Taiwan - Insurance Premium Increases

The nation’s life insurance market might continue its downturn due to new regulations that took effect yesterday, but the market is expected to stabilize by the end of this year. It is foreseeable that sales of life insurance products would continue to fall in the short term as consumers are likely to purchase fewer policies after premiums went up.

However, it seems to me that consumer demand for insurance products tends to be rigid and they might reconsider if they really need insurance products. Nonetheless, insurance sales are expected to recover gradually.

The new regulations would help the life insurance industry develop in a healthier way in the long term, he said. Four new regulations took effect yesterday as the Financial Supervisory Commission (FSC) aims to boost life insurers’ financial solvency and prepare them for the implementation of new insurance contracts standard IFRS 17 in 2025.

The commission lowered life insurance companies’ liability reserve interest rates on all policies denominated in New Taiwan dollars and US dollars by 25 basis points and 50 basis points respectively to keep them in line with declining market rates.

The commission also set a new lower limit on the death benefit-to-policy value ratio, which would incentivize insurers to sell fewer savings plans or policies linked with wealth management, as they provide fewer death benefits.

Insurance companies must calculate the contractual service margins of their products and make sure the margins are positive when applying to the FSC.

Companies are also requested to adopt a mechanism to stabilize their products’ declared interest rates, which determine the bonuses that policyholders receive.