Taiwan Traditional Life Insurance - Slides

Sales of traditional life insurance policies — while continuing to outperform those of investment-linked products — have shown signs of decelerated growth after customers turned conservative due to major insurers lowering their declared interest rates, a Life Insurance Association report showed.

First-year premiums generated by traditional life insurance policies were NT$48.5 billion (US$1.56 billion) last month, up 9.1 percent from a year earlier, while those of investment-linked products dipped 14.7 percent year-on-year to NT$15.60 billion, the report said.

Traditional life products continued to make up the majority of products sold with a market share of 75 percent, with investors indifferent to investment-linked policies that offered lower returns amid volatility in global financial markets and surprise interest rate cuts, the report said.

Growth in sales of traditional life policies decelerated from 35.4 percent in the first quarter to 8.1 percent between April and last month as insurance companies began cutting the declared rates of their products, it said.

Higher declared rates mean higher bonuses for policyholders, but leave insurance companies vulnerable to foreign-exchange risks, as most of their investments are held overseas.

At the outset, the cuts did not discourage investors from buying the products as they still provided better returns than other policies and bank deposits, the report said.

However, with more major insurers continuing to lower their rates, investors became more conservative, which affected sales, it said.

As interest-rate-sensitive policies have dominated the life insurance market, any headwinds would be a drag on the whole industry, the report said.

Six major life insurance firms — Nan Shan Life Insurance Co (南山人壽), Cathay Life Insurance Co (國泰人壽), Shin Kong Life Insurance Co (新光人壽), China Life Insurance Co (中國人壽), Fubon Life Insurance Co (富邦人壽) and Transglobe Life Insurance Co (全球人壽) — have continued to trim their declared rates, the report said.

In the first eight months, first-year premiums generated by traditional life insurance polices grew 10.3 percent to NT$555.15 billion, while those of investment-linked policies fell 21.4 percent to NT$123.51 billion, the report said.

Total first-year premiums generated by all insurance policies fell 2.4 percent year-on-year, it said.

As insurers have continued to trim declared rates, sales of traditional life products might not improve in short term, the report said.