On June 12, 2019, the Financial Services Commission (“FSC”) amended the Insurance Business Supervision Regulations (the “Regulations”).  

Among the changes implemented by the amendment was the introduction of a system to prevent delays in review of insurance business license applications.  Under the amended Regulations, the Financial Supervisory Service (“FSS”) is required to report to the FSC when its review of an insurance business license application exceeds the prescribed review period.  For example, if the review process is prescribed as 60 days, but the FSS does not complete its review of the application within such period, the FSS is required to report the progress of its review to the FSC. 

The amendment also clarified some of the requirements for the business plan to be included with the insurance business license that had been unclear, and eased the requirements for the asset quality ratio of insurance company’s major shareholders and the requirements for the debt ratio of domestic corporations. 

In addition, the amendment also specified the grounds on which an insurer may refuse to accept a policyholder’s demand for an interest rate reduction on his/her policy loan when there is an improvement in the policyholder’s credit rating. The grounds are as follows:

• Where the policyholder’s credit rating at the time of borrowing did not affect the interest rate

• Where the improvement in the policyholder’s credit rating is insignificant and does not affect recalculation of the interest rate

Further, the amendment allowed insurance companies to require submission of relevant materials to check policyholders’ credit rating improvement, if necessary.  Insurance companies should inform policyholders of the requirements and procedures that must be satisfied to qualify for an interest rate reduction, etc. through their internet websites, etc., and if such demand is accepted, they should keep and manage relevant records such as the review result. 

Other amendments to the Regulations are as follows:

• Improvement of method for setting aside reserve for credit loss (Article 7-4)
  - If the bad debt allowance under the accounting principle does not meet the minimum amount under the Regulations, the difference shall be set aside as a reserve for credit loss.

• Measures to establish fair damage assessment order (Article 9-16, Article 9-20)
  - The amendment has allowed the Insurance Associations to establish the criteria for judgment of an insurance company’s consent to a policyholder’s appointment of an independent adjuster and model rules for entrustment of damage assessment works, for utilization thereof by insurance companies.