In order to promote consumers’ right to know and improve the persistency of insurance contracts and timely payment of insurance proceeds, the Financial Supervisory Service (the “FSS”) amended the “Detailed Enforcement Rules on Supervision of Insurance Business.” The key details are as described below.
1. Newly Introduced Disclosure of Persistency Ratio
Persistency ratio by period, product type, and sales channel shall be disclosed on a semi-annual basis.
By period: The persistency ratio for one year (13th month), two years (25th month), three years (37th month), and five years (61st month) shall be disclosed on a semi-annual basis.
By product and sales channel: The persistency ratio by product type and sales channel shall be disclosed on a semi-annual basis.
2. Improved Disclosure Regarding Insurance Proceeds Payment
Disclosure of “prompt payment” that enables consumers to know whether insurance proceeds have been promptly paid shall be added.
The ratio of payment made within three days after receipt of claim request by an insurer and the average period of payment shall be disclosed.
The amended disclosure standards will be implemented from September 2023, which will cover information for the first half of 2023.
This amendment requiring insurers to newly disclose the persistency ratio and the period for payment of insurance proceeds is expected to affect consumers’ choices in selecting their insurers. It is our understanding that the FSS intends to strengthen the disclosure system as such so that insurers would exert more efforts to ensure the sale of suitable insurance policy and prompt payment of insurance proceeds.