Taiwan Today

The Finance Committee of the Legislative Yuan passed June 8 an amendment to the Insurance Law as it relates to the coverage of children. Whereas before the maximum benefit allowed in the event of the death of an insured child less than 14 years of age had been NT$2 million (US$67,000), the amendment states that all death insurance policies for children aged less than 15 are no longer valid. In the future, if a policyholder under 15 dies, the only benefits that can be collected are the original premium fees plus interest. The amendment was written to reduce what is known as “moral risk” to children. At the same time, by stipulating that the amendment will not be retroactive, it minimizes the impact on insurance companies. Since the amendment reduces the insurance benefits insurance companies are required to pay out, Legislator Lai Shyh-bao and others asked the Financial Supervisory Committee to require insurance companies to reduce premiums after the amendment takes effect. Insurance companies acknowledge that the amendment reduces moral risk to children. They concede that the amendment will reduce their costs, since they will no longer be required to pay out NT$2 million in benefits. At the same time, they are concerned that given that the only allowable benefits are premium plus interest, the amendment will hinder the selling of insurance policies for children; there will be little reason to purchase such insurance policies, they say, especially because current interest rates are so low. But such an arrangement at least has a much smaller impact than completely forbidding any payment in the event of the death of a child. Total premiums received last year for policies for children amounted to NT$15.7 billion; in the year before, the figure was at NT$20.4 billion, for 2.52 million insured. The amendment to Article 107 of the Insurance Law was proposed by Legislators Yu Jan-daw, Gao Jyh-peng, Chang Chia-chun and Chen Ken-te. During the discussion of the proposal on June 8 there was a fierce debate as to whether to forbid any payments at all in the event of the death of an insured child. When Legislator Lai suggested that insurance premiums be returned along with interest, a majority of legislators, as well as the Financial Supervisory Committee, were in support of the proposal. There was some debate as to the definition of a child, whether it means someone who is 14, or 18 or 15. After discussion, it was agreed that a child would be defined as someone under the age of 15. This is the minimum age, according the Labor Insurance Law, at which children are allowed to work. In addition, compulsory education lasts until the age of 15. The amendment states clearly that a policy holder must be 15 or above, before death benefits can be received in the event of the policy holder’s death. If the deceased is not yet 15, the only death benefits given out will be premium payments plus interest. For investment-linked insurance policies, the account value of the policy will be returned. The relevant authorities will determine how interest rates are to be calculated.(HZW)