HONG KONG SAR, CHINA Law and Practice Contributed by: Edwin Northover, Jan Buschmann and Tony Dymond, Debevoise & Plimpton
• directly by insurers, including through the internet. Bancassurance typically falls within the second bullet point since banks act as insurance agencies, although some banks act as insurance brokers. The staff act- ing for corporate agencies or brokers in the sale of policies are referred to as technical representatives. Reinsurance contracts are typically written through reinsurance brokers or based on existing relationships between cedants and reinsurers. Insurance intermediaries that carry on regulated activities in Hong Kong must be licensed by the IA, subject to narrow exemptions. “Regulated activities” is broadly defined and includes a wide range of solici- tation and intermediary activities. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer The insured must avoid making misrepresentations and must disclose all material facts that are or ought to be known to them and that are material to the formation of the contract. “Material” in this context means that the fact would influence the judgement of a prudent insurer in determining whether to accept the risk and in fixing the premium where the risk is accepted. The law in Hong Kong reflects the traditional common law position and does not incorporate the reforms that have been undertaken in this area in other jurisdic- tions, including England and Wales. While the common law does not impose obligations on insurers to seek information proactively, the Code of Conduct for Insurers issued by the Hong Kong Federation of Insurers (which is not legally binding) provides that insurers should ask clear and specific questions in relation to matters that insurers gener- ally consider to be material to the type of insurance in question. A serious failure to ask pertinent questions could also constitute misconduct under the Insurance Ordinance and have other regulatory implications.
The rules are not generally different as between con- sumer and commercial contracts, but the courts and regulator are likely to impose higher standards on insurers with regard to questions asked of consumers. 6.2 Failure to Comply With Obligations of an Insurance Contract The insurer is entitled to avoid the policy (ie, to treat it as if it had never existed) if the insured fails to comply with its obligation to disclose material facts. The non-binding Code of Conduct for Insurers issued by the Hong Kong Federation of Insurers provides that an insurer should not refuse a claim by a policyholder on the grounds of non-disclosure of a material fact that the policyholder could not reasonably have been expected to disclose. The exact scope of that pro- viso is unclear and does not, in any event, change the legal position that an insured must disclose all material facts. Life insurers’ remedies in relation to the policyholder’s failure to disclose material facts are also limited by the incontestability provisions contained in their life insurance policies. 6.3 Intermediary Involvement in an Insurance Contract Insurance brokers act for insureds and owe them contractual and fiduciary duties. In addition, they are subject to statutory duties that at least partly overlap with the contractual and fiduciary duties owed to the insured. The key obligations are: • to act honestly, fairly and in the best interest of the (prospective) insured; • to exercise an appropriate level of care, skill and diligence; • to have regard to the circumstances of the (pro- spective) insured to ensure that the insurance cover sought is suitable; • to disclose sufficient information to the (prospec- tive) insured; • to avoid conflicts of interest; and • to handle the monies of the insured in an appropri- ate manner. Insurance agents (whether corporates or individuals) act for an appointing insurer and owe fiduciary and contractual obligations to such insurer. They are also
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