Paper II - General Insurance

Guidance Notes
These are issued by the Insurance Agents Registration Board and especially provide Guidelines for insurance agents’ compliance on, say: (i) Misconduct;
(ii) Handling of Premiums; and
(iii) Effective Date of Registration of Insurance Agents, Responsible Officers and Technical Representatives

LEGAL IMPLICATIONS OF REBATING OF COMMISSION
Rebating of commission means that the insurance intermediary gives part of his commission to his client, thus producing a “cheaper” premium for the latter. In most cases, this is a harmless and understandable gesture. However, if the practice occurs as an improper inducement for securing business, it is a grave matter.

Surveyors
Surveys are an important part of underwriting, of course. In the context of claims, surveyors will mostly be concerned with marine losses. Nearly all marine claims will require a surveyor’s report. This will take the form of an independent investigation into the cause and extent of a reported loss.

Market Exclusions
These are really another form of General Exclusion, but they are common to policies issued by virtually all insurers operating in the market. Often, they concern fundamental risks, and in some territories the exclusions concerned are results of discussions and agreement with the Government concerned. Examples include:
(i) nuclear risks;
(ii) radioactive risks;
(iii) sonic boom damage;
(iv) war risks (non-marine).

Claims are the insurer’s “shop window”: the public opinion of an insurer may easily be ruined if its claims handling is perceived to be unjust, unfair, unreasonable or unduly slow. Within reason, the payment of claims is the insurer’s best form of advertising.

Payment to insurance intermediaries: A question arises as to whether a premium payment made to an insurance intermediary constitutes payment to the insurer. It hinges upon on whose authority the payment has been received or paid. Was it the insurer who has given authority to the insurance intermediary to receive the payment? Did the insured authorize the insurance intermediary to make payment to the insurer? Of course, that provision of the Insurance Companies Ordinance which makes an insurer vicariously liable for the conduct of its appointed insurance agent in prescribed circumstances is relevant to these issues.

Defendants: Those who may incur product liability include manufacturers, assemblers, repairers, and suppliers.

Limitations and exclusions
(i) “Theft”: Under policy terms, there must be some breaking down of the security defences of the insured premises before any claim is payable. A customary limitation is that theft is only covered if accompanied by “forcible and violent entry to or exit from” the insured premises. Such an entry can be made by, say, damaging the lock on a door or smashing a window. Sometimes, a thief may enter, say, a department store as a customer, hide somewhere until it is close for business, and escape with stolen goods by force and violence to the doors or windows of the premises. (Note: insurers do not construe the phrase to include force and violence to people.)
(ii) Theft by staff: Theft by staff is a fidelity guarantee risk (see 1.4.6 below) and is excluded from the theft policy. Theft with the collusion of staff members is also not covered. (iii) Fire damage: It is not unknown for thieves to start a fire to destroy evidence of their theft. But damage by fire is excluded under the theft policy.
(iv) Average: Full value insurance is normally expected, so pro rata average will apply in any under-insurance situation.
(v) Warranties: It is quite common for theft policies on valuable property to be subject to warranties. Examples include requirements for specific security devices (types of lock, iron bars, etc.) and/or security measures (systems regarding keys, stock left in public view overnight, etc.). (A breach of warranty automatically discharges policy liability as from the date of the breach.)

The main element of cover for household insurance is property insurance of the buildings and/or contents belonging to the insured. Cover may be purchased insuring the respective interests of landlords and occupiers:
(i) Buildings only cover
(ii) Contents only cover
(iii) Buildings and contents cover

Combined Liability Policy
Typically, such a policy includes within a single document cover for Public Liability, Products Liability and Employees’ Compensation Liability. Individual clients may also require Directors’ and Officers’ Liability cover and/or Professional Liability cover.