South Korea's top financial regulator said Sunday that it will allow local insurance firms to decide premiums for their insurance policies on their own in a bid to promote price competition in the long-slumped market.

The Financial Services Commission said it will remove guidelines for setting insurance premiums from the beginning of 2016.

Since 2000, the financial authorities have required local insurers to set aside a certain amount of money to make provisions for paying insurance benefits to their clients.

The Financial Supervisory Service, the financial oversight body, announces the percentage every year and insurance firms have to comply with the rules when they decide insurance premiums and benefits.

"The guidelines were aimed at maintaining the financial health of insurance companies and strengthening rights of policyholders," said Doh Kyu-sang, director general of the Banking and Insurance Bureau at the FSC.

"But they have kept insurance firms from waging price competition. They've come up with uniform insurance products in terms of premiums."

For medical and car insurance policies, the FSC will also give more room to insurers to raise premiums by 35 percent from 2017, up from the current 25 percent.

To promote competition and consumer convenience, online insurance markets will be launched next year and Internet portals will provide price-comparison services, the regulator added.

South Korea's insurance industry became the world's eighth-largest market last year, with its total assets reaching 862 trillion won ($763.5 billion) and 44,000 employees, according to the FSC. (Yonhap)