P5 News
Shonan Tax Office No. 166
July 2003

A Reduction of Life Insurances in Interest Rate

    Life insurance company law is planning to be revised, and the House of Representatives has already passed the bill on June 12th. This bill is that the government is able to protect life insurance companies from bankruptcy by reducing the yield of investments from clients. If the yield of investments reduces, insurance earned will be decreased, and also insurance expenses will be risen. 

    This bill says that
1. Life insurance companies that are potential to go bankrupt are able to apply for the reduction if those companies.
2. Cancellations are suspended after a reduction of life insurances in interest rate.
3. Minimum interest rate is 3% after a reduction.
4. It will be executed if two third of the shareholders agree and less than ten percent of contractors are against with this.

The plan interest rate of life insurances by contract date
Contract dates Plan interest rate
12/1/1982 ~ 4/1/1985 5.00%
4/2/1985 ~ 4/1/1993 5.50%
4/2/1993 ~ 4/1/1994 4.75%
4/2/1994 ~ 4/1/1996 3.75%
4/2/1996 ~ 4/1/1999 2.75%
4/2/1999 ~ 4/1/2001 2.00%
4/2/2001 ~ 1.50%

    An intention of the bill is that contractors will make a loss if life insurance companies go bankrupt. The government, therefore, would like to reduce the losses. However, some people disagree this bill, for life insurance companies try to make everything for their own convenience. 

    Postscript, I would like to thank Mr. Luck Chang who is a Certified Public Tax Accountant in South Korea and sent me a book every year.

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