Insurance companies are inflating homeowners' premiums by using a discredited measure that has been banned in the new-homes market for two months, the Legislative Council's housing panel heard yesterday.
A lawmaker said the "loophole" meant customers were paying several hundred dollars more than they would do if insurers used the more accurate "saleable area" measurement instead of gross floor area (GFA) - which takes into account the corridors outside their front doors and other common areas.
"Will the government make sure the insurance industry and all other trades follow the rule and use saleable area only?" Wong Yuk-man asked. "This certainly is a loophole."
Under the Residential Properties (First-hand Sales) Ordinance that took effect in late April, developers selling new projects are banned from using the GFA and must use only saleable area - the space inside the flat plus private balconies. GFA is still allowed in the second-hand market.
Most insurers use GFA to assess home insurance premiums. For example, Prudential charges a HK$890 basic annual premium for a flat with GFA of 800 sq ft, according to its online calculation.
Assuming the saleable area is 75 per cent of the GFA, the premium should drop to HK$660.
Eugene Fung Kin-yip, director of the Sales of First-hand Residential Properties Authority, said he would address the issue with the insurance industry.
"But the ordinance regulates only the sale of flats," he noted. "We don't have the power [to control other industries]."
A lawmaker representing the insurance trade, Chan Kin-por, agreed last night that companies should use the saleable area in order to be "fair" to customers.