TAIPEI (Taiwan News) — The Financial Supervisory Commission (FSC) on Tuesday (Nov. 12) warned consumers against purchasing offshore insurance after reports of financial advisors promoting them on Instagram.

Engaging in the activities of acting as an agent, broker, or solicitor for offshore insurance policies within Taiwan is strictly prohibited, the FSC reiterated. Those who break the law could face up to three years in prison and a fine of NT$3 million (US$92,368) to NT$20 million.

Consumers are advised only to purchase insurance from authorized companies through legitimate channels. The public can verify the legitimacy of insurance companies and insurance products by consulting the websites of the FSC and relevant life insurance associations.

Companies that issue offshore insurance policies are non-domestic insurance companies that the FSC has not authorized to conduct insurance business in Taiwan. Consumers purchasing these policies face five significant risks, the FSC said.

Five risks

• Difficult claim settlement

Policyholders may face difficulties settling claims with foreign insurers, especially if there are disputes.

• Lack of transparency and language barriers

Offshore insurance policies are frequently written in English or poorly translated into Chinese. The complex terms and conditions may not be fully comprehensible to policyholders, potentially leading to misunderstandings and disputes.

• No protection from Taiwan's regulations

Foreign insurance companies issuing offshore policies are not subject to Taiwan's insurance regulations. As a result, policyholders are not eligible for the protections afforded by Taiwan's regulatory framework, which includes financial assistance in the event of an insurance company's insolvency.

• Risk of fraud
• Tax implications and inheritance issues

Offshore insurance policies are not recognized under Taiwan law. As a result, premiums paid for these policies are not tax-deductible, and death benefits may be subject to inheritance tax. Additionally, the distribution of death benefits from offshore policies may not adhere to the same regulations as domestic policies.

Severe offenses could lead to license suspensions or revocations for insurance agents, brokers, and banks involved in illegal activities. The FSC warns against such activities and urges the public to report suspicious behavior.