The Hong Kong Insurance Authority (HKIA) will take over the regulation of insurance intermediaries from the three self-regulatory organisations in mid-2019. Given that there are several sets of competence standards across these organisations, it is necessary to consolidate and update them in line with the statutory requirements to improve protection for policyholders. As such, the HKIA recently held a public consultation on two guidelines under the Insurance Ordinance (Cap 41).
The Hong Kong Insurance Authority (HKIA) has achieved a consensus with the China Banking and Insurance Regulatory Commission that the latter will provide preferential treatment to Hong Kong reinsurers by reducing the reinsurance credit risk requirement under China's Risk-Oriented Solvency System for mainland insurers that use Hong Kong reinsurers authorised by the HKIA. This new arrangement should improve Hong Kong's credentials as an Asian reinsurance hub.
The Hong Kong Insurance Authority recently released a draft guideline on enterprise risk management as part of Hong Kong's move towards a risk-based capital regime. The draft guideline considers the recent consultation and review of the relevant insurance core principles by the International Association of Insurance Supervisors and aims to nurture a strong risk culture which reflects the values, attitudes and norms of business behaviour.
Lawmakers recently met to discuss a new bill to establish a policyholders' protection scheme to protect policyholders' interests in case an insurer becomes insolvent. This safety net will cover individuals, small and medium-sized enterprises and building owners' corporations. All authorised insurers in Hong Kong will have to participate and pay an initial levy to build up the two compensation funds – namely, the life fund (for long-term policies) and the non-life fund (for general policies).
If a policyholder is dissatisfied with the conduct of an insurer, agent or broker, there are various channels for making a complaint. One such channel is the Insurance Claims Complaints Bureau, which was recently revamped to provide Hong Kong's insurance industry with improved methods of settling personal insurance claims and disputes by providing policyholders with an alternative dispute resolution process.
The Insurance Authority has launched two new initiatives to promote the use of 'insurtech' in Hong Kong and encourage insurers and technology companies to team up to develop innovative insurance technology in light of recent market trends. The initiatives aim to promote the development of new technologies in Hong Kong's insurance sector and maintain Hong Kong's competitiveness in the Asian market.
The Insurance Authority will begin to collect a levy from policyholders through premium payments to insurers from January 1 2018. Holders of life insurance policies and general insurance policies (eg, travel, motor, property and household) will be required to pay the levy; however, reinsurers, policies underwritten by captive insurers and marine, aviation and goods-in-transit businesses are exempt.
The Insurance Agents Registration Board recently initiated disciplinary proceedings against a former AIA International Limited agent for breaches of the Code of Practice issued by the Hong Kong Federation of Insurers. The resulting disciplinary action included a payment order of HK$806,200 against AIA; however, this decision was reversed by the Court of First Instance following a judicial review.
The Office of the Commissioner of Insurance and the China Insurance Regulatory Commission recently signed an agreement to conduct an equivalence assessment on the insurance solvency regulatory regimes of Hong Kong and mainland China, as well as to implement procedures and transitional arrangements to increase cooperation between the two insurance regulatory bodies.
The Hong Kong Financial Services Development Council recently released a report entitled Turning Crisis into Opportunities: Hong Kong as an Insurance Hub with Development Focuses on Reinsurance, Marine and Captive. Pointing out that Hong Kong is facing stiff competition from regional competitors, the report identifies opportunities to strengthen Hong Kong's position in the reinsurance and insurance industry.
Hong Kong's largest health insurer, AIA, recently issued letters to doctors in private practice advising them that it is clarifying the policy wording for 'medically necessary' procedures. In an attempt to avoid reimbursing what it regards as 'excessive health procedures' at private hospitals, AIA is proposing that only seven significant comorbidity and five acute conditions be recommended for inpatient care.
The proposed new Apology Bill encourages apologies in disputes by removing legal disincentives to apologising (making an apology inadmissible in lawsuits and ensuring that insurance coverage is not affected), with the aim of promoting the settlement and resolution of disputes and reducing litigation. There are clear advantages for insurers in the enactment of this legislation, as they will not need to be concerned with expressions of regret prejudicing the defence of a claim.
Although the new Independent Insurance Authority is expected to become operational at the end of 2016, changes to insurance industry regulation are already underway. The Office of the Commissioner of Insurance recently issued the revised Guidance Note on the Corporate Governance of Authorised Insurers, which aims to enhance the integrity of Hong Kong's insurance industry by providing guidance to insurers for the evaluation and establishment of their internal practices and procedures.
The China Insurance Regulatory Commission (CIRC) recently issued a public statement regarding the purchase of Hong Kong insurance policies by mainland customers. The CIRC warned mainland purchasers of the legal, financial and policy risks of buying Hong Kong insurance products. So what does this mean for Hong Kong's insurance regulators and insurers?
Following the deadliest hot air ballooning disaster in history, the coroner recently provided recommendations to the Travel Industry Council. Insurers selling travel insurance policies will need to abreast of any new regulations, to ensure that those who purchase travel insurance understand the extent of their coverage, particularly concerning potentially risky activities.
The Hong Kong District Court recently addressed the issue of whether money to be paid out to a beneficiary under a life insurance policy is considered to be held on trust by the administrators of the deceased's estate. The District Court determined that money to be paid out to the spouse or child under the deceased's life insurance policy is deemed a statutory trust under the Married Persons Status Ordinance.
The Court of Final Appeal recently handed down a decision concerning the duty of care owed by insurance agents (who represent or work exclusively for an insurer, advising or arranging contracts of insurance) to their technical representatives (who provide advice to an insured or potential insured, or arrange contracts of insurance on behalf of insurance agents) in respect of compliance with the industry's reporting regulations.
The recent riots in Mong Kok raise questions for insurance policyholders claiming property damage and consequential loss resulting from a riot or similar circumstances. Although Hong Kong continues to remain an open, safe and free economy, businesses and commercial property landlords may want to re-evaluate their insurance and consider adding property all-risks insurance and business interruption insurance.
The Hong Kong Court of First Instance recently issued a decision concerning the interpretation of insurance agency contracts. The case related to a clawback provision in an agent's employment contract, which entitled the employer to a refund of extra inducement payments if the employee failed to fulfil the conditions required for remuneration of the payments.
The Hong Kong police recently conducted a sting operation and raid on the Hong Kong corporate office of US international transportation network company Uber. The crux of the issue is whether Uber discharged its duty to disclose that its vehicles were potentially licensed incorrectly or not at all in accordance with the Road Traffic Ordinance. This update examines an insurer's options should this be the case.