Mon, Jun 17, 2013 - Page 13 News List

Insurance policies to be changed

LONG-TERM VIEW:An official said the government should guide funds to the care homes to create jobs and cope with the nation’s fast-aging population

By Crystal Hsu  /  Staff reporter

The government is studying exit measures for insolvent life insurance companies under which policyholders may have to take a loss on unrealized benefits to reflect interest rate changes and make acquisition deals easier.

“The model on which Transglobe Life Insurance Inc (全球人壽) acquired Kuo Hua Life Insurance Co (國華人壽) should not be repeated as it results in unreasonable costs,” said Barry Tsai (蔡康), vice president of the Taiwan Insurance Guaranty Fund (TIGF, 保險安定基金), the semi-official receiver of Kuo Hua from August 2009 until the recent ownership transfer.

Transglobe Life took over the troubled Kuo Hua in late March after it was granted compensation of NT$88.37 billion (US$2.95 billion) and 10-year governance forbearance linked to legacy policies.

The requirement for the buyer to deliver past and future benefits for all insurance policies is unreasonable because some Kuo Hua policies are fixed on interest rates of 6.5 percent and 8 percent when current rates drop below 2 percent, Tsai said.

The guarantee, intended to protect the rights of policyholders and calm the industry, slowed the transition, as state-owned Taiwan Financial Holding Co (台灣金控) refused the acquisition after a lengthy evaluation and two auction attempts fell through, Tsai said.

“It is not uncommon for insurance policyholders abroad to take a haircut in times of financial turmoil,” Tsai said.

Unreasonable coverage is not sustainable in the first place and consumers must be cautious when buying insurance policies, he said.

The legislature’s Finance Committee passed a resolution last month asking the Financial Supervisory Commission (FSC) to design a fair exit mechanism within three months.

TIGF would throw its weight behind a haircut and premium rate hikes, if necessary, for life insurance policies to facilitate the transition, Tsai said.

“Both policymakers and policyholders should take a more pragmatic approach as a full guarantee may turn out more costly for the public,” he said.

FSC Vice Chairwoman Jennifer Wang (王儷玲) said on Thursday that limited compensation is the international trend and the agency aims to push for its implementation without any legal revision.

TIFG chairman Chu Yun-peng (朱雲鵬) suggested the government guide insurance funds to the construction of nursing homes and related facilities across Taiwan both to create job opportunities and cope with the nation’s fast-aging population.

“It is time the insurance companies plan long term-care policies with the government’s support,” Chu said.

Long-term care insurance, an insurance product already sold in the US, UK and Canada, helps provide for the cost of long-term care not covered by health insurance, Chu said, adding that about 60 percent of individuals over age 65 will require some type of long-term care services during their lifetime.

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