Newsletter - April
2000
IIHK Annual Dinner 2000
We were delighted to see so many of
our members attending our annual dinner on 21st March this year. The support we received
was excellent, and the committee hopes all attendees enjoyed their evening.
In particular we thank our guest
speaker, Ms Anna Wu, for her talk, and our principal guests of honour Mr Benjamin Tang,
Insurance Commissioner.
Lastly we would like to highlight
the wonderful service that Mr George Chu has given the IIHK over the past years.
"Uncle George" is now stepped down from the Committee and we wish him well in
his retirement.
IIHK Web Site
Watch out --- here it comes! IIHK is
launching its own web site to help members in a variety of ways.
The site, currently in the final
stages of preparation will contain up to date information on examinations, syllabuses,
newsletters, council members and the like.
It is planned to allow members to
renew their membership "on-line" and to be interactive.
We will let you know as soon as it's
ready!
President's
Message
As my message in this edition of the newsletter I quote
from a speech I gave recently at the IIHK Annual Dinner. This serves to emphasize the
topic of training and professional standards so vital in our industry today.
"During the past 12 months, we witnessed some major
development within our industry on the training and education side. With the rapid
development of the insurance markets, the demand for insurance expertise is increasing.
In order to ensure the high professional standard of
insurance intermediaries, who are on the front-line and constitute an overwhelming
majority of the insurance practitioners, an Insurance Intermediaries Quality Assurance
Scheme (IIQAS in short) was implemented on January 1st this year. Under the
scheme, insurance agents and brokers are required to be properly trained and qualified
through a public examination conducted by an independent body, the Vocational Training
Council. In addition to taking IIQAS, they will also be required to attend continuing
professional development programmes as condition for re-registration.
On this note, I am pleased to report that the Institute's
Diploma holders are granted full exemption to the three out of four papers of the
Insurance intermediaries Qualifying examination. Also, our Immediate Past President, Mr.
Leo Ma and our Education & Examination Council Chairman Mrs. Irene Wong have been
appointed to sit in the IIQAS Continuing Professional Development sub-committee
representing the Institute.
With the integration of the financial services, insurance
people no longer just sell insurance products, but they are required to be equipped with
the knowledge of banking, pension and investment products. With the cross-border mergers
and acquisitions of banks and insurance companies, there will be more and more financial
one-stop services set up in future. That is why, in 1998, with a view to improving the
long-term competitiveness of Hong Kong as an international financial centre, the
Government established a steering committee to conduct a review of the need for, and
feasibility of, setting up a Financial Services Institute to coordinate the training of
professionals for the financial services sector.
It has long been our firm belief that Hong Kong should have
its own insurance professional qualifications. In the past few years, the Institute has
been pursuing both the insurance industry and the HKSAR Government to provide funding for
such a programme. Even though this time we have been short-listed for phase II review,I
regret to inform you that the Vetting committee of the Service Support Fund has again
turned down our second attempt made on 30th December 1998 to be considered for
the Service Support Fund from the government to implement and establish an internationally
recognised local insurance qualification. By no means, we have been defeated or given up
our hope in this project. Our Local Qualification Committee will continue working even
harder in looking for support and alternative avenues in making this project a success.
Although we have been invited to apply again, judging from the current scenario with the
Government emphasizing on hi-tech and cyberport development, we see that our chance for
success would be even slimmer. Therefore, we have shy away from that route for the time
being and concentrate ourselves in other alternatives.
No doubt, the Insurance Authority's decision to grant our
Diploma holders full exemption from the IIQAS is a positive step on the Government's part
to support local insurance education and training. Couple of months ago, our industry has
a new Commissioner. I have the opportunity of listening to his speech on two occasions. On
both occasions, he has emphasized the Insurance Authority's plan and commitment in the
area of training and education for the industry. They have even taken the initiatives of
printing some pamphlets to be distributed to the general public, to educate them what
insurance is all about, to avoid future arguments and misunderstandings between the
industry and the general public. I understand that these pamphlets will be ready and be
distributed some time in May this year. It is very encouraging to see that the Government
is so supportive and committed in this area and that we share the same goal and objective
in upgrading and promoting our industry."
Peter Leung
President
Legislative
Highlights
Whether we need to pay more tax or new taxes in
the new financial year had been the talk of the town in the past few months until the
Financial Secretary surprised us on March 8 by announcing a "happy-ending" Budget. We were all relieved that we did not
need to dig deeper into our pockets.
The estimated deficit of $1.6 billion was much smaller than
that the government had predicted. This dramatic improvement in our financial position,
according to the Financial Secretary, was due to the unexpected growth in the earnings on
our fiscal reserves invested with the Exchange Fund.
The increase in the Hang Seng Index from 10,049 at the end
of 1998 to 16,962 at the end of 1999 has boosted the value of the portfolio of Hong Kong
stocks acquired by the Exchange Fund in 1998.
But as many of you will agree, we cannot rely on
the increase of stock prices forever. The root of the problem is our tax base is not broad
enough.
The Secretary for the Treasury has been appointed
to head a Task Force to monitor the correlation between our recurrent income and economic
growth. This helps us identify whether we are indeed facing a short-term cyclical problem
or a fundamental shift in our revenue base needing more radical remedies.
In addition, an independent committee comprising tax
experts and academics is to be set up to look into the suitability of introducing new
types of broad-based taxes, including a consumption-based tax, and to consider what form
such taxes should take and the implications.
The
Importance of Record Keeping
A contract of insurance is based upon the duty of utmost
good faith. One of the fundamental principles in relation to insurance risks, is the
disclosure of all relevant information to insurers, when seeking to obtain insurance
coverage. Connected to this duty, are a number of practices which can be adopted by
brokers and by insurers in recording what information is provided during the placing
procedure. In the event that a dispute arises at a later date, it can then be established
what was or was not shown to an underwriter who may suggest that he had not been provided
with all relevant information. Where the issue is whether incorrect information was shown
to an insurer at placement which allegedly induced him to provide cover, an ability to
prove the document was seen may be equally relevant.
Indeed recording what is said or what information is
provided between insurers, brokers and the insured can be relevant in avoiding many
disputes at a later stage. This article refers to some recent English cases by way of
example but with emphasis on the issue of records.
If an allegation of non disclosure or misrepresentation is
made, and there is some dispute as to whether a key document was shown to insurers, absent
insurers' scratch, there may be
difficulty in establishing that the document was produced and shown. The case of Sirius
v Oriental (1999), concerned a facultative reinsurance in respect of a book warehouse
in the Philippines. The case turned on whether each reinsurer could demonstrate that he
had relied upon a fax from the reinsured referring to fire extinguishing appliances at the
warehouse (which subsequently proved to be non existent). Whilst all three reinsurers at
trial claimed to have been shown the fax in issue, only one was held to be entitled to
avoid, namely the one who had scratched the copy of the fax. Because they had not
scratched copies, the other two reinsurers were assumed not to have seen or relied on the
fax.
In Sirius, the failure to scratch the document in
issue acted against the reinsurers, but it is easy to envisage the reverse situation,
where the broker needs to prove that the document was shown and it is clear that there
will be difficulty if a document was not scratched. Therefore, this case illustrates the
relevance of recording what is shown and maintaining those records for in the event of a
dispute.
All brokers will know, that given their duties to the
insured, and as they are the one who liaises with the insurer, in the event of a dispute
they are likely to become the focus of attention. In such circumstances, where an insured
fails to recover from their insurers, they may well seek damages and compensation from
their insurance brokers. The consequences for a broker can be more extensive than may at
first be appreciated. The case of Aneco v Johnson Higgins (1999), illustrates how a
broker's exposure can increase.
J&H placed an inwards fac/oblig of the Bullen Syndicate
with Aneco, and then reinsured out part of Aneco's exposure by way of XL protection. In
placing the XL, J&H failed to disclose that the business reinsured was the Bullen
fac/oblig, and this allowed the XL reinsurers to avoid. The Court of Appeal in England
held that as a consequence, Aneco could recover from the brokers not only the value of the
outwards XL that had been avoided, but also the losses they had sustained on the inwards
fac/oblig, the reasoning being that Aneco would not have written the fac/oblig without the
benefit of the XL. Whilst this case does not deal directly with keeping records, it
illustrates how extensive the consequences of an inability to prove that there was no
non-disclosure can be.
Following the theme of record keeping, brokers can often
find themselves in a difficult position when a claim made by an insured does not fall
within the ambit of the policy. In circumstances where the insured believes that the
policy they had obtained should cover the loss suffered, there is a potential for dispute.
Keeping records of advice provided by brokers to their clients of the extent of cover they
have obtained as well as confirmation from the client that such cover is acceptable, may
well protect brokers in circumstances where they are the recipients of such a complaint.
Similarly there is the issue of explaining to the insured,
what the effect of the policy terms and conditions are. In the 1999 case of JW Bollum v
Bias Mosely, due to difficulties with a fire alarm, the claimant took the decision to
disarm the device at their premises, when a certain employee was absent on holiday. A fire
occurred at this time. It was determined that the broker was in breach of duty for failing
to warn the claimants of the existence and significance of the alarm and protection
clause. The claimant had not been provided by the brokers with a copy of the standard
policy wording. Although a fax had been sent by the brokers to the claimant stating that
there was to be an alarm and protection clause, the fax did not indicate the terms of the
clause and the brokers were aware that the claimants had never received a copy of the
policy. One can envisage circumstances where the brokers do provide this advice thereby
fulfilling their duty, but it is not documented and recorded on file. As with the Aneco
case, a documentary record which is capable of establishing that the advice was given,
will protect the broker concerned.
The purpose of this short article, is to emphasise the
difficulties which participants in the insurance industry can face, if they do not
maintain adequate records. This can be an important part of risk assessment in the conduct
of business operations. Whilst it is often difficult given the time pressures of work,
comprehensive record keeping can prove to be a helpful procedure in the conduct of day to
day business.
The above summary should not be relied upon for legal
advice but, specific legal advice should be sought in relation to any given circumstances.
Timothy Ingham
Cameron McKenna
"Meeting
the Challenge of the New Millennium"
Speech made by
Anna Wu, Chairperson, Equal Opportunities Commission
At the IIHK Annual Dinner 2000
Mr. President, dear friends, ladies and gentlemen,
I feel very honoured to have the opportunity to address you
on this annual function.
Social responsibility of insurance industry
Insurance is an important industry not only because it has
in the past contributed about 4% of GDP in Hong Kong (see Note 1 on p.12), but also
because insurance offers invaluable protection and peace of mind to consumers. It is an
industry that gives hope in times of misfortune.
This probably sounds too good. Policies are generally known
for their exclusions and not for their protection. As a practising lawyer I was paid to
nit pick to avoid liabilities.
According to the Commissioner of Insurance, there are about
200 insurers in Hong Kong (Note 2). The number of individual life policies in force
reached 3.8 million in 1998 which covered about 56% of the population of Hong Kong (Note
3). This level of penetration is comparatively lower than those in developed economies, so
there is further capacity for growth in the life insurance market. Health care insurance
is another area where there is considerable market potential. In 1997, only 36.5 % of
people have medical insurance coverage (Note 4). Towards the end of this year insurance
services and products designed to meet the MPF market will generate additional consumer
interest in insurance products as a long term pension or savings scheme.
Life, medical and pension insurance are not luxuries, they
are very essential aspects of personal security. The purpose of buying insurance is to
protect the policy holders and their families when disasters strike. Often the insurance
business grows as a useful supplement to public health services and pension schemes. There
is a social purpose behind insurance that cannot be ignored. And insurance is uniquely
poised to make social purpose a business.
Many of today's consumers require that companies to be good
corporate citizens. They often ask hard questions about the internal corporate practices
behind the brand name of products and services they buy. In light of this, Hong Kong
Quality Assurance Agency is developing a new international certification system called
SA8000 (Social Accountability Management System), which includes
"non-discrimination" as
one of the elements in the accreditation process.
The concept of equal opportunities
Three anti-discrimination ordinances have been brought into
operation in Hong Kong since 1996. They are the Sex Discrimination Ordinance, the
Disability Discrimination Ordinance and the Family Status Discrimination Ordinance.
In essence, the three ordinances provide that
discrimination on the grounds of sex, marital status, pregnancy, disability or family
status is unlawful. Behaviour such as sexual harassment, or harassment and vilification on
the grounds of disability are also unlawful under the Sex Discrimination Ordinance and the
Disability Discrimination Ordinance.
Contrary to some people's belief, it is not difficult to
comply with equal opportunities legislation and in fact, equal opportunities practices
will enhance the competitive edge of companies and lead to business growth.
Many corporate leaders have come to realize that companies
that are going to survive or excel in the new millennium have to focus on getting the best
talent, regardless of gender, family status or other irrelevant factors. Bias of any kind
is going to hinder business development and is a luxury companies can no longer afford.
Any business needs to tap into the largest and best pool of
talents and explore new markets. These cannot be done without applying equal opportunities
practices. Many overseas companies, including multinational insurance companies, have also
found that equal opportunities policies have positive impact on staff morale as well. In
fact, overseas experience have shown that equal opportunities practices achieved greater
worker loyalty, reduced turnover and absenteeism and maintained a less distracted labour
force.
Effective use of human resources is the key element of
corporate success. And equal opportunities is about using human resources effectively. Its
basic philosophy is to create a level-playing field for the individual. In the employment
world, it means matching the right person with the right job. We focus on people's
abilities, not on their gender, marital status, or other irrelevant criteria. When the
best person hired for a job happens to be a person with a disability, or a woman, he or
she will also identify the market niche and bring in new business.
Targeting the women's market
Catering for the needs of women in fact makes money.
Research shows that it is women who make the purchasing decisions. Women in our present
family set-up buy for themselves and everybody else in the family and everything for the
household. And they pay all the bills for food, utilities and even entertainment. Do not
forget that they also pay the home mortgages and buy stocks and shares too. It is only
logical that insurance decisions relating to the family may also be made by women.
It therefore makes extremely good sense to design insurance
services and products to meet the needs of women.
Employment patterns in the insurance industry
Gender imbalance
In preparation for this speech, I have gathered some
statistics about the insurance industry of interest to all of us. According to Census,
there are 44,900 employees in the insurance sector in the last quarter of 1999 (Note 5),
with 19,000 men and 25,900 women. Of whom, there were 4,400 men in managerial,
administrative and professional positions whereas there were only 2,000 women in the same
category, meaning that women only accounted for 31% of managerial, administrative and
professional positions. On the other hand, 82% of those in clerical jobs are women. ( The
actual numbers are 1,600 men as compared to 7,200 women.) What do these statistics tell us
?
They tell us that more men occupy higher positions than
women in the insurance industry. This is not surprising, as Census statistics show that
generally speaking women only make up 25% of managerial occupations and 35% of
professional occupations in 1996 (Note 6). In addition, similar to the rest of the world,
women's pay in Hong Kong was lower than that of men even when both had similar
qualifications and were employed in comparable jobs and had the same educational
attainment. Labour Department statistics show that in 1999, the median monthly earning of
female employees was still 27% lower than that of their male counterparts. (Note 7).
There are many reasons for the gender imbalance in
employment and remuneration, including gender role stereotyping, sex discrimination,
conflict between work and family responsibilities etc.
Employment for persons with a disability in the
insurance industry
With the increasing usage of Internet at home, direct sales
through electronic means could be employed by insurers to market their products. Persons
with a disability who may not be able to work in the traditional mode, such as performing
outdoor sales duties, may become valuable new recruits for Internet direct marketing.
Statistics about persons with a disability in the insurance
industry are not available for the time being. The Health and Welfare Bureau estimates
that in Hong Kong 6% of our population have a disability (Note 8). A large segment of this
community could participate in gainful employment with some form of reasonable
accommodation from the employer.
Many employers have realized that a disability need not
affect a person's ability to perform a job, while a little more attention to the working
environment could prove to be very rewarding, for employee and employer alike.
Implications of the ordinances on the provision of
insurance services
Besides the field of employment, the anti-discrimination
ordinances also have considerable implications on the provision of insurance service. The
EOC has received feedback from rehab groups that persons with a disability are
experiencing discrimination from insurance companies, in that they are being refused
cover, or that their premiums are higher due to their disability.
With the implementation of the Disability Discrimination
Ordinance, the demand for insurance by persons with a disability is likely to increase. We
recommend that insurance companies should ensure that they have procedures in place and
staff are trained to comply with the specific obligations under the Ordinance.
What the law says
Section 26 of the Disability Discrimination Ordinance is a
general section that applies to providers of goods, services or facilities, including
insurers. It makes it generally unlawful for insurers to discriminate against a person
because he or she has a disability, unless the provision of insurance would impose
unjustifiable hardship on the insurer. Section 52 of the DDO stipulates that exceptions
apply in circumstances where the treatment was effected by reference to actuarial or other
data from a reliable source.
Under the law, it might be unlawful for insurers to refuse
to insure a person with a disability because of historical practice or because they make
inaccurate assumptions about persons with a disability.
For example, it may be reasonable to make certain
assumptions if data reasonably links a particular type of disability with someone being
predisposed to future complications or the possibility of secondary disabilities, but it
is not reasonable to assume that someone who is blind in one eye because of an injury is
more likely than anyone else to become blind in the other eye.
It is not reasonable to assume without evidence that people
with one disability are more accident prone and more likely to incur a workplace injury
than co-workers without a disability, or that people with a disability have poor work
records.
Considerations before claiming exemption
When claiming exemption from liability under Section 52,
insurers should consider actuarial or statistical data if it is available or reasonably
obtainable.
It is reasonable to take into account the relevant claims
experience of other insurance companies that may provide cover to persons with a
disability in Hong Kong or in other countries.
Good practices in service delivery
It is highly recommended that insurers make their service
accessible to persons with a disability by ensuring that information is presented in a
number of different forms. For example, documents in Braille or in large print, or
information recorded on tapes. These should be available on request to persons with a
visual impairment. If advice is being given to a person with a profound hearing
impairment, sign language interpreters should be made available upon request.
Good practice also includes disability awareness training.
Employees should have training in dealing with persons with a disability. Sometimes
because front-line staff do not know how to deal with persons with a disability, they tend
to panic which can give the appearance of discrimination.
DNA test
Lastly, I would like to talk about an emerging issue for
the insurance industry which has an impact on persons with a disability. As you know, some
overseas insurers are trying to get genetic information from applicants for insurance.
According to today's newspapers, the British Government is to allow insurance companies to
use genetic testing to assess a person's risk of inheriting serious illness and his/her
likelihood of developing certain kinds of disease, as a requirement for new policies.
People with a genetic tendency to chronic conditions may have to pay significantly higher
premiums for medical, life and travel insurance.
Although computer modelling carried out at Heriot-Watt
University in Edinburgh showed that the added risk for underwriters would be so small as
to have little, if any, impact on insurance payments, British consumer groups are worried
that insurers could use the data to charge punitive rates to those who appear to show an
increased risk. They fear the scheme will create an uninsurable underclass rejected
because of their genetic make-up. Firms may also deny life insurance cover to those who
refuse to release details of tests.
While DNA testing have not yet been commonly conducted in
Hong Kong, this is one of the biggest issues looming on the horizon. I am concerned when
the use of genetic testing become more widespread, it could affect people getting life and
medical insurance. The insurance industry obviously need more time to prove that genetic
tests are reliable and have an significant impact on the calculation of risks.
There are already people who have difficulty getting access
to insurance, and I don't want to see a worsening of the situation with developments in
DNA testing. I believe that insurers have a responsibility to ensure that all applicants
for insurance are treated reasonably and fairly.
Concluding remarks
To conclude, I am glad to say that more and more companies
in Hong Kong have set up equal opportunities policies and procedures. In some cases they
pride themselves as equal opportunities employers and service providers. They know that
promoting equal opportunities in Hong Kong will produce not only justice for the
individuals but also continuous economic success and social stability. They know that it
makes good business sense.
The role of the EOC is to be an agent of change, and to
facilitate others in promoting equal opportunities. We hope we can be your partners in
bringing about changes in business practices and meeting the challenges of the new
millennium. Thank you.
____________________________
Notes
- Statistics from the web site of Office of the Commissioner
of Insurance
- p.3, Speech of the Commissioner of Insurance, Newsletter of
the Insurance Institute of Hong Kong, August 1999
- p.4, 1999 Annual Report of Office of the Commissioner of
Insurance and the Registrar of Occupational Retirement Schemes Hong Kong
- Statistics from the Hong Kong Federation of Insurers
- Statistics from the General Household Survey of Census and
Statistics Department
- p.68-69, The Changing Status of Women in Hong Kong in EOC's
publication "Breaking New Ground", 1999
- Speech by the Commissioner for Labour at the Conference on
Equal Pay for Work of Equal Value, March 2000
- Keynote address of Dr. E.K.Yeoh at Opening Ceremony of
Interregional Seminar and Symposium on International Norms and Standards Relating to
Disability, December 1999
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