The total first year premiums (FYP) of 17 major life insurance companies in Taiwan declined in 1999 for the first time in two decades.
According to figures released by life insurance companies, total FYPs fell 1.8 percent last year to NT$124.37 billion. The FYP is the revenue raised from premiums in a life insurance contract's first year.
The drop marks the first fall since 1979. The FYP of the 31 life insurance companies currently operating in Taiwan rose 17.9 percent in 1997, and 15.8 percent in 1998. Seventeen major life insurers in Taiwan held about 98 percent of the new policies market.
In explaining the drop, analysts said the life insurance market may have reached a plateau after years of high growth. The market might continue to stagnate this year unless the government deregulates the market to allow for more new insurance products, they said. A possible ban on children's life insurance policies, to be decided later this year, would further dampen future prospects for the industry.
Of Taiwan's top ten life insurers, Cathay Life Insurance (
The company also expects its prospects to pick up this year. "We did not want to cut prices to compete with others," said Hwang Tiau-guay (
"That was why our FYP dropped significantly in 1999. But then the Ministry of Finance (
But several other life insurers, including Aetna Life Insurance (
The double-digit FYP growth of 1997 and 1998 was due mainly to the strong growth in children's life insurance policies and the high rate of return on life insurance policies, said insurance analysts. As a result, the insured rate of Taiwan's population over those two years rose from 62 percent to 104 percent.
But this year's growth is expected to stagnate due to the likely ban on children's life insurance policies. The Legislative Yuan decided to ban the policy during a review at the end of last year, by reactivating Article 107 of the Insurance Law. Life insurers are concerned that the life insurance market will suffer a further decline if the article is not later rescinded and children's policies are banned later this year.
"We need new insurance products to stop the market from declining further," said Chang Chung-yuan (
"The insured rate in Japan reached 594 percent before the market became saturated. That means Taiwan should be able to stay on a course of growth for years to come. The key is to deregulate new insurance products."
The child insurance ban goes against the tide of deregulation, analysts said.
However, the finance ministry has said it will deregulate variable rate insurance policies (變動利率保單) this year.
The finance ministry is also planning to deregulate insurance products in accordance with a preset schedule to fall in line with its impending WTO commitments. Such new insurance products could revive consumer demand and create a higher insured rate, analysts said.
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