The Circular on health insurance under ISA confirms the supervisory requirements on tariffs and technical reserves relating to supplementary health insurances. In particular, it specifies FINMA's mandate to safeguard, in a preventative control procedure on the approval of insurance tariffs, that premiums levied are neither so low as to pose a risk to solvency nor so high as to constitute an abusive practice. To draft the Circular, FINMA held a consultation period and received comments from 27 parties. The circular will come into force on 1 May 2010.
The Circular on health insurance under ISA confirms the supervisory requirements on tariffs and technical reserves relating to supplementary health insurances. The requirements outlined largely correspond to the practice applied by FINMA. The Circular focuses in particular on the application of this practice to both core areas: tariffs and technical reserves.
As part of the revision of supervisory law as of 1 January 2006, parliament retained that the supervisory authority is to conduct a prior review and approval of premiums and terms and conditions of insurance. As a supplement to the law, the Circular defines those products which are subject to approval, excluding those for which the health insurance risk is considered insignificant.
Furthermore, the Circular specifies the tariff structure permitted. They may neither be so low as to pose a risk to solvency nor so high as to constitute an abusive practice. Tariffs must provide sufficient cover for the obligations entered into (no dumping) and no abusively high profit is to be factored, i.e. if the anticipated profit is out of proportion to the technical risk assumed. Significantly unequal treatment of policyholders that is not actuarially justifiable is also deemed to constitute abusive practice.
Financial approach and establishing technical reserves
The revised supervisory law permits a free choice as to the financing approach, provided that the approach chosen does not create any risk of insolvency. The financing approach must be such that, over the longer term, obligations entered into can be fulfilled. It is essential that it covers all foreseeable risks, particularly the risk of a change to the portfolio structure. The technical reserves required must be evaluated and taken into account in the premiums, and be transparent in the accounting.
Reactions to the consultation period
Comments were received from 27 parties. Overall, the reactions to the Draft Circular were positive. Sporadic criticism was voiced by industrial representatives on the scope, legal principles and "interference in economic freedom" posed by the Circular, as well as on certain technical details. The different opinions received were analysed and partly incorporated into the drawing up of the definitive version of the Circular. In the consultation report, FINMA sets out clearly to what extent the opinions submitted have been considered.
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