Extending business to overseas markets and meeting international standards and practices have become core aspects of Taiwanese insurance companies’ sustainable development in the face of the challenges of globalization. Consumers, especially the younger generation, are pushing the insurance industry to embrace innovation. The Taiwan authorities, in turn, need to strike a balance between embracing that innovation and maintaining sound regulatory supervision.
In this year’s paper, the Committee continues to focus on providing simple and innovative solutions through e-commerce to encourage an increased stress on protection insurance. The paper proposes introducing more efficient sales and claims processes, making better use of data, promoting sound asset and liability matching principles, strengthening the industry’s financial stability, and adopting a risk-based supervisory approach, reducing frequent regulatory changes while allowing flexibility of foreign insurers in ESG (Environmental, Social and Governance) and TCFD (Task Force on Climate-related Financial Disclosures) reporting. Initiatives undertaken by the Insurance Bureau (IB) have enabled Taiwan to lead the region in ICS 2.0 and IFRS 17 implementation.
While the banking industry has moved ahead in paperless and digital solutions, the insurance industry has been lagging behind. Inefficiency, especially regarding outdated sales and claims processes, is the main problem. The processes are cumbersome and do not meet the expectations of customers in the digital age. We can do much better in these areas, delivering a more satisfactory customer sales and claims experience by leveraging data from the new eID, reducing the amount of mundane paperwork, and moving towards a greener operating environment. To strengthen the industry’s financial stability, it is also important to ensure that assets match liabilities in the original currency.
When setting up new rules to supervise the insurance industry, the authorities and the industry need to work together to closely follow international market practices and avoid any significant deviations from them. Setting a clear enforcement date would enable industry to be better prepared operationally and reduce paper wastage.
Strong engagement between industry and government is critical to achieving these goals. As an industry, we are committed to working closely with the IB and the Financial Supervisory Commission (FSC), and we appreciate the clear desire of the IB and the FSC to reciprocate. To make progress, it is important to set out priorities that we can all embrace, and then define short-term objectives to work toward together. The Committee is thankful to the government, especially the IB, FSC and the National Development Council (NDC) through the quarterly White Paper follow-up meetings, for its continuing commitment to work with us to realize the value of Insurtech, make the insurance industry’s services more effective and competitive, and help the Taiwan industry leapfrog toward globalization.
Suggestion 1: Provide more opportunities for e-commerce to help modernize and develop Taiwan’s insurance market.
1.1 Allow more types of protection insurance to be sold online and reduce the constraints on e-commerce insurance sales. Online insurance provides fast and convenient protection to the public. It has all the constituents to be an instant hit with today’s young tech-savvy generation, which favors doing everything with a few clicks online. Although COVID-19 in 2020 led to a surge in e-commerce and accelerated digital transformation, the Taiwan online life insurance market has grown relatively slowly since the e-commerce channel opened in 2014.
The slow pace is attributable to several factors. First, only limited types of life insurance products with limited sum assured (coverage) can be sold online. Some short-term health products – such as one-year dread disease, surgery, cancer, and hospital income insurance – are suitable protection products for online sales to meet customer’s unmet needs. Second, the sum assured limit and financial underwriting threshold of e-commerce are affected when an insurance company receives a major penalty, whether or not the penalty is related to e-commerce sales breaches. We recommend that more short-term protection products be allowed for sale online and that the sum assured limit and financial underwriting thresholds be affected only when an e-commerce sales breach occurs.
1.2 Permit data-sharing in line with the new eID policy. Global trends to strengthen personal data protection may prevent insurance companies from accessing policyholders’ personal data without directly contacting them to obtain their express consent, even if there is justifiable cause. Stringent restrictions on personal data sharing may sometimes prevent insurance companies from providing certain valuable services or acting for the benefit of the policyholder. For example, it may be impossible to mail notices of insurance benefits to a policyholder’s most recent address if it is different from the one given on the policy application form.
The Committee recommends that the Taiwan authorities consider relaxing relevant constraints and implementing a cross-industry data-sharing mechanism to facilitate the provision of insurance-related services to policyholders. The new eID policy promoted by the Ministry of the Interior (MOI) could be a good example of such a mechanism, balancing the provision of commercially viable large-scale e-services with customers’ need for privacy and security in online transactions.
We propose that the IB work with the MOI to explore the possibility of allowing insurance companies to access certain personal data stored in the eID on-line database for the purpose of providing insurance-related services to their policyholders. For example, on the condition that reasonable security measures are in place, insurance companies should be permitted to check the most current and valid addresses of its policyholders from the eID database for mailing insurance policies and notices to the policyholders. Such a data-sharing mechanism will help bring about more effective communications with customers while adequately protecting customer interests as well as the rights and obligations of both parties under the insurance contract.
1.3 Allow more insurance services to be fulfilled online. The trend toward digitalization by enterprises and governments worldwide in response to the need for convenient and high-efficiency services has been driving growth in e-commerce, especially after the emergence of COVID-19. We therefore urge the Taiwan authorities to amend relevant insurance regulations related to online services for both life and non-life insurance products, with the aim of allowing the insurance industry to provide more e-services to consumers for a more convenient and efficient customer experience in the following areas:
A. Insurance application process.
A mechanism exists for consumers to approach insurers via online enrollment platforms, and there is a mobile enrollment mechanism by which licensed insurance agents can assist consumers in applying for insurance products via mobile devices connected to the insurer’s IT system. As a data security measure, digital consent is permitted to be given online using a one-time password (OTP), enabling consumers to complete the personal identification process prior to using the online enrollment platform at the insurer’s website. We suggest that this method be extended to mobile enrollment, where written consent with a wet signature provided beforehand by the policyholder would no longer be required.
Currently, online enrollment is limited to only certain types of life insurance products and there are still some barriers to the online sale of non-life insurance products, which inhibits the development of digital services. As long as a proper regulatory regime is in place, we suggest extending the scope of insurance products permitted to be sold online and allowing a digital version of consent to be used to replace hard copy consent for the mobile enrollment process, especially after the eID system has been launched in Taiwan.
B. Endorsement process.
For the sake of consistency in the overall service flow, we suggest providing a mechanism for endorsement via the online platform for consumers to update/amend/modify their policies digitally, without a hard copy endorsement with wet signature.
C. Claims process.
There is no provision requiring claims to be filed in a hard copy form with wet signature. However, current regulations explicitly permit claims to be filed online only for death insurance. For travel inconvenience insurance, the insurer is allowed to pay indemnification to the insured after receiving a LINE notification from the insured of the insurable incident without the need for a hard copy of the claim form with wet signature.
Again for the sake of consistency, we suggest revising the regulatory scheme to enable consumers to file claims online for other types of insurance as well. The result would provide added consumer convenience and a faster payment process.
In addition, insurers could include fraud risk controls in their online claims processes to protect this function from abuse. The changes suggested above are consistent with what is permitted in numerous other jurisdictions, including the U.S., the EU, and Australia.
Suggestion 2: Permit insurers to exclude foreign investments backing foreign-currency-denominated traditional insurance products when calculating the limit on total foreign investment.
Promoting sound asset/liability and investment and risk management practices is crucial to ensuring the soundness of the insurance industry as a whole by enabling well-thought-out and carefully managed investment and risk-management strategies. Insurers in Taiwan should have the same access to, and benefits from, more advanced regulations regarding investment, hedging, and risk management capabilities as are available in other modern insurance markets. We hope to see more progress toward this end in the coming year.
Compared with TWD-denominated traditional products, foreign-currency-denominated products are more ALM (asset-liability management)-friendly to life insurance companies because of the lack of foreign exchange risk and much wider range of investment options with decent quality and sufficient liquidity for matching insurers’ liabilities. Nevertheless, insurers’ capacity to offer foreign-currency-denominated traditional insurance products is severely constrained by current regulations limiting total foreign investments. We believe the removal of this constraint could substantially enhance the ALM adequacy of life insurance companies.
Another positive impact of such removal would be the encouragement of product innovation in the life-insurance industry. When introducing creative, new foreign- currency-denominated products to the market, this removal would allow insurance companies to participate in mature, diverse, and liquid foreign-capital markets without worrying about the foreign investment cap.
Suggestion 3: Adopt risk-based supervisory rules for differentiated sales channels.
Different sales channels pose different levels of risk for insurance companies. Requiring insurance companies to set up equally strong internal control mechanisms for all sales channels is impractical. In fact, applying stringent internal controls to less risky sales increases insurance company compliance cost, obstructs the sound development of the business, and causes inconvenience for customers in securing timely insurance protection.
Take the telemarketing channel, for example. Telemarketers do not collect premiums from customers or indeed have any personal connection with customers. Post-sale services are provided by the insurance companies. Therefore, regulations aimed at preventing premium embezzlement by mapping a customer’s address, email address, telephone number, and IP address against the telemarketing representative’s identity are superfluous when the risk is so low.
In addition, the average ticket size of telemarketing sales is small compared to VUL (variable universal life insurance) or annuity product sales. In the case of a telemarketing sale, it may be unnecessary to check whether the customer took out any loans in the previous three months, a procedure that customers may find onerous. Regulations originally designed for bancassurance or face-to-face sales by agents can be somewhat relaxed given the low inherent risk in the telemarketing channel.
To achieve effective supervision, we recommend a risk-based approach to setting regulations on internal controls. Insurance companies can take mitigating action based on their own assessment of the risks they face, while the regulator conducts risk-based supervision and inspection.
Suggestion 4: Reduce the burden of frequent regulatory changes on stakeholders.
The insurance industry is among the most heavily regulated sectors in Taiwan, and is also subject to frequent changes of laws and regulations. Any minor change in a law or regulation may require all insurance companies to significantly alter or even completely overhaul their product design, policy terms and conditions, product flyers and brochures, IT systems, and other customary practices. Frequent changes not only cause undue administrative burdens on insurance companies but also lead to excessive paperwork, unnecessary costs, and wasteful use of resources.
In view of the above, the Committee urges the Taiwan authorities to place equal emphasis on efficiency and effectiveness in implementing new or amended regulations. For example, fixed enforcement dates could be set for all laws or regulations enacted or amended during the same designated period – such as January 1 and July 1 for those promulgated during the previous six-month periods. Streamlining the implementation process for new laws and regulations would alleviate much of the burden of regulatory changes on the insurance industry.
Suggestion 5: Show flexibility regarding ESG reporting requirements for foreign insurers.
The concept of Corporate Social Responsibility (CSR) was first introduced to Taiwan three decades ago. Now major companies in Taiwan annually publish CSR reports with regulators’ encouragement to communicate their accountability to the public regarding economic, social, and environmental matters. Over the past decade, institutional investors have increasingly adopted a holistic perspective that embraces sustainability metrics and other factors in helping guide their buy and wait strategies. The result is what is known as ESG (Environment, Sustainability, Governance) investing.
In contrast to CSR, ESG is purely driven by economic sustainability and derived from investor needs. Noticing this trend, the U.S. Securities and Exchange Commission (SEC) has sought to provide better reference for the investment market by creating unified guidelines for listed companies in preparing their ESG reports. Fortunately, the FSC is aware of this global trend and has set out its own ESG investing initiative in the form of the “Corporate Governance 3.0 – Sustainable Development Roadmap.” In the long run, the FSC expects to see annual ESG reports that cover both sustainable environmental and economic information, replacing the existing CSR report.
For its part in paving the way toward that goal, the IB is preparing guidelines for the Task Force on Climate-related Financial Disclosures and drafting amendments to the “Corporate Governance Best Practice Principles for Insurance Enterprises.” We strongly believe that those initiatives will enhance governance in the insurance sector. However, no shares of foreign life insurers licensed in Taiwan are traded in the Taiwan securities markets, as the public offering obligation is waived for them. Rather, their Ultimate Holding Companies (UHCs) are listed and traded in offshore securities markets, and those UHCs publish global ESG reports covering all their business operations around the world. Such global ESG strategies are applicable to all business operations in each country where they operate (including Taiwan).
Taking these elements into account, we recommend that the authorities either 1) waive the ESG report-publishing obligation for all foreign life insurers in this market, or 2) allow such insurers to utilize their UHC’s ESG report to meet this obligation.
為了實現該目標，保險局刻著手起草《保險業公司治理實務守則》修正案，並準備氣候相關財務揭露（Task Force on Climate-related Financial Disclosures）之實務執行指引。委員會深信，上述舉措將強化保險業之治理。外商壽險公司依法均得免於公開發行股票，他們的股票並未在台灣證券市場上進行交易。然而，外商壽險公司的最終控股公司（UHC）均在境外證券市場上市交易，基於回應機構投資人之資訊需求，外商壽險公司的最終控股公司涵蓋其全球所有業務營運的 ESG 報告，其ESG策略適用於其全球營運所在國家/地區（含台灣）的所有業務營運。