Financial Institution in Hong Kong

1
Financial Institution in Hong Kong Insurance
IndustryUnder Certain Regulations and
Competition, how insurance companies compete with
each others?
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Group Members List

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

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Agenda

• The development of insurance industry in HK
• Trend of insurance industries in Hong Kong
• Cases
• Noteworthy Points
• Conclusion
• MC

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The development of insurance industry in HK

• Established over 100 years
• Second large insurance market in Asia
• In the late 90s, it has direct US4.1billion
  investment in overseas
• There were 178 authorized insurers
• Gross premiums of grew to HK121.9 billion in
  2004, represent 9.6 of the GDP

5
China Factor

• WTO
• Open the huge market to foreign insurers
• Expend their operations in the region including
  HK
• CEPA
• Global assets of over US 5 billion
• More than 30 years of experience
• Representative office established in the Mainland
  for 2 consecutive years
• Rise in maximum limit of capital

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MPF Transparency

• MPF
• Provide a huge amount of fund to insurers.
• Support the growth of them
• Transparency
• Linkage between Banking sector is closer
• The product is more complex
• Agent move from one firm to another

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Trend of insurance industries in Hong Kong
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Recovery in Economy

• The growth of the GDP and Per capital GDP

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Recovery in Economy (Cont)

• Individual Life business is still the most
  dominant line of business
• ? the insurance industries will be benefited by
  the economic recovery continuously

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Recovery in Economy (Cont)
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Higher sensitive to health

• The Accident and Health business recorded a
  premium growth of 1.6
• The gross premiums increased from 4,336.5
  millions in 2003 to 4,403.9 millions in 2004
• The underwriting profit also increased from 267.8
  millions in 2003 to 329.9 millions in 2004

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Higher sensitive to health (Cont)
13
Higher sensitive to health (Cont)
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Higher growth rate of compliant cases

• In 2004, the Insurance Claims Complaints Bureau
  received a total of 292 compliant cases
• This represents a 14 increase over the previous
  year

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Higher growth rate of compliant cases (Cont)
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Cases
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Case 1

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

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Case 1 (Cont)

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

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• ?????1998?10????????,????????????????????????1994?
  ??????,??1991?1997???,????????????????????????????
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• ??????????????,??????????,??????????,????1995?3??1
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Should the insured be awarded the hospitalization
claim ?
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Yes

• Reason
• The Complaints Panel learned from a medical
  report
• that prior to her policy application, the woman's
• haemoglobin content was normal while her anaemia
• and allergic skin rash were mild and infrequent.
• Under these circumstances, the Complaints Panel
• was not convinced that the non-disclosed
  information
• was material enough to have affected the
  underwriting
• decision of the insurer.

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Non-disclosure

• Principle of Utmost Good Faith
• - The insurer trusts the policyholder to give
• precise and true details of the subject
• matter to be insured
• Policyholder should tell the whole truth

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Non-disclosure (contd)

• Non-disclosure arises when
• - an applicant for an insurance policy fails
  to
• disclose on the application material fact
• within his actual or presumed knowledge
• Information given by an applicant in the
• application has great impact on the insurer's
• underwriting assessment

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whether or not non-disclosed ?

• 1. A material fact, which would influence a
  prudent underwriter in assessment
• 2. A fact within the knowledge of the applicant
• 3. A fact which the applicant could reasonably be
  expected to disclose

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Non-disclosure (contd)

• Non-disclosure could result in policy repudiation
  and claim rejection
• One golden rule to follow
• - if in doubt as to whether a fact is
• material, it is better to disclose it !

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Case 2

• The deceased was killed in a traffic
  accident. At the time of the accident, he was a
  passenger on a motorcycle.
• It is stipulated in the policy
  exclusions that "no benefit will be payable for
  any accidental death directly or indirectly
  caused by or resulting from engaging in hazardous
  activities including but not limited to
  motorcycling". As the circumstance leading to
  the deceased's death was outside the scope of the
  policy coverage, the insurer refused to settle
  the accidental death benefit.

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Case 2 (contd)

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

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  ??????????????????????????????????????,???????????
  ??????
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  ?????????????????????,??????????

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Should the insured be awarded the accidental
death benefit ?
30
No

• Reason
• Although the deceased was only a passenger on
  a motorcycle at the time of the fatal accident,
  the Complaints Panel, having thoroughly studied
  the subject exclusion clause, was of the view
  that a motorcycle passenger should be treated as
  indirectly engaging in motorcycling. In the
  circumstances, the Complaints Panel resolved to
  uphold the insurer's decision in declining the
  accidental death benefit.

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Hazardous activity

• Many personal accident policies contain an
  exclusion clause to exclude loss or damage while
  the insured person is engaged in hazardous
  activities as the risk involved is exceptionally
  high.
• In some policies,
• Motorcycling Hazardous activity

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Excluded Items

• All insurance contracts contain an "exclusion"
  section which lists out all the losses, perils,
  hazards, situations, conditions or circumstances
  that are excluded from the policy coverage
• As additional cover may warrant an addition
  charge in the premium, the purpose of exclusions
  is to limit the coverage to only those risks the
  policies are intended to cover at the agreed
  premium.
• Claim disputes often arise when the insured
  neglects or fails to make reference to these
  exclusions.

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• Special Term-
• ??????Insurable Interest"

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• 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

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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

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Conclusion

• Noteworthy 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

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MC

• 1. Which business has/have a decline in gross
  premiums?
• General Liability business
• Property Damage business
• Motor Vehicle business
• All of above

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• 2. Which are the two most common categories of
  claim disputes?
• Personal accident/disability hospitalization/med
  ical
• Personal accident/disability fire/household
• Personal accident/disability motor
• Personal accident/disability travel

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• 3. Which of the followings is not include in the
  General Business ?
• Property Damage business
• Accident and Health business
• Motor Vehicle business
• Individual life business
• All of the above

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END