New Guideline on Medical Insurance Business

The Insurance Authority has just issued a new Guideline on Medical Insurance Business (GL31) (New Guideline). It takes effect from 23 September 2020 and will apply to insurers writing medical insurance of all types as well as to insurance agents and insurance brokers involved in the placement of medical insurance. Its features can be summarised as follows.

Responsibility of the board, controllers and senior management of insurers

The New Guideline requires insurers to

  • put in place policies and procedures to ensure fair treatment of customers;
  • design an information framework to assess fair treatment of customers;
  • put in place controls over activities which jeopardise fair treatment of customer;
  • provide appropriate training; and
  • implement a performance evaluation.

Product design

Insurers must take into account the interests and needs of different types of customers when developing medical insurance products. This would include meeting identified needs and expectations of the target customers, pricing the product reasonably with regard to sustainability and adopting channels of distribution aimed at targeting identified target customers.

Sales process

Insurers should monitor the process of distribution with a view to ensuring fairness. This also applies to insurance agents and insurance brokers. If shortfalls are identified, remedial action should be taken. The key requirements are:

  • recommending only products that suit the interest of customers;
  • providing adequate and clear information to customers before and at the point of sale in a clear and fair manner which is not misleading;
  • explaining the features and terms and conditions of policies;
  • restricting the offering of gifts to customers which would distract the customers from making an informed decision as to whether to purchase the product;
  • restricting rebates and commissions with limited exceptions; and
  • ensuring competency of insurance agents and insurance brokers recommending insurers’ products including compliance with statutory requirements, having relevant knowledge and skills and providing training.

Claims handling

Claims must be handled fairly and promptly by providing the customer with sufficient information and explanation in a timely manner. When this is outsourced, the insurer should ensure that the service provider fulfils their responsibilities, and the insurer should monitor the service standards of service providers.

After-sale service

On request, insurers, insurance agents and insurance brokers should review continued suitability of insurance products and where changes are made in a policy, they should give customers sufficient advance notice. Where enhancements are made, customers should be given the opportunity of proceeding without the enhancement. Insurers should respond promptly to queries on insurance coverage.

Complaints handling

Insurers, insurance agents and insurance brokers should provide on request information on complaints handling and procedures for making complaints. Also, insurers, insurance agents and insurance brokers should have formal complaints handling procedures.

Proper handling of customer’s personal data

Insurers, insurance agents and insurance brokers should exercise care and diligence in collecting, handling and storing personal data and in compliance with the Personal Data (Privacy) Ordinance.

Voluntary health scheme insurance policies

Insurers and their insurance agents must comply with the requirements of the scheme.