Effective 1 June 2016, Circular No. 52[1] makes some amendments to the rules on universal life insurance products provided by life insurers. Circular No. 52 particularly amends the previous regulations enacted on 23 November 2007 under Decision No. 96[2] (the Previous Rules). Circular No. 52 ameliorates certain conditions for insurance agents selling universal life insurance products for life insurers, which is aimed to help life insurers to expand their distribution channels. It also provides new guidelines for setting up professional operation reserves.

Specific amendments under Circular No. 52

  • Requirements of insurance agents

Under the Previous Rules, for a life insurer to sell universal life insurance products, its insurance agents must have at least six (6) months of experience as life insurance agents, or two (2) years of working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance. Circular No. 52 eases this requirement by reducing the six (6) consecutive months of experience to three (3) as life insurance agent, and reducing the two (2) years of working in such field to one (1) year.

In terms of required training period for agents, under the Previous Rules, insurance agents must be trained intensively for at least 24 hours on the sales of the universal life insurance products.  However, Circular No. 52 also modifies this requirement by removing the minimum training time of 24 hours and only requires that the insurance agents must be trained and certified by their insurers for completing the training for this type of product.

Accordingly, under Circular No. 52, the requirements for insurance agents to be permitted to sell universal life insurance products will comprise of the following:  

  • Have not violated the law on the operation of insurance agents and the rules on insurance agent occupational ethics;
  • Have been trained on universal life insurance products and have been issued training completion certificates; and
  • Have at least three (3) months of experience as life insurance agents, or one (1) year working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance.  
  • Setting up of professional operation reserves

Circular No. 52 provides for new guidelines on the setting up of professional operation insurance reserve by life insurers, specifically:

For insurance risk reserve, it is either (i) the reserve calculated by unearned premium method or (ii) the reserve calculated by cash flow method, whichever is larger, and used to cover all future expenses throughout the term of the policy. In this regard, Circular No. 52 clarifies further that the reserve calculated by unearned premium method is equal to 100% of collected risk insurance premiums of the universal life insurance policies.