Children's life insurance ban sparks debate

A proposal to outlaw life insurance policies for children could affect more than two million parents nationwide who hold such policies today.

Last week, Legislator Shei Chi-da (謝啟大), a former judge in Hsinchu District Court, proposed a ban on children's life insurance. The prohibition would make it impossible for parents to take out policies for children who are not at least 14 years old.

The proposal comes just two years after children's life insurance was made legal. In the 1960s, Lee Ming-zhan (李明章) killed his son to collect an insurance check, and a ban on children's life insurance was in effect until 1997.

Since the Ministry of Finance lifted a ban on children's life insurance, the product has become one of the industry's most popular sellers.

According to the Life Insurance Association (壽險公會), the total number of policies for children had grown to 2.18 million by the end of 1998 -- just 15 months after the deregulation.

During that time, children's life insurance accounted for 36 percent of all newly underwritten life insurance policies.

Average coverage for the policies has been roughly NT$650,000 (US$20,000), according to the association.

"After the deregulation ... more than two million insurance policies have been underwritten, and so far there have been no cases of moral hazard or protest by the general public," said Chang Chung-yuan (張仲源), secretary general of the Life Insurance Association. "It is a mistake to ban children's life insurance policies."

But some say a case similar to that of Lee Ming-zhan in the 1960s could happen in Taiwan today, and for evidence they point to the US, where children's life insurance is also popular.

In 1995, seven-week-old Tara Abdelhaq suffocated in her crib in what looked like a case of sudden infant death syndrome.

Federal prosecutors alleged that Tara's mother, Dina Abdel-haq, had murdered her daughter in an attempt to collect on a US$200,000 life insurance policy.

Abdelhaq, jobless and on welfare, faced US$34,000 in gambling debts and had been recently arrested for check fraud at a casino. Another daughter, Lena, died in 1994 when she was just 18 days old. Abdelhaq is now serving a 21-year sentence.

Still, some life insurers argue that there is a huge demand for children's life insurance. The policies are also an investment vehicle, they note, which can be used for a child's education and healthcare expenses.

But other financial experts disagree.

"If the parents want real protection for their children on college or higher education expenses, mutual funds -- especially global equity funds -- are the answer," said K. P. Liu (劉凱平), president of SinoPro Securities Investment Advisory Consulting (弘利投資顧問).

"Insurance policies for children are not the most ideal investment vehicle. The returns have been relatively low compared to mutual funds," Liu said. "Since the investment period for a young child can be as long as 15 or even 20 years, the risk of equity investments are acceptable. An average global equity fund could easily reach a 12 to 15 percent annual return on investment."

Insurance policies, on the other hand, normally will not return more than 5 percent annually, Liu said.