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Newsletter | February 2016, Issue 1
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INSURANCE
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FSC Begins Rollout of the Amendment to the Insurance Business Supervisory Regulation
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On November 24, 2015, the Financial Services Commission (“FSC”) promulgated an amendment to the Insurance Business Supervisory Regulation19 (“Amendment”).
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This Amendment is being rolled out in phases. As part of the follow-up actions to “The Roadmap for Strengthening the Competitiveness of the Insurance Industry,” the phased approach is designed to help ensure prompt policy implementation, and to improve the cancellation refund system of savings-type insurance.
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Key updates of the Amendment include:
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Standard interest rates abolished.
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The standard interest rate system, which caused uniform insurance product prices, was abolished to promote competition by inducing insurance companies to autonomously determine the premiums.
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Greater flexibility in adjusting the official interest rate.
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Goal is to enhance autonomy through gradual expansion of the “official interest rate” adjustment range. This is used for settlement of variable rate insurance products.20
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Enhance autonomy concerning safety premiums of risk rates.
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The Amendment aims to gradually increase the safety premium limit for risk rates when developing insurance products that target new risks, and for class of people who have difficulty buying insurance.21
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Adjustment limit for risk rates abolished.
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The Amendment, in principle, abolishes the adjustment limit for risk rates (±25%) applied when calculating insurance premiums. Gradually, the adjustment limit will be discontinued for indemnity health insurance, as it may be subject to uniformed price increase following such deregulation.22
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Cancellation refund system of savings-type insurance improved.
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The Amendment also seeks to reduce the deductible amount for cancellation of savings-type insurances by increasing the weight allocation ratio of the cost of entering into an insurance agreement among the operating expenses.
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Additionally, the Amendment aims to gradually reduce the surrender value for savings-type insurance sold through bancassurance and online channels to 50% of the surrender value for general insurance solicitor channels.23
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| 19 |
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Via FSC Notification No. 2015-37.
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| 20 |
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Pre-Amendment rate of ±20% → ±30% in 2016 → Abolishment in 2017.
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| 21 |
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Pre-Amendment rate of ±30% → ±50% in 2016 → Abolishment in 2017.
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| 22 |
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Pre-Amendment rate of ±25% → ±30% in 2016 → ±35% in 2017 → conditional deregulation in 2018.
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| 23 |
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I.e., expand the weight allocation ratio of the cost of entering into an insurance agreement to about 50% for insurance solicitor channels, 70% for bancassurance channels and 100% for online channels.
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