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Operation of insurance companies
Following is a question by the Hon Andrew Cheng and a written reply by the Secretary for Financial Services, Mr Rafael Hui, in the Legislative Council today (Wednesday):
Question:
Regarding the operation of insurance companies, will the Government inform this Council:
Reply:
(a)
(b)
(c)
how the Office of the Commissioner of Insurance (the Office) regulates the sale of the assets and liabilities of one insurance company to another or the merger of one insurance company with another;
of the protection provided for policy holders under the circumstances described in (a) above; whether it is obligatory for the insurance company concerned to obtain the consent of its policy holders prior to transferring their policies to another company, and whether the policy holders can recover the premiums paid if they object to such a transfer; and
the total number and categories of complaints concerning the operation of insurance companies received by the Office over the past three years?
(a) and (b)
Under common law, the transfer of insurance business from one insurer to another can only be executed with the prior consent of each and every policy holder. This represents a "novation" of the contract and the Office of the Commissioner of Insurance is not involved in the process.
Such a process is, however, extremely time-consuming and costly, particularly where a large number of policies are involved. The Insurance Companies Ordinance ("ICO") therefore provides for an alternative mechanism for transfer of insurance business which will not only save time and costs for the insurer concerned but also ensure that policy holders are properly and readily protected with another policy issued by an existing authorised insurer.