Taiwan Regulator Mandates Clearer Disclosures for Variable Annuity Insurance

Taiwan's Financial Supervisory Commission (FSC) is cracking down on misleading sales practices for variable annuity insurance. Many consumers mistakenly believe these products are equivalent to bank fixed deposits, leading to financial misunderstandings. To combat this, the FSC has revised regulations requiring insurers to prominently display three key warnings on sales documents.

These warnings will explicitly state that the product is not a bank deposit or a substitute for one, that the declared interest rate is not guaranteed, and that the surrender value may be less than the premiums paid due to administrative fees. Insurers must also provide examples of policy benefits under different declared interest rate scenarios and establish a confirmation mechanism for policyholders.

Beyond upfront disclosures, the FSC is mandating a regular notification system. Starting one year after policy issuance, insurers must periodically inform policyholders about basic policy details, the declared interest rate and its validity period, and how dividends and surrender values are handled. This aims to enhance transparency and help policyholders track their investments.

The FSC also requires insurers to integrate these new rules into their internal control and audit processes to ensure compliance. The commission reiterated that declared interest rates are not fixed or guaranteed returns and that policy values are calculated based on specific terms, influenced by factors like age and coverage. Consumers are urged to read policy terms carefully and avoid comparing these products to bank deposits to prevent disputes.