The Financial Supervisory Commission (FSC) yesterday reiterated a warning that insurers must contain runaway costs and seek sustainable policy sales growth.
Recent studies found that insurance policy sales have been burdened with excessive costs, including commission and bonuses paid to banks tasked with promoting the products, the commission said.
FINED
“The number of offending companies we uncovered was more than expected,” Insurance Bureau Deputy Director-General Shih Chiung-hwa (施瓊華) said, adding that such companies have been fined for their infractions.
Insurers decide the methods by which insurance policy costs are recognized, resulting in vast differences among carriers, Shih said.
Shih said that the bureau is in talks with the Life Insurance Association of the Republic of China (壽險公會), which is to form a more standardized approach to recognizing fees so that companies can meet regulatory guidelines.
“We urge companies to demonstrate greater restraint and implement improved self-regulatory efforts,” Shih said. “No policy should be designed in a way that does not cover relevant costs.”
The bureau earlier said that policy products’ commissions, bonuses and operating costs must not exceed a premium loading — the amount an insurer needs to cover expenses and generate profit.
The bureau also warned insurers to refrain from raising prices in response to heightened scrutiny on how they control costs.
Total first-year premiums collected by insurers in the first five months was tallied at NT$449.21 billion (US$13.85 billion), 15.6 percent higher than the same period last year, Life Insurance Association statistics showed.
The data showed that banking channels accounted for about 49.83 percent of sales, while insurers’ own sales agents made up 44.46 percent.
With banks’ sales commissions averaging between 3 percent and 5 percent, they have received a windfall of more than NT$10 billion from insurers, the data showed.
“From what we have seen, a number of insurers have been paying commission of between NT$5 and NT$7 to banks for every NT$3 they earn in policy sales,” said an Insurance Bureau official, who asked not to be named.
EXCURSION BAN
Measures to be implemented include a 30 percent cut in commissions, reduced bonuses and the banning of paid excursions abroad for top performing salespeople, the commission said.
The regulatory change is likely to affect smaller-sized organizations and salespeople specializing in traditional life insurance and single-pay products.
At the same time, industry observers have said that banks are increasingly concerned about a rise in the number of online insurance sales channels, in light of NT$15 million worth of interest-sensitive annuity insurance products China Life Insurance Co (中國人壽) sold at much lower commission costs through its online channel last month.
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