Blog: Taiwan Proposes New Framework for Authorising Internet-only Insurers – Regulation Asia

Sponsors of internet-only insurers can include financial institutions and fintech companies. Applications are expected to open in August 2022. 

Taiwan’s FSC (Financial Supervisory Commission) has proposed a draft regulatory framework for internet-only life and property insurers.

The move comes after the authorisation of three internet-only banks in July 2019, based on a digital banking framework introduced in 2018.

The digital transformation of the insurance industry has promoted the research and development of innovative insurance products, and improved the speed, convenience, independence and service experience, while also strengthening insurance protection for consumers and enhancing competitiveness, the FSC said.

However, the current insurance market still has high homogeneity of products, insufficient innovative insurance products, and low uptake of insurance – with just 69 percent of Taiwan consumers having purchased an insurance product.

The new internet-only insurer regime will help to drive greater investment in the fintech ecosystem and enable greater cooperation between fintech firms and financial institutions on product development, thereby accelerating innovation and providing more comprehensive insurance protection for consumers.

Under the proposed regime, internet-only insurers will only be allowed to sell policies online, and not through physical channels or salespersons, and must focus on simple, easy-to-understand protection products that combine innovative technology to expand the accessibility and usability of insurance to enhance insurance protection.

Internet-only life insurers will have to have a minimum paid-in capital of TWD 1 billion (USD 36  million), while internet-only property insurers will need at least TWD 2 billion. They should be able to demonstrate the adequacy of resources and feasibility of operations in their business plans, while also showing how they can meet consumer needs through innovative products and delivery platforms.

“Up to 18 life insurers and 16 property insurers already sell their products online, so internet-only insurance companies must offer different products than what is available and conduct their business differently,” said Shih Chiung-hwa director-general of the FSC’s Insurance Bureau.

Sponsors of internet-only insurers can include financial institutions and fintech companies. Financial institutions should have an insurance company contributing at least 40 percent of the paid-in capital, or a financial holding company with insurance subsidiaries contributing at least 25 percent.

Fintech companies engaged in areas such as big data analysis, software development, IoT (Internet of Things) or wireless communications can hold up to a 60 percent stake in an internet-only insurer.

Other major shareholders are allowed, subject to them being able to explain their interest relationship with the insurer and a 10 percent cap on ownership in the new entity – unless regulatory approval is gained to own more.

Internet-only insurers can establish a head office and a customer service centre, but otherwise may not establish physical offices.

According to Taipei Times, the FSC does not plan to limit the number of operating licences that will be issued under the regime – unlike the digital bank regime where only three applicants were granted authorisation.

Applications are expected to open in August 2022 after public consultation on the new framework. The results of the application process are expected to be revealed in April 2023.

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