The Trend and Risk of Insurance Industry in HK

Introduction Insurance The equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care Risk management

History Around 2500BC 1792BC Old Babylon Ancient Egypt Roman Empire Babylonians Code of Hammurabi

When was the 1st insurance contract being invented?

When was the 1st insurance contract being invented? In Genoa

History 1693 1756 1762 Edmond Halley Joseph Dodson Equitable Society Silesia Breslan城 哈雷死亡表 1756 Joseph Dodson 1762 Equitable Society 1st insurance company in the world

Insurance in HK Begin in 1841 After Qing Government’s defeat in the Opium War HK as an entrepot council-like insurance companies

Insurance in HK Until 30 September 2006 Pure general insurers---115 Pure long-term insurers--- 47 Composite insurers--- 19 Total: 181 authorized insurers in Hong Kong

Insurance in HK Sources: The Hong Kong Federation of insurers <http://www.hkfi.org.hk/b5_insurance_statistics.htm>

Development of Insurance Industry Three Areas World’s China’s Hong Kong’s

Trend of World’s The Incident 911 Aware of safeness Emphasize on insurance

Trend of China’s Reformation Rapid development Past: Superstitious Now: Open-mind

11th Five-Year Plan expects double of income of 2005 in 2010, beyond RMB1000 billion Insurance will grow rapidly

Trend of Hong Kong’s Well-developed Saturated market Increasing premium

Three measures by Hong Kong’s Reinsurance Diversification of services CEPA →Migrate business to Mainland

Statistic source of data

Trend of Premiums

Trend of Individual Life Insurance

Top 10 Long Term Business Insurers by office premiums of In-force Business in 2004 Ranking Name of Insurers Abbreviated Name Office Premiums $m Market Share % 1. American International Assurance Company (Bermuda) Limited AIA (Bermuda) 16,941 17.2 2. Manulife (International) Limited Manulife (Int'l) 12,155 12.4 3. HSBC Life (International) Limited HSBC Life 11,697 11.9 4. Prudential Assurance Company Limited - The Prudential (UK) 8,423 8.6 5. AXA China Region Insurance Company (Bermuda) Limited AXA China (Bermuda) 5,833 5.9

Market share of Long Term Business Insurers by Office Premiums of In-force Business in 2004 Source of information: the Hong Kong Insurance Business Statistics 2004 released by the Office of the Commissioner of Insurance in September 2005

Case Study

Case The insured applied for a life policy and undertook a medical examination at the insurer's appointed clinic. The application was accepted by the insurer at an increased premium. Later, the insured passed away due to a ruptured aortic aneurysm and pneumonia. The insurer subsequently rescinded the policy from inception as an echocardiogram revealed that the insured had suffered from a tachycardia attack, ectopic heart beat and ischcaemic change two years before the policy application.

Should the insured be awarded the death benefit ?

Answer : NO Reason: Non-disclosure a medical examination had been provided by the insurer the onus to disclose all his past medical history devolved upon the insured

Noteworthy Points Disclose fully and accurately all information in the application form. Check personally if all the facts are included in the application form. Your signature on the form is taken as evidence that you are satisfied with the facts Understand the scope of coverage Read the policy, in particular any exclusion clauses

Risk of the Insurance Industry Internal Risk -Fraud External Risk -Adverse Selection -Moral Hazard -Fraud

Internal Risk Arise from the immoral act of the agent. Use the Unreal information to Meet the sales quota Cheat the commission and bonus of the company

External Risk Illegal group recruit some people in mainland Those people are willing to offer their eye Illegal group make them blind Get the large amount of claim from the insurance company