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Adoption of FinTech Accelerated by Pandemic – Taiwan Regulator Further Lifted Restrictions on Remote Insurance Application
In the pandemic era, there are more and more scenarios where digital services replace physical interactions, and the pandemic has boosted the use of "Contactless Financial Services" in the insurance industry in recent years.
1. Meet-and-sign in person - Regulations Governing the Supervision of Insurance Solicitors
According to Article 15 of the Regulations Governing the Supervision of Insurance Solicitors, insurance solicitors soliciting life insurance products shall meet the applicant and the insured in person and obtain the wet-ink signatures of the applicant and the insured on the application-related documents. Although soliciting property insurance products is exempted from the meet-in-person requirement, wet ink signature is still required. Because of this requirement, visiting customers has always been the norm in the solicitation of insurance business.
2. Meet-and-sign via video call - Temporary Principles in Response to the Coronavirus Outbreak
The principle of meet-and-sign-in-person is being challenged in the pandemic era. In May 2021, rising infections prompted the government to expand the scope of Level 3 alert to the whole country. As the pandemic got more intense, the meet-and-sign requirement could no longer be accommodated promptly. To ensure the services and operations of insurance companies were not interrupted at Level 3 alert, the Financial Supervisory Commission (the "FSC") announced the "Temporary Principles in Response to the Coronavirus Outbreak When Providing Services Involving In-person Signatures and Paperwork" applicable to both life and non-life insurance companies on May 25 and 26, 2021 (collectively the "Temporary Principles"), allowing the insurance application process to be completed via video call where the insurance solicitors shall be able to identify and communicate with the applicant/insured and witness the signing of relevant documents. However, since the Temporary Principles are only an expedient measure applicable at Level 3 alert, the applicants/insureds are still required to submit the signed paper documents to the insurance companies once the pandemic alert is downgraded to Level 2. Following the issuance of the Temporary Principles, several insurance companies applied for trial operations for remote insurance applications since June 15, 2021.
3. The new normal of remote insurance application submission – Directions for Insurance Companies to Provide Remote Insurance Services
While the pandemic is subsiding, the number of new contracts signed via remote insurance application submission continues to rise. The FSC, based on the positive experience of insurers' trial operations for remote insurance applications,promulgated the "Directions for Insurance Companies Conducting Remote Insurance Application" (the "Directives") on November 18, 2021, setting standards for life and non-life insurers to conduct remote insurance application process, as summarized below:
(1) The remote insurance application process cannot be officially launched until the trial operation has achieved the expected performance.
(2) The entire process of insurance application submission done via video call should be recorded.
(3) The customer identity verification process is enhanced.
(4) The insurance company shall adopt internal procedures to ensure that the recorded video and audio files are complete.
(5) The insurance company shall ensure that relevant files such as personal information of the clients, audio and video recordings, and insurance documents are properly kept.
(6) The Directives may apply to after-sales services, claim services, and premium payment automatic debit authorization services.
(7) In the event of a dispute, the applicant or the insured may request the insurer to provide copies of the video or audio records, and the insurer cannot refuse such a request. In the event of any dispute arising from poor communication, poor equipment, or network connectivity issues during the remote application process, any steps taken to resolve the dispute shall be taken in favor of the applicant or the insured.
4. Restrictions further lifted - "Directions for Insurance Agent Companies and Insurance Broker Companies to Engage in Remote Insurance Services"
As of February 2022, the total number of remote insurance applications to life insurance companies exceeded 120,000, accounting for more than 30% of the total number of insured cases. This indicates that in the post-pandemic era, the public is in favor of "contactless" remote insurance services. Therefore, the FSC decided to expand the scope of "remote insurance business" to include insurance agencies/brokers and banks.
The FSC promulgated the "Directions for Insurance Agent Companies and Insurance Broker Companies to Provide Remote Insurance Services" on September 15, 2022. The main points include:
(1) Scope of application: Insurance agent companies, broker companies and bancassurance channels may now handle remote insurance applications and provide certain insurance services remotely. They are required to use the video recording software provided by the insurance companies and should establish internal control system and ensure its effective implementation.
(2) Customer identity authentication: Insurance agent companies, broker companies and bancassurance channels shall use the identity authentication method adopted by the insurance companies to verify customer identity and confirm the customer's intent to apply for insurance.
(3) Information Security and Personal Information Protection: Insurance agent companies, broker companies and bancassurance channels shall obtain certification of their information security and personal information management system when handling remote insurance applications and providing remote insurance services. The audio and video recording files must be encrypted and uploaded directly to the internal server of the insurance company or the server of the video software provider used by the insurance company.
(4) Dispute Resolution: In the event of a dispute, the applicant or the insured may request the insurance agent companies, broker companies and bancassurance channels to provide copies of the video or audio records, and the insurance agent companies, broker companies and bancassurance channels cannot refuse such a request. In the event of any dispute arising from poor communication, poor equipment, or network connectivity issues during the remote application process, any relevant steps taken to solve the dispute shall be taken in favor of the applicant or the insured.
(5) Remote signing: The remote signing shall be conducted on the platform/system established by the insurance company.
5. Restrictions and challenges
When InsurTech becomes a solution to traditional insurance challenges, we can see that the regulator emphasizes more on how to protect the rights and interests of policyholders, which would be the main compliance focus of digital insurance providers.
The pandemic has changed lifestyles and thus accelerated the development of financial technology. The new regime of remote insurance application business set an example. The insurance industry and the regulator worked together to realize the new regime swiftly in response to the pandemic, allowing technology to serve financial consumers.
We look forward to a more innovative organizational mindset of the regulator when dealing with the development of financial technology and insurance technology. The policy maker must provide room for financial innovations through sandboxes or new business trials and, in the meantime, provide the industry with appropriate guidance to ensure financial stability and information security.