Renewals 續保
General insurance contracts normally run for one year. At renewal, the parties make a new contract for the next period, even if they reuse the existing policy document. The insurer can reassess insurability and conditions such as the premium and scope of cover; the insured must agree to the terms on which cover will continue.
The duty of utmost good faith applies afresh at renewal. The insured must disclose material facts that have arisen since the contract was made or last renewed, allowing the insurer to assess the current risk. Having made no claim during the previous year does not remove this duty.
Renewal involves offer and acceptance. Normally, neither party has to renew or accept particular terms proposed by the other. They may negotiate the premium and other conditions before agreeing the terms for the next period.
In Hong Kong, the insurer generally has no legal duty to remind the insured to renew, although renewal notices are normally sent in practice. If no reminder is sent and the insured takes no action, cover lapses at its scheduled expiry. This is not cancellation, which means ending cover early.
Operation of Cancellation Clauses 取消條款怎麽運作
Making an insurance contract does not automatically create a right to cancel it. Unless the law permits or requires termination, ending cover early needs mutual consent or an express contractual right of unilateral cancellation. Most general insurance policies contain a cancellation clause: such a clause always gives the insurer a cancellation right and usually, but not invariably, gives the insured one too. A party invoking it generally need not give a reason but must meet its requirements.
An insurer cancelling under the clause must follow the specified notice period and method, and refund premium pro rata for the unexpired period. Seven days' notice by registered post to the insured's last known address is a possible requirement, rather than a universal Hong Kong rule. For an annual policy cancelled with effect from day 66, the refund is annual premium × 300/365. The insured's notice may be immediate or, for example, seven days; the wording determines whether the refund is short-period or pro rata, and some policies permit cancellation by the insured only if no claim has arisen in the current period.
A short-period scale charges more than the proportional annual premium for cover lasting less than a year. A hypothetical scale charges 20% of annual premium for one month, 30% for two months and 100% for nine months. If cancellation occurs after 35 days, treated as two months under that scale, the insurer retains 30% of annual premium and refunds 70%. These are illustrations, and insurers may use different scales.
Insurers rarely invoke cancellation clauses and have traditionally often waited until renewal despite disappointing underwriting results. However, suspected fraud or disastrous claims experience, possibly affecting a whole class of business, may prompt their use. Suspicion alone does not remove the clause's notice requirements; if fraud can be proved, the insurer may terminate the policy immediately without relying on the cancellation clause.
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