministry of Finance requested Prudential Insurance to implement financial handling recommendations for the 2021 accounting period, accounting for a reduction in deductible expenses when determining taxable income for corporate income tax in 2021, an amount of more than VND 740.2 billion.

For expenses with similar content, name, payment method, vouchers and related documents as the expenses stated in the inspection conclusion of the relevant accounting periods, the company is requested to adjust the accounting, determine, recalculate, and declare additional corporate income tax accordingly; do not allocate expenses paid by the insurance company, and do not account for them in accordance with legal regulations into the contract owner funds.

Prudential Insurance leaders are responsible for reviewing the issues mentioned in the Inspection Conclusion and reporting the implementation results in writing to the Ministry of Finance.

In addition, the Ministry of Finance assigned the General Department of Taxation to direct the Ho Chi Minh City Tax Department and related units to urge and review the declaration and compliance of Prudential Life Insurance Company (Vietnam) with tax and invoice laws for the expenses stated in the inspection conclusion; thereby handling administrative violations of tax and invoice (if any) and guiding and handling similar cases.

Assign the Department of Insurance Management and Supervision to review the Company's administrative violations in the Inspection Conclusion (if any) to handle administrative violations in the field of insurance business.

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