Newsletter
Policy Planning Direction of Digital Insurance Company
In response to the digital development trends in insurance industry and to introduce innovative technologies into the insurance market, the Financial Supervisory Commission ("FSC") announced at the end of 2024 its intention to amend the previously issued application conditions and related regulations for "internet-only" insurance companies. Certain key points of the possible policy planning directions are summarized as follows:
1. Proposed Change from "Internet-Only Insurance Company" to "Digital Insurance Company"
Pursuant to Article 29-1 of the Regulations for Establishment and Administration of Insurance Enterprises, the term "internet-only insurance company" refers to an insurance company that sells insurance products to customers through the internet or other electronic transmission channels. However, for foreign insurers that have innovative business models, whether their operations are all conducted online is a strategic choice for the operators and is not limited to the Internet. Moreover, conducting insurance operations solely online presents significant challenges. Therefore, it is proposed that the term "Internet-Only Insurance Company" be revised to the more internationally recognized term "Digital Insurance Company" or "Digital Insurer".
2. Business Scope Not Limited to the Sale of Innovative or Protection-Type Insurance Products
Considering that the scale of innovative or protection-type insurance products remains relatively limited in the domestic insurance market, the FSC aims to promote sustainable operations and fair competition by not restricting the business scope of future digital insurance companies solely to the sale of these types of products. Instead, it is proposed that these companies focus on ensuring that a certain proportion of innovative insurance and services are provided through FinTech or digital technology (e.g., premium income reaches a certain percentage or more), ensuring that newly established insurers possess unique and innovative operational capabilities.
3. Relaxation of Requirement to Set Up Physical Outlets and Sell through Insurance Solicitors or Agent/Brokerage Channels
In terms of operating model, considering the complexity of some insurance products in practice, there is a need for insurance solicitors to explain the coverage content or other face-to-face interactions (e.g., on-site property insurance inspection to asses risk or claims inspection). Therefore, it is proposed that digital insurance companies, in addition to operate digitally, may also set up physical business or service locations based on customer needs and actual needs, and may sell insurance products through insurance solicitors, insurance agents, or insurance brokers.
4. Designated Innovation Protection Period for Innovative Insurance Products or Services
Considering that digital insurance companies need to reach a specified sales threshold for innovative insurance products or services, and in order to safeguard the creativity of industry pioneers, it is proposed that the innovative insurance products or services be granted a designated innovation protection period (e.g., six months) following their launch. The FSC may extend this period if deemed necessary.
5. Lower Minimum Paid-in Capital Requirement to NT$500 Million and NT$1 Billion
Considering that the business scope of digital insurance companies needs to include a certain proportion of innovative insurance products or services, their operations are still subject to considerable restrictions. To encourage investment and company formation, it is proposed to reduce the minimum paid-in capital for digital property and life insurance companies to NT$500 million and NT$1 billion, respectively. However, depending on the business size and budget assessment of the business plan, an increase in paid-in capital may be required to ensure solvency and the capital needed for future development.
6. Relaxation of Conditions for Promoters
Drawing on the experiences of digital insurance companies overseas, the FSC aims to promote more diverse forms of participation by eliminating the requirement that promoters and shareholders from financial institutions must hold a specific percentage of shares. This is intended to facilitate the establishment of digital insurance companies by promoters who are not financial institutions, introducing innovative business models. The application review process will primarily assess whether the promoters have the necessary professional expertise and the long-term operational capacity to successfully manage an insurance company.
7. Permitting Foreign Digital Insurance Companies to Establish Branches
Inspired by the successful business models of international digital insurers, the FSC intends to permit foreign digital insurance companies to apply for branch establishment in Taiwan. The application criteria may include, for example, "sound business performance and financial stability over the past five years, with no significant violations leading to penalties" and "paid-in capital of over NT$2 billion or credit rating above a certain standard."
8. No Application Deadline for Establishment Permits
Recognizing that building a startup investment team requires considerable preparation time and negotiation of ownership structures, the FSC decided not to impose a deadline for accepting applications from digital insurance companies. This approach aims to provide the market with ample time to assemble management teams and build viable business models.
The FSC stated that the policy objective of allowing the establishment of "digital insurance companies" is to motivate industry participants to develop innovative business models, thereby accelerating the digital transformation of the insurance sector and enhancing the rights and interests of financial consumers. The FSC will subsequently make adjustments to relevant regulations and hold public hearings to gather external opinions.
Our firm has established an "Insurance Practice Group." If you have any questions regarding the future amendments and developments of regulations related to digital insurance companies, please feel free to contact the experts in the Group.