1 !!"#$%&'()*+,!"#$%&'()*+ 2.!"#$%&'()#*+,!"#$!"#$!"#$%&'(' 2%!"#$%&'()!"#!"#$%&!"#$%&'()*)+,! 3.!"#$%&'()*+,!"#$%&'()*!!"#$%&'!()*+!!"#$%&'()*+,!"#$%&'()*+,!"#$%&'()*"+,!"#$%&'(!"#$%&'$()*+,-.!"#$%&'()*+, must be the right to life. For this reason, the two types of insurance, namely, automobile liability and employees compensation, which affect the right to life, are compulsory in Hong Kong. Guarantee Funds are also established to protect injured victims as well as policyholders against insurers insolvency. In Hong Kong, the three pillars of protection for a traffic accident victim are: 1. Compulsory insurance Every motorist is required to carry a third party liability insurance pertaining bodily injury and death, with a minimum policy limit of HK$100 million. The purpose is to ensure that an at-fault motorist will have the financial ability to compensate the victim who has been injured on the road. 2. Establishment of Guarantee Funds under the Motor Insurers Bureau of Hong Kong ( MIB ) - Motor insurance premiums are levied at 2% for the funding of the Insolvency Fund of the MIB to cover losses resulting from insolvency of motor insurers. A separate First Fund is in place to cover losses caused by uninsured or hit-and-run motorists. 3. Known as Avoidance of Certain Terms and Right of Recovery, a traffic accident victim may lodge a claim directly to the insurer of an atfault motorist; the insurer is liable to compensate the victim even though the motorist has not complied with the policy provisions. For instance, a motorist violates a policy provision because of over-speeding or drunkdriving. Due to the breach, the insurer should, if otherwise, disclaim its liabilities. However, as an innocent victim is involved, the insurer must first compensate the victim, and then seek repayment from the at-fault insured. As many Hong Kong citizens are worldwide travellers, it may be worthwhile to explore the situation of automobile liability in other countries such as the United States and Canada. In the United States and Canada, motorists are generally required to purchase compulsory third party liability insurance. Some states or provinces administer no-fault statutes. Persons injured in automobile accidents are to be indemnified for their losses irrespective of who is responsible for the accident. Prompt compensation is paid for certain economic losses such as medical expenses and loss of wages. Since victims are compensated irrespective of fault, no lawsuit is involved. The purpose is to avoid costly litigation and 6
2 !./!"#!"#$%&'(!"# $%&'(!) *!"#$%&'()*+!",./!"#$%&'()!*+,-.!"#$#%&'()*+,-#.!"#$%& '()$*+,- %../! "#$%&'()*+,-./!././!"#$%&'()*+!,-..!"#$%&'(!"#$! 1.!"#$!"#$%!"#$%&'()*+,#!"#$%&'()*+!"#$ 2.!!"#$%&'(!"#$%&' ()*+, ( )!"#$%&'!"#$%&'()*+,' (!" 2,000 )!"#$%&'()*#+,!"#$%&'()*+,!"#$%&'()*!"#$%&'(")*+!"# delay for payment of legitimate claims. In surveying the protection accorded to innocent traffic accident victims in other countries, we tend to conclude that Hong Kong citizens are reasonably protected. In Hong Kong, the minimum compulsory insurance of HK$100 million is comparable to other advanced countries. We also have Guarantee Funds in place for victims of uninsured or unidentified drivers. We have generally discussed a traffic accident victim's right to compensation. But from a motorist's perspective, how can he protect himself against the financial risk of claims from third parties, as well as his own property losses? The answer goes back to the purchase of insurance. In Hong Kong, the most common types of motor policies are Third Party Liability and Comprehensive insurance. 1. Third Party Liability Insurance This form of insurance is suitable for those who drive a vehicle which has little market value. The policy limit for third party liability is the statutory minimum of HK$100 million. In 7 addition to the compulsory coverage for a third party's bodily injury and death, a portion of that sum may be applied to third party's property losses. 2. Comprehensive Insurance If your vehicle carries substantial commercial value, it is more appropriate for you to purchase comprehensive insurance, covering both third party as well as first party (or owner's) losses. As for first party losses, the sum insured is limited to the estimated market value of the vehicle. In addition, the policy also provides some indemnity for medical expenses (usually HK$2,000) incurred by the motorist. Insurance policy is a form of contract. As a wise consumer, the insured should pay particular attention to the following: Truthfulness of information provided during the application for insurance The contract of insurance is based on utmost good faith. If the applicant is found to be dishonest, the insured may not secure his intended protection.
3 !!"#$%#&!"!"#$%&"'()*!+!"#!"#$%&'()!"#$%& 5,000!!"!"#$%&'!"#$%&'"()*$+!"#$%&$'()*+,!"#$%&'()*+,!"#$%&'!"!"#!!"#$%&'($)!"#$%&'()*+',!"#$%&'() 60%!"#$%&'()*+!"#$%&'()*+,!"#$%&'()*+,!"#$%&'!!"#$%&'(!"#$%&'()*+!"#$%&'()*+,!"# $%&'()*+,./! Compliance with the terms and conditions of the policy For example, car- racing is specifically forbidden under the policy. Excess This is the initial amount of the claim that the insured must retain for himself e.g. HK$5,000. The purpose of excess is to eliminate the cost of administering small claims and to encourage the insured to exercise greater care to prevent losses. Different amounts of excess may be applicable, depending on whether the accident is caused by a named or unnamed driver, a young or inexperienced driver, etc. The insurance premium may be reduced if the insured agrees to shoulder a higher excess.!"# 1.!"#$ 2.!"#$%&'( 3.!!"#$%&'()!"# 4.!"#$%&'%( 5. 6.!"#$%&'( 7.!"#$%&'()*+ 8 No Claim Discount (NCD) As premium rate depends on cost of risks, good drivers should pay less premium as their cost of risks is lower. NCD can be as high as 60%. A scale of discount has been developed by motor insurers whereby an insured can benefit from a progressive discount at renewal date if he files no claim. The discount will be reduced or eliminated if a claim has been lodged in the previous year. Exclusions You should study the policy exclusions carefully. The common exclusions are losses caused by natural wear and tear, and use of vehicle outside the specified geographical area. Conclusion An insured motorist, if in doubt, should ask his insurer or insurance agent to explain the policy provisions. A motorist should also be mindful of the need to find out his legal obligations and to arrange adequate insurance. General Exclusions 1. Depreciation, wear and tear 2. Mechanical breakdown and failure of electronic equipment 3. Consequential loss (e.g. cost of hiring another motor car as substitute to the damaged one) 4. Loss or damage due to war risks 5. Loss or damage due to strike, riot, or civil commotion 6. Use of vehicle by unauthorized person 7. Use of vehicle outside the specified geographical area
4 Q How much does motor insurance cost? What should I do if a car accident happens?! I forum A!"#$%&'()"*+!"#$%& '()*+,-./0) :8;<=>83?!" #$%&' A motor insurer will consider a range of factors when deciding your premiums. The factors include, among others, your age, profession, driving experience, insurance history as well as the cost and model of your vehicle.!"#$%&'()*+,-!"#$%&'()*+, 1../ 2.!"#$%&'$( 3.!"#$%&'(!)*!"+,-./ 4../ 5.!"#$%&' 6. 7.!"#$%&'()*+ Will a motor insurer pay me from the first dollar of loss? Depending on seriousness of the accident, you are suggested: 1. To obtain name(s) and address(es) of other driver(s) involved in the accident; 2. To note their car registration number(s) and model of car(s); 3. To ask for name(s) of their insurer(s) and their polic(ies) or certificate number(s); 4. To note name(s) and address(es) of independent witness(es); 5. To report the accident to the police; 6. To report the accident to your insurer as soon as possible; and 7. Not to settle with any party on your own.!"#$%&'()* +,-./!"#$!"#./01234%&$56!"#$%&"'()*+ What is No Claim Discount (NCD)? How is it determined? Generally speaking, an excess (or deductible) will be applied to claim on the insured vehicle's own damage and a third party's property damage. The motor insurer will only pay loss above the 10%! "#$% 60% In order to encourage good driving practices, motor insurers generally offer NCD to careful drivers. For instance, a private car driver with one completed year of clean record will be given 20% NCD upon renewal of the policy. The NCD will be increased by 10% for each additional consecutive year of clean record up to a maximum of 60%../0./ :; 1.!"# 5.!"#$%&'( 2.!"#$% 6.!"#$%$& 3.!"# 24!"# 7.!"# 4. 24!"#$%&'.!"#/0123&456789:;<1"=&>!" Are there any additional benefits offered by motor insurers in the market? Due to keen market competition, some motor insurers will offer additional benefits under their insurance policy: 1. Free towing services 5. Windscreen or car window cover 2. Emergency roadside repair services 6. Free personal accident insurance cover hour hotline services for general 7. Claim recovery services traffic information hour claim report centre services Before you buy motor insurance, do shop around. You may find it worthwhile to choose the best policy that suits your need. 9
5 !"#$%& Legal and Technical Corner!"#$%&'(!"( )! !"#$!"#$%&()!"#$%&'!"#!!"#$%&'()* ( )!"#$%&'(!"#$% G H!G H!"#$!!"#$%!"!"#!"(!" )!"(!")!"#$%&'()!"#$!"#$%&'!"#$%&'()*!!"#$!"#$%&'()*+ (!"#$%&!'()*+ )!"#$%&#'$%()!"#$%&'()( )!"#$%&'()*+,!"#$%&'()*+!"#$!"#$%&'!"#$%&!"!"#$%&'()!"#$%&'(!"!"# FAI First Pacific Insurance Company Limited! HIH Insurance Limited ( HIH)!"#$%&'()*+, 8!"#$%&'HIH! 17! !..!"#$%&'()*+,!!"#$%&'()!"#$%&'$()*+.!Mr. Peter WhalleyMr. Jan Blaauw!"#$%&'( Mr. Peter Whalley Mr. Jan Blaauw!"#$%&'( !"#$%&'()*!"#$%&$%'()*+,!"#$%&'()*"#$%..! Reserving Standards for MPF Schemes with Investment Guarantees T he Mandatory Provident Fund ( MPF ) System has come into operation commencing from 1 December Pursuant to the MPF Schemes (General) Regulation, constituent fund(s) of an MPF Scheme may be invested in approved pooled investment funds ( APIFs ) which may be unit trusts or mutual funds authorized by the Securities and Futures Commission ( SFC ), or insurance policies of Class G or H under the Insurance Companies Ordinance. An insurer, who issues Class G or H policies, must comply with the reserving requirements of the Insurance Companies Ordinance, including the Insurance Companies (Determination of Long Term Liabilities) Regulation and the Insurance Companies (Margin of Solvency) Regulation. All authorized insurers with APIFs offering investment guarantees must also observe the requirements set out in the "Guidance Note on Reserving Standards for Investment Guarantees" issued by the Insurance Authority. Other than insurers, all authorized institutions (licensed banks, restricted licence banks and deposit-taking companies) who act as guarantors for MPF guaranteed funds, are required to observe the "Provisioning Requirements for Investment Guarantees under Mandatory Provident Fund Schemes" issued by the Hong Kong Monetary Authority ("HKMA"). In addition, locally incorporated authorized institutions are required to maintain adequate capital in accordance with the guidelines issued by the HKMA on "Capital Adequacy Requirements for Investment Guarantees under Mandatory Provident Fund Schemes". Provisional Liquidation of Three Local Insurers HIH Insurance (Asia) Limited, HIH Casualty and General Insurance (Asia) Limited and FAI Insurance Company Limited are Hong Kong subsidiaries of HIH Insurance Limited of Australia ( HIH Australia ). After disclosing A$ 800 million in losses, HIH Australia and its 17 group companies were put into provisional liquidation on 15 March An independent review required by the Insurance Authority indicated that a significant portion of the three local insurers assets have been tied up in 10