“Insolvency Fund” of the MIB to c o v e r l o s s e s r e s u l t i n g f r o m 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 Cer tain Ter ms and Right of Recovery”, a traffic accident victim may lodge a claim directly to the insurer of an at-fault 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 drunk-driving. Due to the breach, the i n s u r e r s h o u l d , i f o t h e r w i s e , 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 w o r l d w i d e t r a v e l l e r s , i t m a y b e 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 p u r c h a s e c o m p u l s o r y t h i rd p a r t y liability insurance. Some states or p r o v i n c e s a d m i n i s t e r “ n o - f a u l t ” statutes. Persons injured in automobile accidents are to be indemnified for their losses irrespective of who is responsible for the accident. Prompt c o m p e n s a t i o n i s p a i d f o r c e r t a i n e c o n o m i c l o s s e s s u c h a s m e d i c a l expenses and loss of wages. Since victims are compensated irrespective of fault, no lawsuit is involved. The purpose is to avoid costly litigation and
!
Feature
!"#$%&'()*+, !"#$%&'()*+,- !"#$%&'()*+ !"#$%&'()*+,-2. !"#$%&'()#*+, !"#$ !"#$ !"#$%&'(' 2% !"#$%&'() !"#$%&'()*+,- !"# !"#$%& !"#$%&'()*)+, ! m u s t b e t h e r i g h t t o l i f e . F o r t h i s reason, the two types of insurance, n a m e l y , a u t o m o b i l e l i a b i l i t y a n d e m p l o y e e s ’ c o m p e n s a t i o n , w h i c h affect the right to life, are compulsory in Hong Kong. Guarantee Funds are also established to protect injured v i c t i m s a s w e l l a s p o l i c y h o l d e r s against insurers’ insolvency.In Hong Kong, the three pillars of p r o t e c t i o n f o r a t r a f f i c a c c i d e n t victim are: 3. !"#$%&'()*+,- ! " # $ % & ' ( ) * + , !"#$%&'()* ! !"#$%&'()*+,- !"#$%&'!()*+! ! " # $ % & ' ( ) * + , !"#$%&'()*+,- !"#$%&'()*+, !"#$%&'()*"+, !"#$%&'( !"#$%&'()*+,- !"#$%&'$()*+,-. !"#$%&'()*+, 1 . C o m p u l s o r y i n s u r a n c e – E v e r y motorist is required to carry a third party liability insurance pertaining b o d i l y i n j u r y a n d d e a t h , w i t h a minimum policy limit of HK$100 million. The purpose is to ensure that an at-fault motorist will have the financial ability to compensate the victim who has been injured on the road.
2. Establishment of Guarantee Funds under the Motor Insurers’ Bureau of H o n g K o n g ( “ M I B ” ) - M o t o r insurance premiums are levied at 2 % f o r t h e f u n d i n g o f t h e
!"#$%&'()*+,- !"#$%&'()*+,-./ !"# !"#$%&'( !"# $%&'(!) * !"#$%&'()*+,- !"#$%&'()*+ !", !"#$%&'()*+,-./ !"#$%&'()!*+,-. !"#$#%&'()*+,-# !"#$%&'()*+,-. !"#$%&'()*+,- !"#$%& '()$*+,- !"#$%&'()*+,-%. !"#$%&'()*+,-./ ! "#$%&'()*+,- !"#$%&'()*+,-./ ! !"#$%&'()*+,- !"#$%&'()*+,-./ !"#$%&'()*+,-./ !"#$%&'()*+!,-. !"#$%&'()*+,-. !"#$%&'( !"#$ ! 1. !"#$ !"#$% !"#$%&'()*+,- !"#$%&'()*+,# !"#$%&'()*+,- !"#$%&'()!"#$%&'()*+,-*+ !"#$ 2. ! !"#$%&'( !"#$%&' ()*+, ( ) !"#$%&' !"#$%&'()*+,' !"#$%&'()*+,-( !" 2,000 ) !"#$%&'()*#+, !"#$%&'()*+, !"#$%&'()* !"#$%&'()*+,- !"#$%&'(")*+ !"# a d d i t i o n t o t h e c o m p u l s o r y 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 v e h i c l e c a r r i e s s u b s t a n t i a l c o m m e r c i a l v a l u e , i t i s m o r e 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 p r o v i d e s s o m e i n d e m n i t y f o r m e d i c a l e x p e n s e s ( u s u a l l y HK$2,000) incurred by the motorist. I n s u r a n c e p o l i c y i s a f o r m o f contract. As a wise consumer, the insured should pay particular attention to the following:
Tr u t h f u l n e s s o f i n f o r m a t i o n provided during the application for insurance – The contract of insurance is based on utmost good faith. If the applicant is found to be d i s h o n e s t , t h e i n s u re d m a y n o t secure his intended protection. delay for payment of legitimate claims.
I n s u r v e y i n g t h e p r o t e c t i o n 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 t r a f f i c a c c i d e n t v i c t i m ' s r i g h t t o compensation. But from a motorist's p e r s p e c t i v e , h o w c a n h e p r o t e c t himself against the financial risk of claims from third parties, as well as his own proper ty losses? The answer g o e s b a c k t o t h e p u r c h a s e o f insurance. In Hong Kong, the most common types of motor policies are “ T h i r d P a r t y L i a b i l i t y ” a n d “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 m i n i m u m o f H K $ 1 0 0 m i l l i o n . I n
!
Feature
!"#$%#& !" !"#$%&"'()*!+ !"# !"#$%&'() !"#$%& 5,000 ! !" !"#$%&' !"#$%&'()*+,- !"#$%&'"()*$+ !"#$%&$'()*+, !"#$%&'()*+, !"#$%&'()*+,- !"#$%&' !" !"# ! !"#$%&'($) !"#$%&'()*+', ! " # $ % & ' ( ) 60% !"#$%&'()*+ !"#$%&'()*+, !"#$%&'()*+,- !"#$%&'()*+, !"#$%&' ! !"#$%&'( !"#$%&'()*+,- ! " # $ % & ' ( ) * +
!"#$%&'()*+, !"# $%&'()*+, !"#$%&'()*+,-./ !Compliance with the terms and c o n d i t i o n s o f t h e p o l i c y – F o r 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. T h e p u r p o s e o f “ e x c e s s ” i s t o eliminate the cost of administering small claims and to encourage the insured to exercise greater care to prevent losses. Different amounts o f e x c e s s m a y b e a p p l i c a b l e , depending on whether the accident is caused by a named or unnamed driver, a young or inexperienced driver, etc. The insurance premium m a y b e r e d u c e d i f t h e i n s u re d agrees to shoulder a higher excess.
!
Feature
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 s c a l e o f d i s c o u n t h a s b e e n d e v e l o p e d b y m o t o r i n s u r e r s whereby an insured can benefit from a progressive discount at renewal d a t e i f h e f i l e s n o c l a i m . T h e d i s c o u n t w i l l b e r e d u c e d o r e l i m i n a t e d i f a c l a i m h a s b e e n lodged in the previous year.
Exclusions – You should study the policy exclusions carefully. The c o m m o n e x c l u s i o n s a re l o s s e s caused by natural wear and tear, a n d u s e o f v e h i c l e o u t s i d e t h e 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 t h e n e e d t o f i n d o u t h i s l e g a l 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
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I forum
A
Q
How much does motor insurance cost? 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.
What should I do if a car accident happens? 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.
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Will a motor insurer pay me from the first dollar of loss ?
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 excess. !"#$%&'()* +,-./ !"#$ !"# !"#$%&'()*+,-./01234%&$56
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What is “No Claim Discount” (NCD)? How is it determined?
In order to encourage good driving practices, motor insurers generally offer NCD to careful drivers. For instance, a private car driver with one completed year of clean record will be given 20% NCD upon renewal of the policy. The NCD will be increased by 10% for each additional consecutive year of clean record up to a maximum of 60%.
!"#$ !"#$%! !"#$%&'()*+,-./012345%&$/6789:;<=>?@A !"#$%&'()*+,-./0123456)20% !"#$%&'() !"#$%&'()* 10% ! "#$% 60%
Are there any additional benefits offered by motor insurers in the market?
Due to keen market competition, some motor insurers will offer additional benefits under their insurance policy:
1. Free towing services 5. Windscreen or car window cover 2. Emergency roadside repair services 6. Free personal accident insurance cover 3. 24-hour hotline services for general 7. Claim recovery services
traffic information
4. 24-hour claim report centre services
Before you buy motor insurance, do shop around. You may find it worthwhile to choose the best policy that suits your need.
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Legal and Technical Corner
Reserving Standards for
MPF Schemes with Investment
Guarantees
T
he Mandator y Provident Fund (“MPF”) System has come into o p e r a t i o n c o m m e n c i n g f r o m 1 December 2000. Pursuant to the MPF S c h e m e s ( G e n e r a l ) R e g u l a t i o n , constituent fund(s) of an MPF Scheme may be invested in approved pooled investment funds (“APIFs”) which may b e u n i t t r u s t s o r m u t u a l f u n d s a u t h o r i z e d b y t h e S e c u r i t i e s a n d F u t u r e s C o m m i s s i o n ( “ S F C ” ) , o r insurance policies of Class G or H u n d e r t h e I n s u r a n c e C o m p a n i e s Ordinance.An insurer, who issues Class G or H p o l i c i e s , m u s t c o m p l y w i t h t h e r e s e r v i n g r e q u i r e m e n t s o f t h e I n s u r a n c e C o m p a n i e s O rd i n a n c e , including the Insurance Companies ( D e t e r m i n a t i o n o f L o n g Te r m L i a b i l i t i e s ) R e g u l a t i o n a n d t h e I n s u r a n c e C o m p a n i e s ( M a r g i n o f Solvency) Regulation. All authorized insurers with APIFs offering investment
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!"( ) ! 2000 12 1 !"#$ !"#$%&() !"#$%&' !"# ! !"#$%&'()* ( ) !"#$%&'( !"#$% G H !GH !"#$ ! !"#$% !" !"# !"( !" ) !"( !") !"#$%&'() !"#$ !"#$%&' !"#$%&'()* ! !"#$ !"#$%&'()*+ ( !"#$%& !'()*+ ) !"#$%&#'$%() !"#$%&'()( ) !"#$%&'()*+, !"#$%&'()*+ !"#$ !"#$%&' ! " # $ % & ! "!"#$%&'()
!"#$%&'(!" !"# FAI First Pacific Insurance Company Limited ! HIH Insurance Limited ( HIH) !"#$%&'()*+, 8 !"#$%&'HIH ! 17 !2001 3 15 ! !"#$%&'()*+,-. !"#$%&'()*+,-. !"#$%&'()*+ , ! !"#$%&'() !"#$%&'$()*+ !"#$%&'()*+,-. !Mr. Peter WhalleyMr. Jan B l a a u w ! " # $ % & ' ( M r . P e t e r W h a l l e y Mr. Jan Blaauw !"#$%&'( 2001 4 9 !"#$%&'()* !"#$%&$%'()*+, !"#$%&'()*"#$% !"#$%&'()*+,-. !"#$%&'()*+,-. !guarantees must also observe the requirements set out in the "Guidance N o t e o n R e s e r v i n g S t a n d a r d s f o r Investment Guarantees" issued by the Insurance Authority.
Other than insurers, all authorized institutions (licensed banks, restricted l i c e n c e b a n k s a n d d e p o s i t - t a k i n g companies) who act as guarantors for MPF guaranteed funds, are required to o b s e r v e t h e " P r o v i s i o n i n g R e q u i r e m e n t s f o r I n v e s t m e n t G u a r a n t e e s u n d e r M a n d a t o r y Provident Fund Schemes" issued by the Hong Kong Monetar y Authority ( " H K M A " ) . I n a d d i t i o n , l o c a l l y incorporated authorized institutions are required to maintain adequate c a p i t a l i n a c c o r d a n c e w i t h t h e guidelines issued by the HKMA on "Capital Adequacy Requirements for I n v e s t m e n t G u a r a n t e e s u n d e r Mandatory Provident Fund Schemes".
