Five Taiwanese life insurers have cut the declared interest rates for their interest-sensitive New Taiwan dollar and US dollar products in a bid to reduce operating risks.
Cathay Life Insurance Co (國泰人壽) on Sunday announced on its Web site that it would lower the declared rates for dozens of its US dollar-denominated policies from last month’s 3.55 percent to 3.2 percent or 3.15 percent.
The insurance company is also lowering the rates of some of its NT dollar-denominated policies from 2.5 percent to 2.25 percent, it said.
Fubon Life Insurance Co (富邦人壽) has trimmed the rates for its US dollar policies from 3.5 percent to 3.25 percent and cut rates for its NT dollar policies from 2.5 percent to 2.3 percent.
Fubon Life’s declared rates in January were as high as 3.7 percent for US dollar products and 2.96 percent for NT dollar products, company data showed.
Transglobe Life Insurance Co (全球人壽) and China Life Insurance Co (中國人壽) lowered the rates for their US dollar products from 3.73 percent to 3.7 percent and 3.41 percent to 3.3 percent respectively, according to their Web sites.
Transglobe and China Life also lowered the rates for their NT dollar products from 2.55 percent to 2.35 percent and 2.5 percent to 2.3 percent respectively, their Web sites showed.
Nan Shan Life Insurance Co (南山人壽) has kept the rates for most of its US dollar policies unchanged, but decreased the rates for its NT dollar products from 2.5 percent to 2.3 percent, the company said yesterday.
Insurance companies in Taiwan began to lower the declared interest rates for their products in March, after the Insurance Bureau warned in January that setting unrealistically high declared rates could pose a risk to their businesses.
While higher declared rates mean higher bonuses for policyholders, they leave insurance companies vulnerable to foreign-exchange risks, as most of their investments target overseas assets, the regulator said.
“We will not tell insurers how low the declared rates should be, as only companies know what investment returns are best for their investment portfolios, but we have since the beginning of this year been asking them to stop selling products that are not profitable,” a Financial Supervisory Commission official surnamed Tsai (蔡) said by telephone.
The commission does not want to see insurers promise good declared interest rates just to poach clients, he added.
Although insurers’ rates cuts might be unwelcome for policyholders, consumers are not likely in the short term to switch and invest in policies from other insurers that have left their rates unchanged, said Peng Jin-lung (彭金隆), chairman of National Chengchi University’s department of risk management and insurance.
“People who have the funds and plan to make investments will still prefer insurance policies, which offer higher returns than bank deposits,” Peng said.
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