The Financial Supervisory Commission (FSC) on Thursday said it would tighten regulations on property insurance companies and require them to adjust their policy premiums at least every five years.
The measure aims to prevent insurers from engaging in price wars or setting unreasonably high rates, the commission said.
The amendment to the Regulations Governing Pre-sale Procedures for Insurance Products (保險商品銷售前程序作業準則) would take effect in two months, Insurance Bureau Deputy Director-General Wang Li-hui (王麗惠) told a news conference in Taipei.
Currently, property insurance companies are required to review their insurance products at least every six months and adapt their premiums based on their loss ratio or expense loading ratio, but they are not required to adjust them routinely, Wang said.
The loss ratio is the losses an insurer incurs due to claims as a percentage of premiums earned, while the expense ratio is the ratio of the administrative and maintenance expenses compared with the premiums.
A high loss ratio or expense ratio indicates financial distress, while low ratios suggest that insurance products are overpriced.
While insurers are subject to FSC regulation when independently calculating their rates, some tend to be conservative about raising their premiums even though their loss ratio or expense ratio is high, Wang said.
Those insurers are afraid of losing market share, as this hurts their financial strength in the long term, she said.
On the other hand, some insurers are not proactive about trimming their premiums, even as their loss ratio or expense ratio decreases, Wang added.
The tightened regulations would require insurers to regularly assess and adjust their rates for vehicle and fire insurance products, Wang said, adding that the rate adjustments would have to be approved by the insurers’ president and reported to the board of directors.
Insurers that contravene the regulations would be fined NT$600,000 to NT$6 million (US$21,067 to US$210,674), she said, adding that the new rules would make the industry fairer and healthier.
In separate news, Cathay Life Insurance Co (國泰人壽) yesterday announced a capital injection of US$400 million into its branch in Ho Chi Minh City, Vietnam.
This would raise the Vietnamese firm’s capital to US$690 million to fund its expansion, Cathay said in an exchange filing.
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