The cost of insurance policies is expected to rise by as much as 20 percent next year as the Financial Supervisory Commission tightens reserve requirements.
The changes are set to take effect on Jan. 1, the commission said on Thursday.
The benchmark interest rates for the New Taiwan dollar, the US dollar and the Australian dollar have been lowered by between 1 and 3 basis points in reflection of market trends, as global central banks’ monetary easing policies continue, Insurance Bureau Deputy Directory-General Shih Chiung-hwa (施瓊華) told a news conference in Taipei.
The commission left the benchmark rates for the Chinese yuan and the euro unchanged.
Due to the lowered rates, insurance companies would have to allocate more funds to their reserves to meet the commission’s requirements, leading to elevated costs for underwriting insurance products, Shih said.
With diminished returns, companies would be compelled to pass the extra costs on to their customers to avoid incurring losses, she said.
“Whole life insurance, paid-up additional whole life insurance with compound interest and level-premium whole life insurance products are expected to see the most pronounced price increases,” Shih said.
For an NT dollar-denominated whole life insurance product with a six-year duration, the price increase is projected to be between 7.9 and 11.2 percent, while the cost of a 20-year whole life insurance product is set to to increase by between 2.1 and 23.4 percent, Shih said, citing the bureau’s estimates.
Shih said the price increases would vary according to the structure of the issuer.
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