Are Hong Kong insurance policies taken out by Mainland residents entitled to legal protection in Hong Kong? This has been a question troubling Mainland residents and lawyers for a long time.

Just like the real property industry boom few years ago, the insurance industry has been expanding with a significant surge in recent years. As a result, people from all walks of life, like PhD/Master graduates, doctors and even lawyers, joined the insurance industry.

I have never shared my thoughts on this issue before, mainly because most of my friends work in various insurance companies in Hong Kong, like Prudential, AIA. It does not seem to be prudent for me to share my views on the same as it will most probably stir up a heated debate among my friends.

The China Insurance Regulatory Commission (CIRC) issued a guidance on the risks of taking out insurance in Hong Kong, which led to a war of words between Hong Kong and the Mainland insurance industries.

Before discussing whether insurance policies taken out in Hong Kong are entitled to protection by Hong Kong’s laws from a legal perspective, it should be noted that the scope of this article is limited to the legal side of the matter only and I have no intention of getting involved in the conflicts between Hong Kong and the Mainland insurance industries. If you would like to learn more about which insurance company suits you the most, kindly seek professional advice thereof.

The issue of whether Hong Kong insurance policies are regulated by Hong Kong’s laws, i.e. whether Hong Kong courts will handle cases of insurance disputes, depends on the relationship between the subject disputes and Hong Kong. If a Mainland resident takes out a Hong Kong insurance policy, in general he must come to Hong Kong and sign the insurance proposal form in person. If the place of signing the proposal form, the domicile of the insurance company, or even the invoice of the insurance is in Hong Kong, then Hong Kong will very likely handle the case. One of the most significant characteristics of Hong Kong courts is that it offers equal protection to all investors coming to Hong Kong. Of course, if you take out your insurance in Mainland China, Mainland courts will offer their respective protection under their relevant laws.

On the other hand, why do Hong Kong insurance companies tend to deny policy liability? I have encountered this question numerous times during my legal consultations. In Hong Kong, a full and frank disclosure in the declaration part of the proposal form of any bodily condition, such as digestive system disorder or neurological disorder, is a condition precedent of any policy. This is to allow the insurance company to assess the risks and propose policy conditions and premiums accordingly. Denial of policy liability is possible where a policyholder breaches the said condition precedent in his declaration. This is the major difference between insurance in Hong Kong and the Mainland China. Under common law, any declaration made by the policyholder to the insurance company is legally binding. Therefore, full and frank disclosure to the insurance company is always required. Deliberate non-disclosure may even result in a criminal prosecution for fraud. Therefore, any uncertainties regarding the terms and requirements of the proposal form or the policy terms must be confirmed with the insurance agent, failing which the Courts will have difficulties in supporting your future claims (if any).

Of course, where there is solid evidence of misrepresentation on the part of the insurance agents which reasonably led to your genuine belief that the required correct information has been provided, the Courts may potentially support your claim. Furthermore, if your contingent situation fulfils the conditions set out in the policy terms but the insurance company wrongly denies liability, you may also consider seeking redress in Hong Kong courts after taking into account the inconveniences that may arise - the hefty legal fees, the complicated court procedures and the language used in court. For valid claims supported by the Court, the usual order is that the losing party will foot the lawyers’ bills.

As mentioned before, one of the most significant characteristics of Hong Kong courts is its uncompromised independence, which gives equal protection to all overseas investors coming to Hong Kong. This is also a vital element that enables Hong Kong to be an international financial centre.

This article does not seek to point out which place has the better insurance regime - a question to which each individual is entitled to make his own commercially sound decision in view of his own circumstances. The take-home message herewith is that insurance taken out in Hong Kong are entitled to legal protection of Hong Kong Courts, similar to how insurance taken out in Mainland China are subject to legal protection of Mainland courts.

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