The first-year premiums of the nation’s life insurance companies plunged 37.7 percent year-on-year to a total of NT$217 billion (US$7.2 billion) in the first quarter after they cut their products’ returns due to lower interest rates and stricter regulations, the Life Insurance Association said in a report.
The decline was steeper than a 20 percent drop forecast by Fubon Life Insurance Co (富邦人壽) last month.
First-year premiums declined for all types of policies, including traditional life insurance, accident insurance and annuity insurance, which reported annual drops of 41.7 percent to NT$147 billion, 4.3 percent to NT$2.7 billion and 28.9 percent to NT$10.2 billion respectively in the first three months of this year, the report said.
Sales of investment-linked products also retreated 32 percent from a year earlier to NT$45.6 billion in the period, it said.
The only exception was the health insurance sector, which bucked the downtrend with an 8.3 percent year-on-year increase in sales to NT$10.7 billion in the first quarter, as consumers paid more attention to their health insurance coverage amid the COVID-19 pandemic, it added.
Life insurers, which have seen their sales deteriorate since January, faced bigger challenges amid a low interest rate environment caused by the central bank cutting its rates by 25 basis points and the US Federal Reserve’s emergency rate cuts of 1.5 percentage points, the report said.
With the lower interest rates, insurers continued to reduce their products’ declared interest rates, which determine the bonuses that policyholders can receive, it said.
Declared interest rates for most New Taiwan dollar-denominated interest rate-sensitive policies offered by major insurers were slashed to 2 percent or less after the rate cuts, it added, marking a considerable drop from 2.7 percent a year earlier.
Sales were also negatively affected by the Financial Supervisory Commission on Jan. 1 reducing insurers’ liability reserve interest rates by 25 basis points, which caused an average increase of about 2 to 3 percent in premiums for new policyholders, the report said.
Meanwhile, the growing epidemic prevented salespeople from visiting clients, which has also negatively affected sales, it said.
The commission requiring target-maturity bond funds to be linked with policies that only invest in bonds with ratings of at least “BBB” led to insurers offering lower investment returns on investment-linked products, which caused a drop in sales, it added.
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