Insurance cartel stifling competition
I AM sure that everyone in Hong Kong was glad to read the article in the South China Morning Post, on Wednesday, bringing the good news that the rate of inflation has fallen to 6.6 per cent per annum. After several years of double-digit inflation forcing the costs of living and business in Hong Kong to near impossible levels, it is heartening to see a new period of reasonable price increases in prospect.
The Government will claim a victory for its policy of free market forces setting price levels. How infuriating it is, then, to receive a vehicle insurance renewal which shows an increase of 25 per cent on the basic premium.
It is quite possible that this increase is one that is brought about by 'exceptional circumstances' and 'greater claims than expected' or any other excuse of a one-off nature until you realise that the premiums last year for the same policy were already increased by 29 per cent. Although my particular policy is with Taikoo Royal Insurance, there is almost no variation in other companies' quotes since it is the insurance industry cartel, the Accident Insurance Association (AIA) which is regulating the industry. It regulates the 'recommended' premium levels of its member companies ensuring that there is no competition on pricing available to the public.
This lack of competition leads to the situation whereby the cost of third-party only insurance for a motorcycle is 3.25 times the cost of the same cover for a motorcar. This is patently absurd since the destructive capacity of a motorcycle is far less than that of a car; the cover for the motorcycle is only $750,000 compared to the $2 million for the car policy and both policies have an excess of $5,000 imposed upon them.
As it is of little use asking the AIA for an explanation (I have tried before) of its policies, which in most other countries would not be allowed, I would like to ask the Government what it intends to do about this industry which is flagrantly profiteering and sabotaging the good efforts of the free market to bring down inflation to a more reasonable level.
C. H. LAWRENCE Pokfulam