In the insurance section of the 2018 Taiwan White Paper recently released by the American Chamber of Commerce in Taipei, the Insurance Committee offers a long-term roadmap to improving the insurance market in Taiwan and allowing citizens to take a more holistic view of their insurance protection needs.

The insurance penetration ratio of Taiwan, or the ratio of insurance premiums to GDP, is almost 20%, among the highest in the world. However, even with this high degree of penetration, many Taiwanese people remain underinsured because the amount of insurance bought is not sufficient to guarantee protection in situations where it is needed the most.

The Insurance Committee has compiled a series of recommendations designed to:

• Address the risks of living longer than expected, dying too soon, or being underinsured during one’s lifetime.
• Improve the customer experience by encouraging the introduction of new products.
• Bring regulation of the insurance industry’s investment management practices up to date by adopting regulations in line with global best practices.

One of the problems Taiwan currently faces is the rapid aging of its population. Two decades ago there were nearly 10 working-age people to support each senior citizen. Now that number has decreased to only 5.2, and if trends continue, it is estimated that by the year 2060 there will be only 1.3 working-age people for each senior citizen.

Longer life expectancy carries the risk of not having sufficient retirement funds later in life. Without adequate longevity protection, senior citizens might not have enough savings to last their entire lives, and their families might be forced to bear the burden. The opposite situation can occur when people die earlier than expected; their families might not receive enough money from insurance to make up for the loss of income. For both cases, the Insurance Committee emphasizes the need for greater understanding of the risks of going underinsured and encourages consumers to buy appropriate insurance policies.

In order to promote flexibility and innovation, the Committee recommends that the Insurance Bureau form a dedicated team to improve the consumer experience. It suggests that the team look into ways of making the purchase of insurance policies more widely available online, as well as looking at ways of making the introduction of new products faster and more flexible. This would increase consumer choices, allowing the purchase of policies that best fit individual needs.

“People need to be able to go through a process where they can think about what’s most important to them, what are their highest goals in their life, and then they determine how they are going to be able to protect those priorities in case something unfortunate should happen,” says Dylan Tyson, CEO of Prudential Life Insurance Co. of Taiwan and co-chair of the AmCham Insurance Committee.

The Insurance Committee’s final suggestion was to allow insurers more diverse ways of investing their premium income from policyholders, bringing investment management regulations more in line with international standards.

For the full White Paper on insurance in Taiwan, click here.