What is Insurance?

Insurance is a mechanism of transferring the uncertainty. Insurance company pooled the contribution of a number of policyholders together, if anyone of them suffers loss due to accident, a lump sum can be withdrawn in order to solve economic risk. Some insurance has saving element for the purpose of future planning of policyholder.

 

Insurance Agent vs Insurance Broker

Both agent and broker are insurance intermediaries. Accordingly to Part X of Insurance Companies Ordinance, Insurance Authority is responsible for the supervision of insurance intermediaries.An Insurance Agent is the agent of insurance company for promoting the products of that company. He/she has to register with Insurance Agents Registration Board of the Hong Kong Federation of Insurers.

 

An Insurance Broker is the agent of policyholder for advising suitable insurance coverage for the policyholder. He/she has to be a member of Professional Insurance Brokers Association Ltd. or the Hong Kong Confederation of Insurance Brokers, who are authorized by the Insurance Authority.

 

Who can be insured?

Insurable interest must exist between the subject matter (including human or property) and the policyholder, so that the policyholder can insure the subject matter. "Insurable interest" is the legal relationship from which a policyholder will suffer financial loss if a subject matter has been damaged accidentally. For example, Mr. Chan is the legal owner of his new saloon car, he can insure his car for comprehensive insurance, so that he is entitled compensation if his car is damaged accidentally.

 

What should I disclose to insurance company?

According to principle of Utmost Good Faith, a policyholder has to disclose all the material facts to insurance company for application of insurance. "Material Facts" are the facts that will affect the decision of a prudent underwriter of accepting the insured risk or not. For example, for life insurance, a policyholder/insured has to disclose the medical history of the insured.

 

How to determine the sum insured?

According to principle of Utmost Good Faith, a policyholder has to disclose all the material facts to insurance company for application of insurance. "Material Facts" are the facts that will affect the decision of a prudent underwriter of accepting the insured risk or not. For example, for life insurance, a policyholder/insured has to disclose the medical history of the insured.

 

How to lodge insurance claims?

Insured ought to notify his insurance agent / broker when there is a claim. The claim procedure is different for different type of insurance.

 

For example:
Life Insurance The claimant usually is the beneficiary. He/she has to provide such documents as death certificate, identity document, medical report etc.
Medical Insurance The claimant has to provide such documents as original receipts, medical report, laboratory report etc. He/she can only be reimbursed the actual medical expenses.
Property Insurance The claimant has to provide such documents as original receipts, medical report, laboratory report etc. He/she can only be reimbursed the actual medical expenses.
Liability Insurance Insured should pass all letters, summons and documents to insurer for processing. He/she cannot compromise with the third party without the approval of insurer.

 

Regulatory framework of Insurance

中文Insurance Ordinance appoints Insurance Authority to supervise the insurance companies, insurance brokers are registered with PIBA or CIB.

 

 

Types of Insurance
Life Insurance
"Term Insurance" insurance without saving element, insurer will pay the sum insured if the insured die within the insurance period.
"Endowment" insurance with target saving, insurer will pay the sum insured at the maturity or the insured die within the insurance period.
"Whole Life Insurance" insurance with saving element, the policy owner is entitled the cash value (including guaranteed cash value and non-guaranteed dividend). Insurer will pay the sum insured and non-guaranteed dividend if the insured die.
"Critical Illness" insurer will pay a lump sum to the insured if he/she suffers from specified serious diseases (e.g. cancer, heart attack, kidney failure etc.).
"Female Insurance special designed insurance for such female diseases as pregnancy related illness, systemic lupus erythematosus. Usually, some other benefits will be attached, e.g. medical check up, cash bonus for newborn baby, newborn baby's congenital diseases.

 

Investment Insurance
"Universal Life" insurance with flexibility to adjust the portion of protection and investment, to increase or decrease sum insured, to make use of the cash value. However, the transparency of the investment is low because policy owner cannot select his/her own investment portfolio.
"Investment-linked Insurance" insurance emphasis on investment, death benefit always equal to 101% of the cash value. It has high transparency of investment, policy owner can select his/her own investment portfolio, but not the individual assets in the portfolio.

 

General Insurance
"Personal Accident" cover the insured's death, disablement and medical expenses caused by accidental, external, violent and visible events.
"Medical Insurance" cover the insured's medical expenses due to accident or illness, including :
  • In-patient expenses
  • Out-patient expenses
  • Hospital cash