Newsletter
FSC Opens Application for Internet-Only Insurance Companies from August 2022
The Financial Supervisory Commission ("FSC") announced the policy of allowing the establishment of internet-only insurance companies on December 21, 2021 in response to the digitalization of financial services and to promote the research and development of innovative insurance products and meet the diverse needs of consumers, and amended the "Regulations for Establishment and Administration of Insurance Enterprises" on June 29, 2022, to stipulate the conditions and application forms for establishment of internet-only insurance companies.
According to the press releases issued by the Insurance Bureau on March 10 and June 30 this year, the Insurance Bureau will accept applications for the establishment of internet-only insurance companies from August 1 to October 31 this year. The review period spans 5 months after the end of the application period. The review will focus on the financial capability of the applicants, the qualifications of the promoter/responsible person/majority shareholder, the feasibility of the business model, the innovativeness of the insurance products, the appropriateness of the management mechanism and the cost-effectiveness of the applicants.
In order to implement the relevant policies for the establishment of internet-only insurance companies, in addition to the "Regulations for Establishment and Administration of Insurance Enterprises", the FSC has also amended the laws and regulations related to the application and operation of internet-only insurance companies, as released and effective from June 29 this year. The relevant amendments are as follows:
A. Regulations for Establishment and Administration of Insurance Enterprises
Internet-only insurance companies are allowed only to provide insurance products to customers through digital means such as the internet. Also, the insurance products sold are limited to innovative and protection-type insurance products. Therefore, based on the business characteristics of internet-only insurance companies, the amendments to the Regulations for Establishment and Administration of Insurance Enterprises (the "Regulations") are as follows:
1. In view of the new business model of internet-only insurance companies, internet-only insurance companies are defined as insurance companies that can only use the internet or other forms of electronic transmission channels to sell insurance products to customers. In addition, it is expressly stipulated that internet-only non-life insurance companies shall only sell innovative insurance products, meaning a product must pass the innovation review (such as small units of insurance products which cut the insured amount, the type of risk insured or the period of insurance into small units) before it can be sold. Internet-only life insurance companies can only sell protection-type insurance products (i.e., products that do not include survival or maturity benefit designs and whose insurance premiums are used only for insurance protection). Further, in accordance with the proviso of Article 138 of the Insurance Act, property insurance companies may engage in personal injury insurance or health insurance with the approval of the competent authority and the products are limited to innovative insurance products. (Amendment to Article 29-1)
2. It is expressly stipulated that internet-only insurance companies shall apply within the period announced by the competent authority. For example, the FSC announced that it will accept applications for establishment of internet-only insurance company from August 1 to October 31 this year. (Amendment to Article 29-2)
3. The paid-in capital requirements for internet-only insurance companies are also expressly stipulated. In particular, the minimum paid-in capital of internet-only property insurance companies and internet-only life insurance companies is NT$1 billion and NT$2 billion respectively, and the capital contributions of promoters and shareholders are limited to cash. In addition, during the application for establishment of internet-only insurance company, the competent authority may request an increase in the amount of paid-in capital based on the business scale described in the business plan. The aforementioned paid-in capital shall be fully subscribed by all promoters and shall not be subject to the provisions of Article 9 for public offering. (Amendment to Article 29-3)
4. It is expressly stipulated that internet-only insurance companies shall have promoters from both the finance industry and the financial technology (FinTech) industry. That is, at least 40% of the paid-in capital of an internet-only insurance company shall be subscribed by promoters and shareholders such as financial holding companies, banks, securities firms, insurance companies, insurance broker companies, or insurance agent companies. In addition, at least one insurance company or a financial holding company with an insurance company subsidiary shall hold more than 25% of the paid-in capital to ensure an internet-only insurance company has the requisite financial management capabilities and fully understands and complies with financial regulations on compliance, anti-money laundering, consumer protection and information security. Moreover, considering that internet-only insurance companies are based on innovative financial technology, it is expressly stipulated that the promoters of internet-only insurance companies from the FinTech industry shall engage in big data analysis (such as AI, machine learning), interface design, software development, internet of things, and wireless communication business, and shall be able to provide a track record for the proposed business model. (Amendment to Article 29-4)
5. In view of the fact that internet-only insurance companies are a new type of business model based on innovative financial technology, it is required that more than half of the directors of an internet-only insurance company should have professional expertise and qualifications in insurance or FinTech industry, at least two-thirds of the qualified directors must have professional qualifications in insurance industry, and at least one of the directors must have qualifications in FinTech industry and considerable practical experience. (Amendment to Article 29-5)
6. Considering the business characteristics of internet-only insurance companies, it is expressly stipulated that the business plan shall specify the business scope, business principles and policies, and specific implementation methods (including premises and facilities, internal organization and segregation of duties, personnel recruitment and training, business development plan, financial forecasts for the next five years, and policy on reinsurance) in accordance with Article 6 of the Regulations, as well as customer identity verification mechanisms, information technology system, security controls, backup operations, business continuity plan, operating model, insurance product planning, market exit plan, etc. (Amendment to Article 29-6)
7. It is expressly stipulated that except for the head office and customer service center, internet-only insurance company shall not set up physical operation sites, and the customer service center shall not engage in selling or soliciting insurance products. (Amendment to Article 29-7)
B. Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises
In line with the operational characteristics of internet-only insurance companies which can only sell insurance products through internet channel, Articles 16-1 and 17 of the Regulations shall be amended that an internet-only insurance company shall not have insurance solicitors or sell insurance products through insurance brokers or insurance agents, and shall stipulate its internal regulations for business solicitation, underwriting and claim adjusting systems and procedures.
C. Regulations Governing Pre-sale Procedures for Insurance Products
In connection with the establishment of internet-only insurance companies, Article 16-1 of the Regulations is newly stipulated. In view of the fact that internet-only property insurance companies can only sell innovative insurance products, it is expressly stipulated that the innovativeness of the products must be reviewed and approved by the competent authority before they can be sold. In addition, insurance enterprises other than internet-only property insurance companies that intend to sell insurance products approved to be sold by internet-only property insurance companies should also apply for approval from the competent authority in advance. For the aforementioned insurance products that have been approved by the competent authority, in case of any subsequent amendments to the policy terms, application for insurance, pricing actuarial memorandum, or premium calculation formula, it is still required to apply for approval unless otherwise provided by the competent authority.
D. Regulations Governing Non-Life Insurance Enterprises Engaging in Injury Insurance and Health Insurance
In connection with the establishment of an internet-only insurance company, Paragraph three is added to stipulate that an internet-only property insurance company which has been in business for less than one year may be exempt from the qualification requirements for the actual performance in the most recent year listed in Paragraph 1 when applying for engaging in injury and health insurance business.