The Trend and Risk of Insurance Industry in HK

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The Trend and Risk of Insurance Industry in HK
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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

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History

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

4
When was the 1st insurance contract being
invented?

• A--??1234
• B--??1347
• C--??1986
• D--??2006

5
When was the 1st insurance contract being
invented?

• A--??1234
• B--??1347
• C--??1986
• D--??2006
• In Genoa

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History

• 1693
• Edmond Halley
• Silesia Breslan?
• ?????
• 1756
• Joseph Dodson
• 1762
• Equitable Society
• 1st insurance company in the world

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Insurance in HK

• Begin in 1841
• After Qing Governments defeat in the Opium War
• HK as an entrepot
• council-like insurance companies

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Insurance in HK

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

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Insurance in HK
Sources The Hong Kong Federation of
insurerslthttp//www.hkfi.org.hk/b5_insurance_stat
istics.htmgt
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Development of Insurance Industry

• Three Areas
• Worlds
• Chinas
• Hong Kongs

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Trend of Worlds

• The Incident 911
• Aware of safeness
• Emphasize on insurance

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Trend of Chinas

• Reformation
• Rapid development
• Past Superstitious
• Now Open-mind

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

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Trend of Hong Kongs

• Well-developed
• Saturated market
• Increasing premium

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Three measures by Hong Kongs

• Reinsurance
• Diversification of services
• CEPA ?Migrate business to Mainland

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Statistic source of data
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Trend of Premiums
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Trend of Individual Life Insurance
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• 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
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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

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• Case Study

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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.

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• Should the insured be awarded the death benefit ?

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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

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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

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Risk of the Insurance Industry

• Internal Risk-Fraud
• External Risk-Adverse Selection-Moral
  Hazard-Fraud

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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

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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