Directions on Outsourcing Activities of Insurance Industry

09/01/2010

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In response to the growing demand for outsourcing services from the insurance industry, the Financial Supervisory Commission of the Executive Yuan issued the Directions on Outsourcing Activities of Insurance Enterprises (the "Directions") on July 21, 2010. The purpose of the Directions is to ensure the quality of outsourcing services and consumer data protection. The major provisions of the Directions are summarized below:
l	The items and scope of outsourcing are limited to those specified in the Directions, unless otherwise permitted by other applicable insurance regulations, such as the Regulations Governing Appointed Actuaries of Insurance Enterprises which allow insurance companies to engage outside actuaries. The Directions do not apply to insurance agencies, insurance brokers, and adjusters that engage in the insurance business for and on behalf of, or refer insurance business to, insurance companies in accordance with the Insurance Act.
l	Insurance companies should form special teams to oversee their outsourcing operations, and set up internal rules for protecting customers' rights, and systems on risk management, internal control and auditing.
l	Insurance companies must obtain approval from the competent authority before they outsource the collection of accounts receivable to others.
l	The competent authority, or the organizations or persons authorized by the competent authority, may investigate any outsourcing matters of insurance companies. The costs of such an investigation will be borne by the insurance companies.
l	The competent authority may, in accordance with the Insurance Act, determine the penalty for violation of the Directions.