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Differentiation Supervision Mechanism

For the sake of improving the performance of insurance companies in their compulsory automotive liability insurance (CALI) business, fulfilling legislative objectives, and promoting the sound development of CALI system, the Financial Supervisory Commission (FSC) instructed the Compulsory Automotive Liability Insurance Actuarial and Research Taskforce (referred to as “Actuarial Taskforce” below) to study the development of a “differentiation supervision mechanism for compulsory automotive liability insurance” (DSM), which was first implemented in 2007. Since implementation, DSM has been shown to be effective in improving the claim adjustment operation and regulatory compliance of insurance companies. In the effort of continuously polishing up the DSM, the FSC took actions to improve DSM and adjust the methods for DSM assessment in 2018 and 2021 respectively to ensure effective supervision of CALI operations.

The DSM pertains to a scoring system with scoring items developed based on consumer interests, sustainable operations and market discipline. Items relating to consumer interests and items relating to improvements that can be made by a company are assigned with different weight values. Scoring rubrics and methods are then formulated to serve as benchmarks for assessing differences in the performance of different companies.

Through rolling review of the DSM, practices that can improve the CALI system are continuously incorporated into the scoring items so that the CALI operations of each insurance company become more transparent and consumer interests are better protected. The implementation of the DSM makes sure insurance companies value the sound development and sustainable operation of CALI business.