FSC Suspends Sale of Investment-Type Insurance Policies by Shin Kong

Taipei, March 13, 2009 (CENS)--The Financial Supervisory Commission (FSC) has resolved to forbid Shin Kong Life Insurance from selling investment-type insurance policies for three months, plus a fine of NT$2.4 million, effective immediately.

The penalty, the severest ever for domestic life insurers, was inflicted on the company, due to the irregular practice of the company's salesmen in pushing the insurance policies, including guaranteed 4% annual returns and encouragement for the use of housing mortgages in purchasing the insurance policies. The irregularities, said FSC, derived from lax internal control of the company, rather than individual acts of salesmen.

In response to the penalty, Shin Kong has refunded NT$1.3 billion premium for 1,000 insurance policies in dispute. The suspension of the sale of investment-type insurance policies will deal a major blow to the business of the insurance company, since such policies are mainstream products of the company, generating NT$44.9 billion of premium revenue for the company last year.

FSC, though, pointed out that it may shorten the suspension period for the insurance policy, should Shin Kong produce solid evidence of improvement.

Investment-type insurance policies combine the functions of insurance and investment, allowing the insurers to link part of their premiums to a number of investment targets, such as mutual funds, structured notes, and monetary funds. The product has become a hot insurance product in recent years, with its premium income peaking at NT$400 billion in 2007, before declining in 2008 due to the global financial tsunami.