• "Legislative Corner"
  
• "Legal Case Studies"
  
• "Education Corner"
  
• "Did you know - THE INSTITUTE HAS BEING INCORPORATED"
  
• "Our Next Generation.. E-Business!"
  
• "Special gifts from the committee ...... Jokes about our Insurance Industry"
  

UPDATE ON EXTERNAL RECOGNITION TO IIHK DIPLOMA QUALIFICATION HOLDERS

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) has confirmed that our Diploma holders (i.e. holders of the IIHK's Hong Kong Diploma in Insurance Studies) will continue to gain recognition from them. Under ANZIIF's new curriculum, our Diploma holders will be exempted from the following two subjects in their Certificate IV in Financial Services (General Insurance) programme:

FSI102 - Insurance Law and Regulation

FSI103 - Insurance Products

This means that the Diploma holders will only need to pass three more subjects in ANZIIF's Certificate IV and they will be eligible to become Associates of the ANZIIF. For more detailed information about ANZIIF's examination, visit the IIHK's website at http://www.iihk.org.hk/ and use the ANZIIF link there.

Education and Examination Committee.

The timetable for these exams are available at our website http://www.iihk.org.hk/ .

FORTHCOMING SEMINARS

Where a person is killed by an act or omission giving rise to a cause of action which survives for the benefit of his estate, would the damages recoverable for the benefit of his estate include an award in respect of loss of accumulation of wealth?

The answer is yes. And a recent ruling by the Court of Final Appeal over such a case has already raised concern in the insurance industry. There were fears that the case would pose greater financial pressure on the already cash-strapped Employees Compensation Assistance Fund in future.

I raised the issue at the Legislative Council meeting recently and I would like to share with you the reply given by the Secretary for Education and Manpower, Fanny Law Fan Chiu-fun.

The Court of Final Appeal ruled on February 20 in a fatal industrial accident that even if the deceased did not have any established habit of saving money during his lifetime, it was open to the court to make an estimate of the wealth which the deceased would have probably accumulated in his future days but for the accident causing his death, and use this as the basis for determining the amount of compensation payable to his dependants in this respect.

Although the deceased was not able to accumulate any wealth due to his heavy family burden, the fact that he was a thrifty and hardworking person who was not hooked on any bad habits, his parents were already very old and his children were about to complete their schooling formed the basis for it to arrive at an inference that if not for the accident, the deceased would have accumulated wealth by the time he would otherwise have died.

The ruling was based on Section 20(2)(b)(iii) of the Law Amendment and Reform (Consolidation) Ordinance which provides that damages payable to an employee who died in the course of duty covers the loss of wealth which the deceased would have accumulated.

In assessing such loss, the court will take into account the income and expenditure of the deceased person, the age when he died, and the wealth he would have accumulated if not for the accident which took his life.

Since the Ordinance came into force in 1986, the High Court already has a number of precedents awarding damages, including to those who did not have any established habit of saving money, in respect of loss of wealth that would have been accumulated.

Following that recent ruling, some insurance practitioners anticipate the number of claims and awards being made for loss of accumulation of wealth will hence increase possibly by 50 per cent.

It is difficult to anticipate the overall increase to damages awards but they estimate there could be an increase of say, $500,000 per fatal accident claim. This further escalation in damages will no doubt cause further pressure on the present Employees Compensation levy and exacerbate the current under-funding of the industry generally due to the retroactivity of the above decision.

The Secretary for Education and Manpower, however, maintained that the ruling of the Court of Final Appeal did not constitute a change of the calculation basis for damages and that there have only been a small number of such cases. She estimated that they would not pose a great financial pressure on the Employees Compensation Assistance Fund.

No matter what her argument is, such ruling has already raised concern in the insurance industry. It is also a fact that the Employees Compensation Assistance Fund is facing financial problem. The government should tackle the problem before the Fund runs out of money and workers' interest put at risk.

Facts of the case found by Seagroatt J:

To Shing Chiu, deceased, aged 42, was a painting worker who died in an accident on 19th September 1995 when he fell from defective bamboo scaffolding. The deceased was survived by his wife aged 38 at the time of his death, and two children aged 15 and 6 respectively at death.

At the time of his death, the deceased earned $16,708 per month. He gave $8,000 to his wife for household expenses, $1,134 for rent, $500 for utilities, $2,000 for his own parents, and about $1,000 on his family for things such as dinner and entertainment outside the home. The deceased had approximately $4,000 odd left for his own travelling expenses, meals etc.

The deceased's wife was employed as a quality control inspector and earned $5,300 per month. By her own admission, she contributed $3,000 per month towards household expenses and in addition to what the deceased gave her. She gave up her job after the deceased's death, and claimed loss of earnings as a result.

NB       Seagroatt J made an award of $546,000 which was set aside by the Court of Appeal on the ground that such loss was too remote.

The deceased's daughter started working as sales assistant three months after her father's death. The younger son remained in school.

Pleaded claim for loss of accumulation of wealth:

As per Statement of Damages served by the Plaintiffs, the claim for loss of accumulation of wealth was formulated as follows:

(a) The deceased was a responsible husband and father. He was a frugal person and did not have any undesirable habits, e.g. smoking or gambling.
(b) Although he did not have any established saving pattern at the time of his death, he would have been able to save some money, in particular, when his parents had passed away and his children ceased to depend on him. It is probable that he would have been able to accumulate some wealth at the time of his natural death.
(c) The Plaintiff's claim a global sum of HK$ 50,000 under this head

Seagroatt J accepted the widow's oral evidence that the deceased was a frugal man without selfish indulgence. Assuming the deceased's earnings would have increased in line with inflation, Seagroatt J found that the deceased would have been able to start saving at or about the time of the trial, and further increasing such savings when the deceased's parents passed away and children became financially independent. Seagroatt J made an award using the multiplicand and multiplier approach, hence the sum of $ 320,000 for loss of accumulation of wealth.

Court of Appeal

The Court of Appeal considered Seagroatt J was entitled to take an overall view of the evidence when making an award for loss of accumulation of wealth. They further commented in their judgement that it was understandable for a deceased bringing up a young family with high expenditure not to be able to accumulate any savings, but eventually, it was likely savings would be made. Refusing to disturb the finding made by Seagroatt J, the Court of Appeal said:

"The amount which a court can award in respect of loss of accumulation of wealth must be a result of a matter of impression and depend upon the judge's assessment of the evidence, including the nuances and impressions he receives as a result of seeing and hearing that evidence¡K.. It was a reasonable assessment based on the deceased's circumstances, taking account of what the court below had been told of the deceased and using common sense."

Court of Final Appeal

The Appellants' grounds of appeal were threefold:

(a) Whether it is open to the court to assume that the deceased would have accumulated wealth in the absence of any proven evidence of established pre-mortem pattern or habit of savings or a propensity for such by the deceased himself.
(b) If such an assumption is appropriate, on what basis is the calculation to be made to arrive at the sum which the deceased would otherwise have accumulated at the time of his natural death.
(c) Whether it is appropriate to calculate such loss by adopting a multiplier and multiplicand, and discounting for the expenditure which the deceased would have incurred between his retirement and ultimate death.

The Court of Final Appeal looked at the following issues:

1. Law Amendment and Reform (Consolidation) Ordinance Cap 23 (LARCO)

• The Court of Final Appeal did not find that section 20(2)(b)(ii) of LARCO lays down any pre-condition of the existence of a saving pattern before an award for loss of accumulation of wealth can be made. Their Lordship found all section 20(2)(b)(ii) requires is that the court be satisfied the deceased would have achieved an accumulation of wealth by the time of his natural death but for the accident:
  "Even in the absence of any savings during the deceased's lifetime, there may in any given case be, on a balanced view, real prospects of an eventual accumulation of wealth such as to justify an award for loss of accumulation of wealth. The court then assesses the award in accordance with those prospects as it sees them."

2. Mandatory Provident Fund

• With the introduction of the above scheme, the Court of Final Appeal stated it is too early to tell just how it would affect accumulation of wealth. It was acknowledged that while the MPF scheme may somewhat diminish what people will tend to save during their working years, any receipt under the scheme may sell or form the wealth of the deceased in question.

3. Expenditure during retirement

• The Appellants argued that even if the deceased was able to save during his working life, the court must take into account expenditure during retirement before determining whether any accumulation of wealth would exist at the time of the decease's natural death.
• Whilst the Court of Final Appeal agreed that one must look at what the position would have been at the end of the decease's natural life, assuming that any accumulation of wealth made during the working years would yield income during the retirement years, the court is not prepared to set up the hypothesis of a man saving up during his working life for his retirement, then using up all his savings so that he spends his last cent as he draws his last breath. The burden therefore lies on the party who asserts either the expenditure during retirement may exceed the income from the accumulation of wealth and therefore no award should be made; or receipts would exceed expenditure during retirement therefore justifying the making of an award. The Court of Final Appeal believed Seagroatt J did take into account of post-retirement expenditure on pre-retirement accumulation in the particular case before them despite there being no such express reference in his judgement.

Recommendation for future handling of claims for loss of accumulation of wealth.

It is clear from this Judgement that the inference will be drawn by the Court in making an assessment under this head of damage that injured persons working towards their retirement will accumulate wealth and if the Defendants submit others, they have to prove their case. The burden is therefore on the Defendant to shift the inference of accumulation of wealth by actively adducing evidence to disprove the same.

(a) What the deceased would have earned during his working life (but for the accident) and what savings he would otherwise have achieved, if any;
(b) The impact caused by the introduction of the Mandatory Provident Fund scheme to one's ability to save during working years;
(c) The income yield on any accumulation of wealth during working years, and a clear analysis of whether such income is likely to be exhausted by expenditure during retirement years.

Education Corner

The Insurance School (Non-Life) of Japan - The 30th General Course

"The Insurance School (Non-Life) of Japan" (ISJ) was founded in 1972 by the Japanese non-life insurance industry as a private initiative. ISJ provides selected staff members of insurance organisations from the East Asian region with educational and training courses, in order to further develop international collaboration and friendship. Our Institute has a long association with the School and has been invited to nominate practitioners to attend their courses for many years.

The Marine & Fire Insurance Association of Japan and the Non-Life Insurance Institute of Japan are jointly in charge of the conduct and management of the courses. Applicants selected to attend must meet certain admission requirements. They must be employees of non-life insurance companies or related organizations with at least three years practical experience in non-life insurance business and good command of English. They must be officially nominated by the national non-life insurance association or relevant government authority.

This year four applicants have been nominated to attend the 30th Session of the General Course with the main theme "Underwriting of Commercial Risks". This will take place from September 25 to October 12, 2001, at Chiyoda-Ku, Tokyo.

The Marine & Fire Insurance Association of Japan sponsors hotel accommodation, provides free tuition and study materials, and organises trips during the course period. A daily allowance, meals and sundries are also provided by the Association for each participant.

The course programme this year includes a Special Lecture and Report on Japan, the Japanese Non-Life Insurance Market, an Overview of Risk Management, numerous Underwriting topics, Natural Catastrophe Risks, the Roles of Brokers and Captive Insurers, and visits to Insurance Companies' offices.

Each of the participants has been requested to submit a report or article following their trip to Japan. We hope to publish some of this material in the Newsletter later this year.

Did you know - THE INSTITUTE HAS BEING INCORPORATED

The idea of incorporating the Institute under the Companies Ordinance was first brought up at a monthly meeting of the Council when Alex Wong was the President. This matter was not taken up further until the 33rd Annual General Meeting in the year 2000 when incorporation of the Institute was approved. Therefore, the matter has been very carefully considered before action was taken!

The first draft of the Memorandum and Articles of Association was eventually presented to the Council for comments. The members of the Council took an active part in reviewing the draft and made considerable suggestions and comments, mostly aiming at simple and smooth running of the Institute after incorporation. I admire the efforts and time spent by the members of the Council in reviewing the draft which, I must say, was quite a boring exercise associated with a document of this nature.

After a series of exchange of questions, answers and comments the draft Memorandum and Articles of Association was finally approved, signed and submitted to the Companies Registry for approval and registration. The corporate name of the Institute "The Insurance Institute of Hong Kong Limited" has now been approved by the Companies Registry. There is also no problem with its name in Chinese

An inevitable consequence of incorporation of the Institute is the requirement to add the word "Limited" at the end of its corporate name "­»´ä«OÀI¾Ç·|¦³­­¤½¥q". Dispensation with this word can only be done with the approval of the Companies Registry. As such approval may not be granted easily I suggested to the Council at the last monthly meeting of the Council on 14th June 2001 to consider application for such approval at a later stage.

One of the main reasons for incorporation of the Institute is to attempt to avoid exposure of the members of the Council to tortious liabilities arising from activities organised by the Institute.

An unincorporated body other than a natural person cannot in law own any property. Having the Institute's own premises has been one of the subjects for discussion of the members of the Council. Incorporation of the Institute will remove the difficulty created by law in owing premises, if the Institute is fortunate enough in obtaining sufficient funds for acquisition of its own premises.

I believe and expect that you will see the next newsletter issued under the corporate name of the Institute.

Our Next Generation.. E-Business!

The Insurance Institute of Hong Kong fully supports meaningful insurance education activity. The following is an appeal made by a group of students studying in the Hong Kong Institute of Vocational Education (Chai Wan). Please read on and respond to the appeal if you feel you are the person they are looking for.

Interested in becoming part of the team to form the first Virtual Insurance Broking Firm in Hong Kong?

Background
A group of final year students taking the Higher Diploma in Insurance Studies in the Hong Kong Institute of Vocational Education (Chai Wan) is planning to form an online virtual broking firm on the Internet as their final year project. Though the firm is not intended to take in real business, the virtual company will participate in trading in a virtual business community formed by a network of schools in Hong Kong and overseas.

To simulate the actual broking business, students need the support and contribution of industry members. They are now lodging an appeal for volunteers from the industry to be their Industry Mentors.

Student preparation begins this summer with summer internship. The project work will start in September 2001 and shall be completed by February, 2002. Industry Mentors are expected to join the project group in late September.

To become the project group's Industry Mentor, you should
1. have experience in the operation and workflow of an insurance broking firm
2. have an interest in learning new things and new ideas
3. be prepared to work with prospective industry new blood and to promote the good image of insurance broking
4. have Internet access after normal office hours
5. preferably possess knowledge in Web technology though this is not essential.

Expected contribution from the Industry Mentor
1. to meet the student group fortnightly initially and then once a month
2. to act as advisers on the design of the virtual company and the workflow in the company
3. to provide guides on where to obtain information.
The project group is guided by a project supervisor as well. Your participation shows your support to the growth of the industry and will be most invaluable to students who are preparing themselves to join the industry.

What to do next?
If you are interested in this project and in becoming an Industry Mentor, please send your reply to Mrs. I. Wong at Hong Kong Institute of Vocational Education (Chai Wan) via the email address at: virtual_firm@hotmail.com together with the following information on or before July 31, 2001:
1. your experience in insurance broking and your current employer
2. your contact telephone numbers and email address.

Special gifts from the committee .... Jokes about our Insurance Industry

Three guys are fishing in the Caribbean. One guy says, "I had a terrible fire; lost everything. Now the insurance company is paying for everything and that's why I'm here."
The second guy says, "I had a terrible explosion; lost everything. Now the insurance company is paying for everything and that's why I'm here."

The third guy says, "What a coincidence. I had a terrible flood; lost everything. Now the insurance company is paying for everything and that's why I'm here."

The other guys turned to him with confusion and asked, "Flood? How do you start a flood?"

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Life insurance agent to would-be client: "Don't let me frighten you into a hasty decision. Sleep on it tonight. If you wake in the morning, give me a call then and let me know."

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THIS policy guarantees absolute security in the event of any fatal accident.

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The insurance company noted with suspicion that Fred's premises were burnt down the very day he took out the insurance policy. Suspecting fraud, the company sent him the following message:
"Sire, You took out a policy with us at 11:00, and the fire didn't break out until 17:00 the same evening. Will you please explain the delay?"

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Car Insurance Excuses

The other car collided with mine without giving warning of its intention.
The accident occured when I was attempting to bring my car out of a skid by steering it into the other vehicle.
I was driving my car out of the driveway in the usual manner, when it was struck by the other car in the same place it had been struck several times before.
Coming home, I drove into the wrong house and collided with a tree I don't have.
The indirect cause of this accident was a little guy in a small car with a big mouth.
As I approached the intersection, a stop sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.
The telephone pole was approaching fast. I was attempting to swerve out of its path when it struck my front end.
An invisible car came out of nowhere, struck my vehicle and vanished.
I thought my window was down but found it was up when I put my hand through it.
To avoid hitting the bumper of the car in front, I struck the pedestrian.
A pedestrian hit me and went under my car.
The pedestrian had no idea which direction to go, so I ran him over.
I saw the slow-moving, sad-faced old gentleman as he bounced off the hood of my car.