ASKING questions about your insurer's financial soundness is a good policy at any time, but even more so now, when financial markets are in turmoil.
How safe is your insurance company? Will you get your money back when you need it? Has the drop in the region's stock and currency markets hit your insurer's bottom line? Thus far in Hong Kong, market volatility has caused three general insurance companies to fail to meet their solvency-margin requirements, the Commissioner of Insurance, Alan Wong Chi-kong, said.
The solvency margin reflects the company's ability to pay clients' claims. It is the excess of assets over outstanding claim liabilities and must be at least $10 million.
Other insurers could be hit as well, and industry experts advise potential policy buyers and existing policyholders to check carefully the profile of their insurers and not be dazzled by bargain-basement premiums.
John Snelgrove, general manager of employee benefits and corporate affairs at National Mutual Insurance, said cheapest did not mean best. 'Particularly on the general insurance side, there has been a lot of rate-cutting.
'The industry is price sensitive. It is a danger signal to clients who just go for the cheapest quote. It pays to check who the company is.' This last suggestion can be a cake walk - if the company is large and reputable, as well as transparent and listed on a stock exchange. Picking up an annual report should reveal how aggressive the company's investments are.
Life insurers themselves agree they are, by nature, a staid, risk-averse bunch. 'The point is not making a profit but having money to pay policyholders' claims when they arise,' Mr Snelgrove said.
