Prioritizing Protection in Life Insurance for an Aging Taiwan

As global advances in e-commerce and financial technology (“fintech”) catalyze change in insurance markets, how can Taiwan enable insurers to provide individuals and families with the full insurance coverage they need and close the insurance “protection gap”?

In the recently published 2017 Taiwan White Paper, the Insurance Committee of the American Chamber of Commerce in Taipei encourages the government to adopt measures to incentivize insurers to offer protection insurance and to increase the convenience for consumers to obtain protection insurance.

Taiwan faces a serious “protection gap” – the disparity between the amount of insurance consumers need in order to be adequately covered in the event of a serious issue such as critical illness, accident or death, and the amount they actually have purchased. Closing this gap by increasing the convenience for consumers to obtain protection insurance is one of AmCham’s top priority issues in the 2017 Taiwan White Paper.

Promoting protection products benefits both consumers and insurers: more opportunities for protection are accessible to more consumers, and the subsequent earnings diversity helps shield insurers from market volatility, making the insurance industry healthier financially.

While the Insurance Committee recognizes that structurally amending mechanisms within the insurance industry is a long-term goal, the Committee nonetheless proposes various short-term solutions that can effect positive change quickly, including streamlining life and non-life insurance tax methods and reevaluating taxation of protection insurance products to make them more attractive to insurers and consumers.

Taking into account the social benefits offered by protection insurance products, the government should exempt or reduce the business tax for insurers that promote protection products. As the Committee’s position paper in the 2016 Taiwan White Paper notes, most OECD and EU countries exempt the life insurance industry from business tax.

The Insurance Committee urges the government to increase the transparency of obtaining insurance and to leverage innovative products and technologies to empower citizens to get the coverage they need. The Committee’s 2017 position paper delineates tangible steps authorities can take to achieve this goal.

Enhancing the ease, transparency, and convenience of using online resources to acquire insurance is crucial to enabling a greater portion of society to access needed protection coverage. Regarding the “Regulation on Insurance E-Commerce” announced in March 2016, the Committee’s position paper recommends “simplifying the application process, allowing more products and a larger amount of insurance to be transacted on e-commerce platforms, and permitting additional electronic payment methods.”

A more effective mechanism of protecting consumers’ right to knowledge of insurance policies must replace the current contract pre-review period. Insurance contracts already contain a generous 10-day cancellation period, which protects consumers’ rights to information and redress. The pre-review period obstructs consumers’ ability to obtain simple and immediate insurance protection, as there is no insurance coverage during this period. The Committee maintains that more consumer-friendly alternatives, “such as amending the insurer’s information disclosure obligation and legalizing the right of revocation during the cooling-off period,” need to be explored as mechanisms to replace the burdensome and ineffectual pre-review period.

To harness the power of fintech to develop and strengthen the insurance industry, current restrictions on digital insurance must be removed. Such reforms would increase the number of participants in and accelerate the growth of insurance e-commerce in Taiwan. In addition, the Insurance Committee urges the establishment of a legal basis to use electronic recordings for underwriting purposes, in line with global insurance technology development.

To read the full Insurance position paper, click here.

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