Life Insurance Company of Georgia (Taiwan Branch) was complained for increasing insurance premiums in violation of the Fair Trade Law
Case:
Life Insurance Company of Georgia (Taiwan Branch) was complained for increasing insurance premiums in violation of the Fair Trade Law
Key Words:
life insurance, yearly renewable term premiums, level premiums
Reference:
Fair Trade Commission Decision of August 16, 2001 (the 510th Commissioners' Meeting); Letters (90) Kung Yi Tzu No. 8910937-005 and 8910937- 006
Industry:
Life Insurance Industry (6410)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
1. The complainants of this case are clients of Life Insurance Company of Georgia (Taiwan Branch) ("LIC Georgia"). In August 2000, LIC Georgia sent the complainants a written notice regarding a premium increase for its "Fixed Payment Policy for Hospitalization Medical Expenses." The complainants claimed that LIC Georgia initially solicited customers with lower premiums but then unilaterally notified clients that premiums would be increased to cover its losses for the reason that the insurance indemnity rate had been too high. At the same time, LIC Georgia issued an "Addendum to New Fixed Payment for Medical Care Policies," a policy with less guarantee and yearly renewable term premium. The complainants claimed that LIC Georgia's actions had seriously infringed the rights of its clients and thus filed a complaint to the Fair Trade Commission (FTC) against LIC Georgia for alleged violations of Article 24 of the Fair Trade Law (FTL). 2. The FTC's investigation found that the respondent did not violate Article 24 of the FTL. The following is a summary of the reasons for that finding: (1) Article 5(2) of "Fixed Payment Policy for Hospitalization Medical Expenses" clearly states the transaction terms for adjustment of the insurance premium rate. In addition, given that the insured had access to copies of the offer of Insurance Policy and insurance policy contractual terms prior to signing the policy contract, the insured should have already been fully aware of information relating to the adjustment of premiums. Even if the insured had questions regarding the content of the insurance policy after signing the contract, the contract could be invalidated within 10 days of receipt of the policy under the provisions of a revocation clause in the contract. Therefore, because the rights of the insured had been fully protected, they should not accuse the respondent of engaging in fraudulent or obviously unfair conduct because of their own mistaken belief that the policy at issue was not subject to premium increase. (2) It was also found that the Ministry of Finance had approved the adjustment to the insurance premium in the "Fixed Payment Policy for Hospitalization Medical Expenses" because the adjustment conforms to the actuary standards for insurance policies. It is unlikely that the respondent increased the insurance premiums with an intent to deceive its clients. Also, even though insurance premiums for individual age groups were increased as a result of high insurance indemnity rates with regard to the policy at issue, with respect to clients that purchased policies with a level premium rate, the respondent uniformly charged these clients the adjusted premium rate applicable to the respective age group to which they belonged at the time the policy was purchased. The respondent did not charge these clients the adjusted premium applicable to the age group to which they belonged when renewing their policy. The respondent bore the costs to cover the difference between the yearly renewable term premiums and level premiums for different age groups. This shows that it is unlikely that the respondent breached its duties to the insured with respect to level premiums. (3) Based on the above and on evidence presented to the FTC, the respondent did not engage in any deceptive conduct during it course of dealing with consumers regarding level premium rate. The increased insurance premium rate was implemented after obtaining the approval of the Ministry of Finance pursuant to the contractual terms of the policy. Since the respondent uniformly charged clients who were promised level premiums the increased rate applicable to their respective age group they belonged to at the time they purchased their policies, the respondent did not violate the provisions of Article 24 of the FTL. 3. However, considering that the complainants' false expectations and erroneous recognition that premium rates for "level premium" policies were non-adjustable could be due to the fact that they were not fully informed with respect to the content of the insurance policy at the time they purchased said policy from the respondent. The Commission will issue a formal notification to the respondent to request it to pay more attention to full disclosure of information in its course of dealing with consumers so that similar disputes that may constitute a violation of the Fair Trade Law or other relevant laws can be prevented in the future. Appendix: Life Insurance Company of Georgia's (Taiwan Branch) Uniform Invoice Number: 22958131 Summarized by Lin, Huei-Yun; Supervised by Horng, Der-Chang