Insurance in Hong Kong

How to choose business insurance in Hong Kong

Unforeseen circumstances can force a business to cease operations. From injury to employees to damage to the environment, having business insurance is a sensible option.

There are multiple types of business insurance in Hong Kong and the right one for your business will depend on the requirements of the law, type of business, and the discretion of the manager.

Here we look at the different types of business insurance to consider in Hong Kong and how to decide which one best suits your type of business. We will also look at some tips when choosing each business insurance policy type.

Employee Compensation Insurance

If you plan to start a business in Hong Kong, a major insurance coverage that is mandatory by law is employee compensation insurance.

This covers employees in case of an accident, such as an injury or disease they may experience while working for your business.

Employee compensation insurance covers:

  • Payments
  • Medical bills
  • Economic loss due to the injury
  • Death benefits to dependents

Note that it is mandatory for any employee, including domestic help, to be covered by employee compensation insurance.

There are several important factors to consider when choosing an employee compensation plan:

  • Contact a reputable insurance agent or broker, who will know the best policies from the different companies available and will be able to help you choose the best coverage for your business.
  • Understand the requirements of the law, which helps ensure that you operate within the law and can be a determining factor when choosing an insurance company.
  • Understand what the policy covers. Some policies cover injury by accident while others cover injury caused by the employment conditions.
  • Review the policy. Do this each year with the assistance of your agent. It helps address any changes in business operations that could have an impact on the premiums and coverage.

Public liability insurance

Public liability insurance is not mandatory in Hong Kong, but is a critical consideration for businesses that routinely interact with the general public. It covers any member of the general public for injuries that may be caused by the operations of the business.

For instance, if you have a sign outside your business premises, then public liability insurance will protect the business from costs incurred if the sign falls and injures a passerby.

This type of insurance is diverse, however, and the policy will depend on the nature and type of business. For instance, a manufacturer may take public liability insurance to protect itself from repercussions in case waste matter causes damage to the environment.

Factors to consider when taking public liability insurance are:

  • Analyze the risks. Insurance companies can offer full coverage or partial coverage, based on the level and type of risk.
  • Get full coverage. While some insurance companies will offer partial coverage, choose one that offers full coverage. Taking measures to reduce risk can help you access full coverage.
  • Ask for multiple quotes. Quotes from different companies can help you choose the most affordable yet most effective coverage for your business.

Business Insurance Packages

Think of a business insurance package in Hong Kong as a wholesome plan that covers multiple areas of a business.

This can be employee compensation, public liability, and/or office insurance, all under one package and policy. Others include, but are not limited to:

  • Business life insurance
  • Directors and officers insurance
  • Cyber risk insurance
  • Business medical insurance
  • Business interruption insurance

The main reason why a business in Hong Kong may want to consider a business insurance package is the ability to offer a more comprehensive coverage compared to other types of business insurance.

Factors to consider when taking a business insurance package are:

  • Talk to a few insurance agents to get information on the best available business insurance packages in Hong Kong.
  • Consider a package that will scale with you as your business develops.
  • Ask for multiple quotations and compare the per-employee costs.
  • Read the policies carefully and never make assumptions on what is covered and what is not.

Professional Indemnity Insurance

Professional indemnity insurance offers coverage to businesses in the service industry, includes stockbrokers, law firms, and even insurance agencies, against offering bad advice to customers.

If you run a service business in Hong Kong, such as brokerage trading and offering investment advice, professional indemnity insurance is a worthy consideration. If any advice or information provided by the business causes loss to a client, then the client can sue the business. This may cause a huge upset to business operations.

Professional indemnity insurance will cover such aspects as:

  • Client compensation
  • Legal defense
  • Subsequent lawsuits

Factors to consider when taking professional indemnity insurance include:

  • Consider the risks, which depend on the type of business, contractual obligations, and even the potential cost of a claim.
  • Choose a level of coverage – this should cover the costs of the potential risks.
  • Consider exclusions – the last thing you need is to learn you are not covered during a claim.

Speak to a broker, who will advise on the best policies to consider.  

Keyman insurance

Entrepreneurs running a small business in Hong Kong likely will not have major assets that require insurance protection. In such a business, the main asset is the employees.

If a major employee of a small business becomes sick, injured, or dies, the business may suffer a major setback. In worst cases, the business can even be forced to cease operating.

Keyman insurance covers the business in case a major employee became injured, fell sick, or died. The beneficiary of the insurance coverage is, therefore, the business:

  • Losses experienced with the unavailability of the key employee
  • Shortfalls in sales
  • Credit shortfalls caused by financial institutions losing confidence
  • Business interruption expenses
  • Financing the recruitment of a new employee

Some major tips when choosing Keyman insurance are:

  • Define key men and how many – these could be manager, IT expert, top salesperson.
  • Contribution to earnings of the key men – the greater their contribution to the business, the more expensive the coverage.
  • The health of the key men – the healthier they are, the less costly the policy will be.
  • Nature of the business – the fewer the risks involved, the less costly the policy.

Group life insurance

Group life insurance offers compensation to descendants of your business employee in case your employee dies.

The business can wholly finance the insurance policy or the employee can pay part of the premiums. It all depends on the agreements and the terms of employment.

Group life insurance is not mandatory, but can help cushion the business in the eventuality of the death of employees.

As group life insurance is not common in Hong Kong, having it can help businesses secure quality talent and reduce employee turnover.

Things to note when taking group life insurance:

  • Employee age – younger employees are less likely to die than are older employees. An insurance company may thus ask for higher premiums if the majority of employees are older.
  • Gender – females tend to live longer than males. You can secure a less-expensive policy if the majority of employees are female.
  • Employee health – the healthier the employees, the less costly the policy.
  • Duration – taking a policy for a longer duration will be less costly than taking it for a shorter duration.

Group health insurance

Group health insurance covers employees in case they become sick, give birth, or are injured.

Note that Hong Kong has an excellent public healthcare system, which means it is not a requirement by law to offer group health insurance for your employees.

However, the best healthcare is offered by private clinics and hospitals. These are highly expensive.

A business may offer group health insurance to entice and keep top-quality talent.

It is all at the discretion of the business.

Factors to consider when taking group health insurance include:

  • Don’t base your choice on price – the least expensive policies will often offer less comprehensive coverage.
  • Understand the coverage – read through the policies and understand exactly for what your employees are covered.
  • Look for limitations – reading the policy thoroughly will help you uncover any limitations.

How Insurance Requirements changed after COVID-19

For the insurance sector, what are the implications of COVID-19? And what longer-term trends could be ushered in for the future by the outbreak.

A global pandemic has now become the COVID-19 coronavirus outbreak that started in China toward the end of last year.

A situation such as COVID-19 affects all market areas, but in particular focuses on insurers that may anticipate general inquiries and claims to be inundated across several lines, whether for health, life, or non-life coverage. Balancing the need to adapt to this explosion of activity with a rapidly changing remote workforce in contact centres is an environment that insurers are trying to solve. Countries are at various levels of coronavirus activity, of course.

So how is it possible that the insurance industry will influence the unfolding crisis? What are the consequences for various sectors of the industry? And what could the epidemic do to usher in longer-term trends for the future?

The pandemic of COVID-19 has had a significant effect on almost all sectors of the economy, and insurers are no exception. Although governments reduce the harm by stepping in as last resort insurers, the market valuations of Asian insurers have suffered in line with wider markets. Customers are currently focusing on protecting their wellbeing rather than deliberately lodging claims, as the pandemic is still unfolding. However, as the health and social conditions change, we expect the underlying effect on the efficiency of insurers’ underwriting to become clearer.

As the ramifications unfold, insurers should start preparing for the future by accelerating the digitization of their activities and planning for future business opportunities. They first have to consider the possible effects of the pandemic in order to do this effectively. We assume that various business lines will be affected to varying degrees over time and that the direct effect will be primarily experienced in three waves. In the first, when potential clients lose sales and are struck by financial problems, new business in most lines will decrease. After insurable incidents that occur from the pandemic, claims will increase in the second. This will affect lines such as exchange / credit / security, life insurance, and cancelation of events. That being said, certain personal lines of claims are likely to decline. The third wave could consist of a rise in demand for insurance products: people are likely to become risk-averse after the pandemic and obtain insurance to cover themselves.

This is how the pandemic has affected various segments of the Asia-Pacific insurance market.

Commercial lines

Insurance for exchange, credit, shares, and collateral. Widespread trade arbitration delays, the drying-up of credit facilities, and insolvencies are likely to hit liability lines across Asia hard. There will be an especially severe impact on several lines: trade and credit policies in which insurers pay up when the client of the holder is not due to events such as bankruptcy; bond insurance guarantees that reimburse the principal and interest payments of bondholders in the event of default; and security policies that take effect if a party fails to perform an obligation, such as a building project Despite widespread efforts by most governments, banks, and credit institutions to restrict or postpone financial system stress, we expect this class of insurance to have a material impact..

Event cancellation.

The cancellation or delay of multiple events, such as the Olympics in Tokyo and the Grand Prixs in Shanghai and Vietnam, is likely to cause event cancellation allegations. Not all incidents are insured; especially the smaller ones, and some policies carry pandemic exclusions. So, very few statements can be made. But those claims that are made may be considerably larger: the Olympics, for example, have a total insurance coverage of $2 billion, analysts say.

Business interruption.

Although the pandemic directly affects a lot of companies, business interruption (BI) claims are expected to be limited. BI plans also exclude “extraordinary events,” “authority-imposed forced business closures,” and “infectious diseases,” and there are strong legal concerns that BI insurance is designed to cover property damage but not outbreaks of disease. BI claims were hotly challenged in the courts during the SARS outbreak, for instance. So, in this case, legal challenges are likely to occur again. The right to file BI claims usually relies on the regulation wordings and will be determined on a case-by-case basis.

Personal lines

Until lockout restrictions are removed, personal insurance claims are projected to be substantially lower, as individuals reduce the actions that usually cause such claims. For example, the widespread drop in car use will mean fewer accidents, while confining individuals to their homes could decrease the amount of property theft. This short-term upside, however, is likely to be offset by an adverse revenue impact, resulting from lower (or delayed) renewals and limited new business.

Although European insurers are expecting record claims due to flight cancellations, COVID-related claims exclusions were quickly announced by most Asian insurers. With limited penalties, airlines and hotels have allowed clients to cancel or postpone trips. Travel insurance claims are therefore anticipated to be minimal. However, insurers expect a significant hit to the volume of new business, compounded by premium refunds on cancelled travel policies, as virtually all travel comes to a halt.

Life and Health Insurance

A spike in life insurance (mortality) claims related to COVID will impact most life insurers across the region. Some have changed the coverage provisions for new companies rapidly, but that will have a minimal impact compared to their current business. Rising

unemployment may, subject to policy limitations, increase income protection insurance claims. For both insurance lines in each market, the severity of the claim increases will be directly related to the health and economic impact of the pandemic.

Most of the medical costs of COVID-related therapy are currently borne by governments in several Asian markets, particularly China, Japan, Korea, and Singapore. Therefore the impact on private health insurers is likely to be limited in those markets. The impact on private health insurers could, however, be greater in emerging countries with large vulnerable populations, such as India and Indonesia.

In the future, the heightened awareness of mortality and health risks should result in a surge in demand for health and protection products in several markets. During the six months after the SARS outbreak in China, total health insurance premiums more than doubled.

Impact of COVID-19 on the Indian insurance sector

In general, the Indian insurance industry is well equipped for key loss incidents, including pandemics; however it will take time to participate in the financial consequences and will be explicit to the insurer. As claims payers, owners, and investment managers, insurers are acting on numerous fronts in response to the expanding COVID-19 outbreak. Each has a discrete confrontation of its own, not just for the insurance industry, but for the global economy and the general public.

In terms of premium growth, a year that could have been an amazing year for the Indian insurance industry is abruptly staring at a state where harmonizing the figure of last year seems to be an intimidating challenge. The last three months of financial years have traditionally been the months that have seen the industry’s peak collection.

Insurance premiums vs death claim challenge

In addition to the absence of new company premiums, the insurance industry is looking at increased death claims as a challenge. Although the government proceeded positively and went to double digits for a total lockdown of 21 days even before the death toll climbed, given the early signs of community expansion becoming apparent and the size of the nation, nothing can be taken for granted. At this stage, insurance agencies feel it would be too early to comment on an exponential increase in life insurance mortality claims. If India can manage the spread effectively, then there could be a smaller impact on life insurance claims. A number of companies will continue to honour the claims on current policies when talking about life insurance policies; the price of future policies will increase rates and the number of policies offering comprehensive coverage may fall,

The IRDA clarification

Corona is causing the biggest challenge that the Indian insurance industry has seen so far. There is a pan-India reach for the infection and there is a very real risk of its distribution exponentially. COVID-19 treatment may require extended hospitalization, which could be costly. Many people have some sort of health coverage, be it a personal health coverage or employer sponsored. Although, since this virus is new, there is a lot of uncertainty as to whether or not corona cases would be covered under health policies offered. According to IRDA law, if hospitalization is covered, insurance companies must ensure that cases related to COVID 19 are handled quickly.

The Road Ahead

Although insurance undertakings are listed under the Exempted Services Register under a lockdown with common movement restrictions, there is scarcely any chance of a new undertaking. If there is a spiky rise in COVID-19 cases, insurance players with strong digital infrastructure should fare superior to others (as observed in China and Italy). One of the main challenges for insurers could be to empower their employees and sales force with substitute work arrangements so that they are more flexible and able to deal with rising claims and faster response times.

The priority of insurers was to respond to customer and employee requirements during the COVID-19 pandemic. So, they are still assessing the impact, and many have been unable to provide updated earnings guidance.

They should take the following precautions even before they realize the potential fallout:

1. Remember a number of circumstances and the effect this would have on their companies. Then formulate plans for reaction.

2. Increase consumer outreach by using and partnering with partners across digital distribution networks. Remind consumers of the value of insurance in tough times, both current and prospective.

3. Accelerate digital transformations of their own.

The insurers that successfully emerge from this crisis will support their customers in their time of need while revising their business model for the post-COVID-19 environment.


They will change the insurance business. In order to carve out this coverage, policies that contain verbiage specifically covering coronavirus should be updated as it has been a huge cost for all. It is possible to explain regulations that are silent on coronavirus-like issues as to what is covered. Insurance companies can either carve out coronavirus-like problems entirely or add an add-on to coverage. A similar pandemic risk insurance that evolves in relation to COVID-19 and/or virus risks, as Terrorism Risk Insurance was created after 9/11 and was structured such that a share of the costs would be covered by the government when damages reached a defined threshold.

What this means today is that to assess the effects, management teams should quickly analyse operating areas with large concentrations of support for human resources, such as call centres, claimants, shared service centres, etc. Company disruption or resilience plans are being checked, emphasized, and extracted in some instances.  This is particularly true in areas where there is a lack of resources for digital workflows, limited capacities for virtual or mobile workstations, or unscaled communication technology. Such conventional approaches are mostly used to complete moderate to more complex processing operations requiring a team approach resolution. This situation allows for a major change in the pace of implementation of new ways of operating, including supporting technology, which can alter the manner in which companies function after a crisis.

The crisis may also be the spur to look at shifting more systems and software to the cloud, an environment in which insurers have lagged in other industries, speaking of technology. With more people operating remotely, using cloud infrastructure provides much greater bandwidth and capacity than if workers remotely access on-premise servers. For the insurance sector, this is an opportunity and may be the spark for this movement. Actuarial modelling software, for example, mostly resides on the computers of people, as storing it in the cloud is perceived to be a security issue. But perhaps the time has come for more of the industry to make the switch, with today’s cloud providers providing improved security protocols.

More generally, insurance companies need to embark on the digital transformation of their organizations, like other industries, to become more flexible, sensitive, and linked. Perhaps one legacy of the coronavirus crisis may be that more insurers are genuinely motivated to do that.

For people, families, corporations, and, indeed, whole communities and economies, these are highly difficult times. In helping clients and economies during the recession and recovery, the insurance industry has a vital role to play.


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