Financial Institution in Financial Institution in Hong Kong – Insurance Hong Kong – Insurance

IndustryIndustryUnder Certain Under Certain

Regulations and Regulations and Competition, how Competition, how

insurance companies insurance companies compete with each compete with each

other’s?other’s?

Group Members ListGroup Members List

Li Wai Hang Li Wai Hang ( 033091 ( 033091 GalaxyGalaxy ) ) Hung Oi Lun Hung Oi Lun ( 033121 ( 033121 Ellen Ellen ))Yeun Wing Chi Yeun Wing Chi ( 033124 ( 033124 ChiChi ) )Lee Yan Yan Lee Yan Yan ( 033131 ( 033131 Kim Kim ))Mak Ka Yi Mak Ka Yi ( 033136 ( 033136 JoeyJoey ) )Lai Po ShanLai Po Shan ( 033146 ( 033146 QinVi QinVi ))Chiu Lok Yee Chiu Lok Yee ( 033199 ( 033199 Emily Emily ))

AgendaAgenda

The development of insurance The development of insurance industry in HKindustry in HK

Trend of insurance industries in Trend of insurance industries in Hong KongHong Kong

CasesCases Noteworthy Points Noteworthy Points ConclusionConclusion MCMC

The development of The development of insurance industry in HKinsurance industry in HK

Established over 100 yearsEstablished over 100 years Second large insurance market in AsiaSecond large insurance market in Asia In the late 90’s, it has direct In the late 90’s, it has direct

US$4.1billion investment in overseasUS$4.1billion investment in overseas There were 178 authorized insurers There were 178 authorized insurers Gross premiums of grew to HK$121.9 Gross premiums of grew to HK$121.9

billion in 2004, represent 9.6% of the billion in 2004, represent 9.6% of the GDPGDP

China FactorChina Factor WTOWTO

– Open the huge market to foreign Open the huge market to foreign insurersinsurers

– Expend their operations in the region Expend their operations in the region including HKincluding HK

CEPACEPA– Global assets of over US$ 5 billionGlobal assets of over US$ 5 billion– More than 30 years of experience More than 30 years of experience – Representative office established in Representative office established in

the Mainland for 2 consecutive yearsthe Mainland for 2 consecutive years– Rise in maximum limit of capitalRise in maximum limit of capital

MPF & TransparencyMPF & Transparency

MPFMPF– Provide a huge amount of fund to Provide a huge amount of fund to

insurers. insurers. – Support the growth of them Support the growth of them

TransparencyTransparency– Linkage between Banking sector is Linkage between Banking sector is

closercloser– The product is more complexThe product is more complex– Agent move from one firm to another Agent move from one firm to another

Trend of insurance Trend of insurance industries in Hong industries in Hong

KongKong

Recovery in Economy Recovery in Economy

The growth of the GDP and Per capital The growth of the GDP and Per capital GDPGDP

Recovery in Economy (Con’Recovery in Economy (Con’t)t)

Individual Life business is still the Individual Life business is still the

most dominant line of businessmost dominant line of business

the insurance industries will be the insurance industries will be

benefited by the economic recovery benefited by the economic recovery

continuously continuously

Recovery in Economy (Con’Recovery in Economy (Con’t)t)

Higher sensitive to Higher sensitive to healthhealth

The Accident and Health business The Accident and Health business recorded a premium growth of 1.6% recorded a premium growth of 1.6%

The gross premiums increased from The gross premiums increased from 4,336.5 millions in 2003 to 4,403.9 4,336.5 millions in 2003 to 4,403.9 millions in 2004millions in 2004

The underwriting profit also The underwriting profit also increased from 267.8 millions in increased from 267.8 millions in 2003 to 329.9 millions in 20042003 to 329.9 millions in 2004

Higher sensitive to healthHigher sensitive to health (Con(Con’t)’t)

Higher sensitive to healthHigher sensitive to health (Con(Con’t)’t)

Higher growth rate of Higher growth rate of compliant casescompliant cases

In 2004, the Insurance Claims ComplaintIn 2004, the Insurance Claims Complaints Bureau received a total of 292 complias Bureau received a total of 292 compliant casesnt cases

This represents a 14% increase over the This represents a 14% increase over the previous yearprevious year

Higher growth rate of compliant cases Higher growth rate of compliant cases (Con’t)(Con’t)

CasesCases

Case 1Case 1 A woman was admitted to hospital for treatment oA woman was admitted to hospital for treatment o

f thyrotoxic goitre nine months after she effected f thyrotoxic goitre nine months after she effected a medical policy in October 1998. The insurer founa medical policy in October 1998. The insurer found that she had sought medical consultation for and that she had sought medical consultation for anaemia in 1994, as well as an on-and-off allergic skiaemia in 1994, as well as an on-and-off allergic skin rash between 1991 and 1997. As such information rash between 1991 and 1997. As such information was not disclosed on the application form, the inn was not disclosed on the application form, the insurer rejected her hospitalisation claim and rescinsurer rejected her hospitalisation claim and rescinded the policy on the ground of non-disclosure. ded the policy on the ground of non-disclosure.

Case 1 (Con’t)Case 1 (Con’t)

The woman emphasised that she had recovered The woman emphasised that she had recovered from anaemia and did not need to take medicatfrom anaemia and did not need to take medication for at least three years. To substantiate her ion for at least three years. To substantiate her argument, she submitted a letter from her atteargument, she submitted a letter from her attending physician, confirming that her haemoglonding physician, confirming that her haemoglobin levels in March 1995 and October 1997 were bin levels in March 1995 and October 1997 were normal. As for her skin rash, the woman indicatnormal. As for her skin rash, the woman indicated that it was only a common allergy and not of ed that it was only a common allergy and not of a serious nature. a serious nature.

個案一 個案一 :: 一位婦人於一位婦人於 19981998 年年 1010 月購買了醫療保險，九個月購買了醫療保險，九個

月後入院接受甲狀腺腫脹治療。保險公司得悉她月後入院接受甲狀腺腫脹治療。保險公司得悉她於於 19941994 年曾因貧血求診，又在年曾因貧血求診，又在 19911991 至至 19971997 年年期間，間歇性出現皮膚敏感。由於被保人沒有在期間，間歇性出現皮膚敏感。由於被保人沒有在投保申請書上披露有關資料，保險公司以她沒有投保申請書上披露有關資料，保險公司以她沒有披露事實為理由拒絕其住院索償，並撤銷合約。披露事實為理由拒絕其住院索償，並撤銷合約。

被保人強調她的貧血病早已痊癒，最少三年前已被保人強調她的貧血病早已痊癒，最少三年前已停止服藥，更提交主診醫生的函件，證明她於停止服藥，更提交主診醫生的函件，證明她於 19199595 年年 33 月至月至 19971997 年年 1010 月期間的血紅蛋白水平正月期間的血紅蛋白水平正常；至於皮膚敏感，她表示只屬普通症狀，情況常；至於皮膚敏感，她表示只屬普通症狀，情況並不嚴重。並不嚴重。

Should the insured be Should the insured be awarded the hospitalization awarded the hospitalization

claim ?claim ?

YesYesReason:Reason:The Complaints Panel learned from a medical reportThe Complaints Panel learned from a medical reportthat that prior to her policy applicationprior to her policy application, the woman's, the woman'shaemoglobin content was haemoglobin content was normalnormal while her anaemia while her anaemiaand allergic skin rash were and allergic skin rash were mild and infrequentmild and infrequent. .

Under these circumstances, the Complaints PanelUnder these circumstances, the Complaints Panelwas was not convincednot convinced that the that the non-disclosed information non-disclosed information was material enoughwas material enough to have to have affected the underwritinaffected the underwritin

ggdecisiondecision of the insurer. of the insurer.

Non-disclosureNon-disclosure

Principle of Utmost Good Faith Principle of Utmost Good Faith - The insurer trusts the policyholder to - The insurer trusts the policyholder to

givegive

preciseprecise and and truetrue details of the subject details of the subject

matter to be insuredmatter to be insured

Policyholder should Policyholder should tell the whole tell the whole truthtruth

Non-disclosure (cont’d)Non-disclosure (cont’d) Non-disclosure arises when:Non-disclosure arises when:

- an applicant for an insurance policy - an applicant for an insurance policy fails fails toto

disclosedisclose on the application material fact on the application material fact

within his actual or presumed knowledgewithin his actual or presumed knowledge

Information given by an applicant in theInformation given by an applicant in the

application has application has great impactgreat impact on the on the insurer'sinsurer's

underwriting assessmentunderwriting assessment

whether or not non-whether or not non-disclosed ? disclosed ?

1. A material fact, which would 1. A material fact, which would influenceinfluence a a prudent underwriter in prudent underwriter in assessmentassessment

2. A fact 2. A fact within the knowledgewithin the knowledge of the appli of the applicant cant

3. A fact which the applicant could 3. A fact which the applicant could reasonreasonably be expectedably be expected to disclose to disclose

Non-disclosure (cont’d)Non-disclosure (cont’d)

Non-disclosure could result in Non-disclosure could result in policy policy repudiationrepudiation and and claim rejectionclaim rejection

One golden rule to follow One golden rule to follow

- if - if in doubtin doubt as to whether a fact is as to whether a fact is

material, it is better to material, it is better to disclose it disclose it !!

Case 2Case 2 The deceased was killed in a traffic accident. The deceased was killed in a traffic accident.

At the time of the accident, he was a passenger on At the time of the accident, he was a passenger on a motorcycle.a motorcycle.

It is stipulated in the policy exclusions that "no It is stipulated in the policy exclusions that "no benefit will be payable for any accidental death benefit will be payable for any accidental death directly or indirectly caused by or resulting from directly or indirectly caused by or resulting from engaging in hazardous activities including but not engaging in hazardous activities including but not limited to… motorcycling…". As the circumstance limited to… motorcycling…". As the circumstance leading to the deceased's death was outside the leading to the deceased's death was outside the scope of the policy coverage, the insurer refused to scope of the policy coverage, the insurer refused to settle the accidental death benefit.settle the accidental death benefit.

Case 2 (cont’d)Case 2 (cont’d)

The deceased's mother presented a The deceased's mother presented a traffic accident report to substantiate that traffic accident report to substantiate that her son's death was caused by the her son's death was caused by the negligence of a public light bus driver who negligence of a public light bus driver who talked on a mobile phone while driving. talked on a mobile phone while driving. She emphasized that her son was only a She emphasized that her son was only a passenger at the time of the accident and passenger at the time of the accident and had never been engaged in hazardous had never been engaged in hazardous activities.activities.

個案二 個案二 :: 死者因交通意外喪生，發生意外時，死者是電單死者因交通意外喪生，發生意外時，死者是電單

車的乘客。車的乘客。 保單豁免條款訂明：「不會賠償因為參與危險活保單豁免條款訂明：「不會賠償因為參與危險活

動，包括動，包括 (( 但不限於但不限於 )......)...... 騎電單車騎電單車 ............ ，直接或，直接或間接導致或造成的意外死亡」。由於導致死者喪間接導致或造成的意外死亡」。由於導致死者喪生的情況並非在保單的保障範圍之內，故此保險生的情況並非在保單的保障範圍之內，故此保險公司拒絕發放意外死亡賠償。公司拒絕發放意外死亡賠償。

死者的母親出示交通意外報告，以資證明其子之死者的母親出示交通意外報告，以資證明其子之死是因為小巴司機疏忽所致，當時小巴司機一面死是因為小巴司機疏忽所致，當時小巴司機一面行車，一面使用手提電話。她強調其子發生意外行車，一面使用手提電話。她強調其子發生意外時只是電單車乘客，並沒有參與危險活動。時只是電單車乘客，並沒有參與危險活動。

Should the insured be Should the insured be awarded the accidental awarded the accidental

death benefit ?death benefit ?

No Reason: Reason: Although the deceased was only a Although the deceased was only a passenger on passenger on

a motorcyclea motorcycle at the time of the at the time of the fatal accidentfatal accident, , the Complaints Panel, having thoroughly the Complaints Panel, having thoroughly studied the studied the subject exclusion clausesubject exclusion clause, was of the , was of the view that a motorcycle passengerview that a motorcycle passenger should beshould be treated as indirectly engaging in motorcyclingtreated as indirectly engaging in motorcycling. . In the circumstances, the Complaints Panel In the circumstances, the Complaints Panel resolved to resolved to uphold the insurer's decisionuphold the insurer's decision in in declining the accidental death benefit.declining the accidental death benefit.

Hazardous activityHazardous activity

Many personal accident policies contain Many personal accident policies contain an exclusion clause to an exclusion clause to exclude loss or daexclude loss or damagemage while the insured person is while the insured person is engageengaged in hazardous activitiesd in hazardous activities as the risk invol as the risk involved is ved is exceptionally highexceptionally high. .

In some policies, In some policies, Motorcycling = Hazardous activityMotorcycling = Hazardous activity

Excluded ItemsExcluded Items All insurance contracts contain All insurance contracts contain an "exclusion" an "exclusion"

sectionsection which lists out all the losses, perils, which lists out all the losses, perils, hazards, situations, conditions or circumstances hazards, situations, conditions or circumstances that are that are excluded from the policy coverageexcluded from the policy coverage

As As additional cover may warrant an addition additional cover may warrant an addition chargecharge in the premium, the purpose of exclusions in the premium, the purpose of exclusions is to is to limit the coveragelimit the coverage to only those risks the to only those risks the policies are policies are intended to cover at the agreed intended to cover at the agreed premiumpremium. .

Claim disputes often arise when the Claim disputes often arise when the insured insured neglects or fails to make referenceneglects or fails to make reference to these to these exclusions. exclusions.

Special Term-「可保利益」

“ Insurable Interest"

Basic requirement for all insurances a person who buys a policy must

have an insurable interest in the subject of the insurance– Legally accepted relations

Couple Debtor Partner In contract Parents/guardians and their child under 18

– when the loss or damage to the item would suffer a financial loss or other kinds of losses

When is Insurable Interest needed?

For life insurance:– Only need when start insurance contract

For other insurance:– Insurance Interest was need when

Start insurance contract Claims occur

ConclusionConclusion Noteworthy PointsNoteworthy Points Disclose fully and accurately all

information in the application form. – Ask the agent to explain fully the implications

of the questions. Check personally if all the facts are

included in the application form Understand the scope of coverage Read the policy, in particular any exclusion

clauses

MCMC

1. Which business has/have a decline 1. Which business has/have a decline in gross premiums?in gross premiums?

a)a) General Liability businessGeneral Liability business

b)b) Property Damage businessProperty Damage business

c)c) Motor Vehicle businessMotor Vehicle business

d)d) All of aboveAll of above

2. Which are the two most common 2. Which are the two most common categories of claim disputes?categories of claim disputes?

a)a) Personal accident/disability & Personal accident/disability & hospitalization/medical hospitalization/medical

b)b) Personal accident/disability & Personal accident/disability & fire/householdfire/household

c)c) Personal accident/disability & motorPersonal accident/disability & motor

d)d) Personal accident/disability & travelPersonal accident/disability & travel

3. Which of the followings is not 3. Which of the followings is not include in the General Business ?include in the General Business ?

a)a) Property Damage businessProperty Damage business

b)b) Accident and Health businessAccident and Health business

c)c) Motor Vehicle businessMotor Vehicle business

d)d) Individual life businessIndividual life business

e)e) All of the aboveAll of the above

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