Only insurers would be protected by 'independent' OCI

Earlier this month, executive council member and Legco insurance representative Bernard Chan Charnwut offered South China Morning Post readers some 'good news' - the government will propose that the Office of the Commissioner of Insurance (OCI, a public body purported to 'regulate' the insurance sector) become 'independent'.

Oddly, Mr Chan did not explain precisely why the proposal, in which he certainly played a key role in drafting, is 'good news' for the industry. After all, in Hong Kong's woefully underregulated insurance sector, the fox already guards the proverbial chicken coop.

The OCI does virtually nothing to ensure that insurance firms behave themselves. Its mandate is simply to ensure that underwriters are solvent and capable of meeting their liabilities. Oversight of marketing ethics, policy wording and claims disputes is undertaken by the industry itself, with no meddlesome bureaucrats nosing about.

For insurance companies, how could it get much better than this?

The answer lies in Mr Chan's definition of 'independent'. By separating OCI's funding from the public treasury, it is rendered 'independent' of non-corporate forces seeking to transform it into a modern, international-standard regulator of insurance practices.

It would not be independent from the influence of the insurance industry, which will find itself in full control of the money and information upon which all future regulatory initiatives will depend.

Mr Chan's 'independent' OCI would become accountable first and foremost to the insurance industry, allowing it unprecedented control over the course of public policy. With the stroke of a pen, Mr Chan hopes to define the public interest and that of insurance firms as identical.

Money Week thinks this is very bad news.

assurance with insurance

Hong Kong insurance consumers have no easy means of assessing how their insurance companies might handle claims. The understaffed, underfunded Consumer Council does not publicise records on complaints against specific insurers, and neither does the industry-funded Insurance Claims Complaints Bureau.

Prospective policy buyers interested in how international insurers might handle their claims can visit the US website, which ranks insurers according to how frequently they pay or reject claims.

Money Week cannot vouch for the methodology the site uses to determine the rankings.

oh baby, what an excuse

Most local hospital cash policies, which pay a cash benefit in the event of hospitalisation, exclude pregnancy. This makes actuarial sense, because pregnancies can be planned in advance.

In March 2003, Money Week was astonished to find that AXA Insurance was offering a hospital cash policy - SmartCare Essential - that covered maternity hospitalisation.

For $2,183 a year, AXA promised to pay Money Week and his fecund spouse $750 for each day either of them found themselves in the hospital.

Money Week contacted his trusted insurance adviser about the product, who told him it was simply too good to be true. The catch, he said, would be in the renewal process. The policy excluded pregnancy occurring within 10 months of the policy commencement date. In order to make money, AXA would have to ensure that the renewal rates stayed far lower than normal.

Outright refusal to renew would be illegal so the task of offloading unwanted policyholders would be accomplished through plausible 'mishaps', such as computer errors.

Sure enough, when the time came to renew the policy in February 2004, no renewal form came in the mail. Even after Money Week submitted the form on time, AXA failed to renew the policy, claiming that 'the cheque had been unintentionally separated from the renewal form.' Never mind that the cheque had the policy number written on it.

Finally, Money Week demanded and received a renewal. In May 2004, he sent a change of address notice to AXA. He sent another one in January 2005.

February 2005: No renewal form. The excuse this time?

'Although your address was updated in our computer system, the renewal notice is sent out from manual records.'