The Compulsory Automobile Liability Insurance in Taiwan

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The Compulsory Automobile Liability Insurance (CALI) is one of the important systems        established to compensate the basic loss of the victims in traffic accidents. Many countries in        the world require automobile owners, or drivers, to have automobile liability insurance, which        ensures the victims could receive basic coverage for the injuries caused by traffic accidents and        maintains traffic safety.   Therefore, after consulting the legislative systems of many other countries and hearing the  voices of local activists, the legislative procedures of the Compulsory Automobile Liability  Insurance Act (the "CALI Act") were finally completed in December 1996. The CALI Act became  effective on January 1, 1998.   

Statistics of Compulsory Automobile Liability Insurance 

 

 

 

 

 

 

Unit: NT$ Thousand  Year/  Month 

MotorVehicle 

Vehicle   Insured  Premium   Income​2     ​Policies  

In Force​3   Premium Pure  (LClaims Paid iability­Based)

Ratio of  Claims Paid  (Liability­Bas ed) to Pure  Premium %  2004  6,315,473  11,337,662  6,531,480  9,066,213  ­  ­  2005  6,720,993  11,961,357  6,820,546  9,513,479  ­  ­  2006  6,808,623  11,748,758  7,092,863  9,297,415  ­  ­  2007  6,884,785  11,774,590  7,195,206  9,315,550  6,975,734  74.88  2008  6,882,734  11,231,651  7,326,516  8,813,411  6,200,309  70.35  2009  6,830,751  10,311,432  7,353,094  7,909,253  5,918,509  74.83  2010  6,987,173  9,583,025  6,809,865  7,092,024  6,125,611  86.37  2011  7,229,004  9,317,479  6,986,900  6,672,733  6,440,367  96.52  2012  7,321,361  9,377,767  7,126,638  6,695,588  6,967,658  104.06  2013  7,570,537  9,635,741  7,300,827  6,863,221  6,928,052  100.94  2014  7,849,993  9,938,297  7,497,933  7,069,419  6,826,466  96.56  2015  7,800,952  9,916,919  7,663,460  7,060,237  ­  ­ 

 

 

 

 

 

 

 

 

 

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Year/  Month 

Motorcycle 

Motorcycle   Insured  Premium   Income2   ​Policies   In Force​3   Pure  Premium  Claims Paid  (Liability­Based) 4  Ratio of Claims  Paid  (Liability­Based)  to Pure Premium  %  2004  5,542,058  5,742,702  8,535,972  4,247,405  ­  ­  2005  5,372,360  5,560,735  8,772,617  4,105,294  ­  ­  2006  5,785,535  6,040,757  9,059,956  4,489,769  ­  ­  2007  5,916,023  6,158,179  9,425,775  4,587,885  3,949,672  86.09  2008  6,295,020  6,472,705  9,906,000  4,825,643  3,868,232  80.16  2009  6,261,670  5,917,256  10,137,891  4,302,969  3,963,819  92.12  2010  6,583,608  5,765,418  9,930,762  4,218,137  4,357,122  103.29  2011  6,776,315  5,778,868  10,153,998  4,293,196  5,251,462  122.32  2012  6,965,669  5,908,754  10,370,494  4,402,618  5,519,706  125.37  2013  7,334,275  6,048,369  10,614,309  4,558,652  5,908,217  129.60  2014  7,648,574  5,956,371  10,695,439  4,454,389  6,194,073  139.06  2015  7,918,295  6,146,477  10,796,855  4,606,204  ­  ­  Source: Taiwan Insurance Institute (http://www.tii.org.tw/opencms/english/index.html)  Note: 1. The annual and monthly figures are cumulative figures from the beginning of the year to the            end of the given month.        2. The premium income indicated in this table represents written premiums collected during the          specified period (including expected losses, the business expenses of insurers, contribution to           the Stabilization Fund, overhead associated with actuarial calculation of rates, research and           development, information inquiry services, information transmission and other expenses           necessary to ensure the soundness of this insurance. However, this does not include           contribution to the Compensation Fund.)         3. Prior to December 2009, the statistical data for the number of policies in force indicated in           this  table was calculated based on the statistical cutoff month. Starting from January 2010, the           calculation is based on the statistical cutoff date, which is also the last day of each month.        4.The figures in this column are liability­based paid losses, which are calculated by converting,           on the basis of liability, the amount of the claims paid for the year. They are an insurance cost          used in the premium rate calculation basis. The figures represent paid claims. For any            outstanding claims, the accident liability ratio is undetermined, so the figures do not include the           difference between year­end outstanding losses and year­opening outstanding losses.         5. This table uses business statistics as its basis; it therefore differs from other tables that use            financial accounting as their basis.        6. Premium income is calculated by expected losses and collected when the insurance contract is           entered into. Nevertheless, insured events and claims could occur years after the premium          income was collected. Therefore,it is considered appropriate to place the development of net           premium income and liability­based paid losses under long­term observation.   

The Framework of the Compulsory Automobile Liability Insurance 

Differentiation Supervision Mechanism 

The Framework of the Compulsory Automobile Liability Insurance Differentiation Supervision  Mechanism (DSM) for insurance companies was approved by the Financial Supervisory  Commission (FSC) in June 2007 to enhance insurance companies' operations of the CALI, to  achieve the goal of the legislation, and to accelerate sound development of the CALI system. It 

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I. Purposes of DSM 

1. To establish a way to examine the effectiveness of the insurance companies' operations        of the CALI in order to accelerate sound development of the CALI. 

2. To strengthen corporate governance and insurer’s disciplinary agreements by        examining the differences among insurance companies’ operations of the CALI. 

3. To help insurance companies operate the CALI more efficiently, the FSC manages        insurance companies differently by using the results found in DSM. 

II. Key points of DSM and ways of implementation: 

1. Establishing key indicators from financial, business and managerial points of view  a. Financial Aspects 

▪ To make a reserve according to regulations. 

▪ To manage the pool account and the claim recovery according to the pool        disciplinary agreements. 

▪ To check and review the adequacy and stability of ratio of the risk­based capital        ratio. 

b. Business Aspects 

▪ To write the business according to regulations. 

▪ To transmit the data to the CALI database according to regulations.  ▪ To handle claim cases according to regulations. 

▪ To deposit its apportionment of the Motor Vehicle Accident Compensation Fund        (MVACF) according to regulations. 

c. Managerial Aspects 

▪ To check and review the establishment and implementation of internal audit system.  ▪ To comply with the Regulations Governing the Accounting Arrangements and       

Procedures for Submitting Business and Financial Reports of the CALI. 

▪ To check and review the establishment and implementation of mediation system for        disputes. 

▪ To verify whether or not there are major moral hazards caused by internal or        external party.  ▪ To check and review the finances, business and operating results of the CALI.  2. Establishing a scoring system for each indicator to differentiate insurance companies.  3. Frequency of application: annually     

Compulsory Automobile Liability Insurance Comprehensive Audit 

Mechanism 

The Comprehensive Audit Mechanism (CAM) for insurance companies was approved by the        FSC in January 2007. The goal of the CAM is to improve insurance companies' operations of        the CALI. 

I. Purposes of the CAM 

1. To ascertain whether insurance companies are acting in compliance with the laws and        regulations related to the CALI. 

2. To ascertain whether insurance companies are qualified to operate the CALI. 

3. To provide a platform for discussion with related agencies when questions arise from        the laws and regulations related to the CALI. 

4. To track and rectify defects to ensure that insurance companies are incompliance with        the laws. 

5. To invite the participation of external units in order to enhance the accountability of the        CALI's operational results. 

6. To use the audit results as a reference for scoring the indicators of the CALI        Differentiation Supervision Mechanism.  

II. Audit System 

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1. Internal audit: Insurance companies should self­audit in accordance to the CALI internal        audit system. 

2. External audit: It is divided into standard audit and special audit. Standard audit should        be handled by Non­Life Insurance Association of the R.O.C and supported by the        Taiwan Insurance Institute. Special audit should be based on the analysis of a special        topic and handled by the MVACF as commissioned by the competent authority.  

III. Scope of the Audit 

The scope encompasses: CALI Act, its derived law, and other related regulations on financial        accounting, business operations, management, complaints and etc 

 

Motor Vehicle Accident Compensation Fund

 

The system planned under the Act differs substantially from the original Compulsory Automobile        Third Person Liability Insurance, especially in regards to Article 3 of the CALI Act. Formulated in        reference to the systems in the United States, Britain and Japan, this article stipulates the        establishment of the Motor Vehicle Accident Compensation Fund (MVACF) to provide        compensation for parties injured in an automobile traffic accident when: the accident vehicles        cannot be traced; the accident vehicles are uninsured automobiles; insured accident vehicles        were used or managed without the consent of the insured; and/or all or some of the accident        vehicles are exempt from this insurance. The goal is to provide basic protection to the victim or        the survivors who are unable to obtain claim payment based on the stipulations of the CALI Act,        thus offsetting the insufficiency of the CALI. 

I. Functional purposes of MVACF to perform CALI 

In accordance with Article 1 of the CALI Act:「This Act is specially adopted in order to        ensure prompt basic coverage for the injured parties in automobile traffic accidents that        result in injury or loss of life and to maintain roadway traffic safety.」and Article 38:「The        Compensation Fund shall be established in order to ensure prompt basic coverage for all the        injured parties in automobile traffic accidents under this Act, and to ensure the soundness of        this insurance system. The Compensation Fund shall maintain separate accounts for        automobiles and for motorcycles as a basis for calculation of fees.」, the legislative purpose        indicates the function of the MVACF to protect the basic right of the victims in traffic        accidents and ensure the soundness of the CALI system. The Act stresses the CALI system        and MVACF are to enhance the public safety. MVACF accumulates the recommendations of        practical experience to provide the authority as the amended opinions and cares for the        victims on our own initiative to maintain the popularity of the CALI for better social security        development. The system performs as following:   

1. To ensure the soundness of the CALI system. 

a. Special audit is based on the analysis of a special topic and handled by the        MVACF as commissioned by the competent authority to track and rectify        defects to ensure that insurance companies are incompliance with the laws.  b. According to the current issue of the actual work of discovery, MVACF offer       

opinions and suggestions of amendments to ensure the CALI law practice to        perform better by fair and reasonable. 

c. To hold education training to practice the claims affairs, MVACF provide     

 

two­way exchange of views on the opportunity to explore practical problems        and answers to doubt, to ensure that the insurance payment standards        converge. 

2. MVACF provide the assistance for insurance company processing the CALI practice        questions of individual cases and take the initiative to care for victims of major accidents        to assist the application of the insurance or compensation, and sent staff to assist as        needed.

 

The CALI gives the victim has a direct right to request, for the purpose of        making claims or compensation can be immediate and effective assistance to the        victims. Some significant traffic accidents need assistance for its complex situation. For        the reason, to cares for the victims on our own initiative and provide onsite service can        ensure prompt basic coverage for the injured parties in automobile traffic accidents and        enhance the popularity of the CALI.  

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sustainable development goals. Therefore, to avoid repeated violations of claimant's        application, MVACF regularly review data of the victims through the system, in order to        prevent and control the illegal compensation of the insurance payment situation.                  II. Statistics of the Compensation Fund   Unit: NT$ Thousand 

Year/Month 

Income from 

Shared Quota 

Compensation 

Expenditure

Compensation  

Cases 

2004 

534,245 

326,828 

558 

2005 

491,489 

526,627 

1,709 

2006 

486,824 

610,400 

2,628 

2007 

489,540 

557,086 

2,700 

2008 

481,003 

641,752 

3,543 

2009 

445,383 

561,439 

3,800 

2010 

424,151 

534,097 

3,870 

2011 

438,221 

460,907 

3,778 

2012 

409,895 

465,535 

3,717 

2013 

426,770 

528,518 

3,876 

2014 

433,407 

447,832 

3,705 

2015 

436,995 

433,972 

3,923 

Source: Motor Vehicle Accident Compensation Fund(http://www.mvacf.org.tw/e_content/about/about01.aspx)  Note: 1.Compensation Expenditure includes settled and unsettled amount, the settled          amount is estimated at the date Compensation Cases are filed.   

Since its implementation in 1998, the CALI has been in force for more than a decade. Moreover,        according to recent surveys, approximately 90% of the general public is satisfied with the CALI        system. No doubt, the CALI has become an important part of Taiwan social security systems.  As of Dec. 2015, more than 18.5 million motor vehicles were covered by the CALI. The total        number of loss of life paid out thus far by insurers has amounted to 77,654 cases; disability        benefits paid out amounted to 185,054 cases, and medical benefits paid out amounted to       

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3,434,425 cases. The amount of total has paid insurance benefits NT 210.1 billion and        compensation NT 8.5 billion (41,672 cases) from MVACF. 

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