Regulation of Insurance Companies in Hong Kong 香港保險公司的規管

Insurance Ordinance 《保險業條例》

The Insurance Ordinance (Cap. 41) is the main statute governing the Hong Kong insurance industry. It set up the Insurance Authority (IA) as an independent regulator. The IA took over the work of the Office of the Commissioner of Insurance, a government department, on 26 June 2017. From 23 September 2019 it also licensed insurance intermediaries directly, replacing the earlier self-regulatory system. The IA's principal function is to regulate and supervise the insurance industry, so as to promote its general stability and protect existing and potential policy holders.

Apart from limited exceptions such as Lloyd's, no one may carry on insurance business in or from Hong Kong without the IA's authorisation, and doing so is a criminal offence. Insurance business is divided into long term business (Classes A to I, such as life and annuity and linked long term) and general business (Classes 1 to 17, such as accident, motor, damage to property and general liability). An insurer authorised to carry on both types of business is a composite insurer.

To be authorised, and to stay authorised, an insurer must meet minimum paid-up capital and solvency (capital adequacy) requirements. These are higher for a composite insurer or one writing the statutory classes, and lower for a captive insurer. Its directors and controllers must be fit and proper, and it must have adequate reinsurance arrangements. Hong Kong has applied a risk-based capital regime since 2024.

An insurer needs the IA's prior approval to appoint a director, a controller, or a key person in any of the six control functions: risk management, financial control, compliance, internal audit, actuarial and intermediary management. A long term insurer must also appoint an appointed actuary. Insurers file regular financial and business returns with the IA. If policy holders' interests are threatened, the IA can use its intervention powers, for example by restricting the insurer from writing new business.

Code of Conduct for Insurers 《承保商專業守則》

The Code of Conduct for Insurers was drawn up by the Hong Kong Federation of Insurers (HKFI). It is industry self-regulation, not legislation. Member insurers must comply as a condition of membership, but a breach is not in itself a criminal offence. The Code supplements statutory regulation and mainly applies to individual policyholders resident in Hong Kong who insure in their private capacity.

On selling, proposal forms and policies must be in clear, plain language. Proposal forms should draw attention to the duty to disclose material facts and to the consequences of non-disclosure, and should not ask about matters the proposer could not reasonably be expected to know. Insurers must also make sure their agents act professionally and fairly.

On claims, insurers must handle claims promptly and fairly, give reasons when they reject a claim, and tell the claimant that they can complain to the Insurance Complaints Bureau. The Code also limits rejection on technical grounds. An insurer should not reject a claim for non-disclosure of a material fact the policyholder could not reasonably be expected to disclose. It should not reject for misrepresentation unless the misrepresentation was deliberate or negligent. Nor should it reject for breach of a warranty or condition unrelated to the circumstances of the claim, unless fraud is involved.

Insurance Complaints Bureau 保險投訴局

The Insurance Complaints Bureau (ICB) was set up by the insurance industry as a self-regulatory body. It works independently of insurers, is funded by its member insurers, and charges complainants nothing. It deals mainly with complaints about policies, especially claims disputes, from individual policyholders (or their beneficiaries) who insured in a private capacity. Policies taken out by companies or organisations in a business capacity are outside its scope.

The complainant must first go through the insurer's internal complaints procedure and receive the insurer's final decision. The complaint must then be lodged within six months of that final decision. The ICB will not accept a dispute that is already before a court or in arbitration.

Claims disputes are decided by the ICB's complaints panel, which has an independent chairman and includes members from outside the industry. Its rulings bind the member insurer but not the complainant. A complainant who is not satisfied can still take legal action.

Note the difference from the IA. The IA supervises the conduct of insurers and intermediaries, but it does not decide individual contractual claims or award compensation. Deciding disputes over claim amounts is the ICB's role.