Collection of premium levy to take effect on 1 January 2018
22 September 2017
From 1 January 2018, the Insurance Authority (IA) will start collecting a premium levy from policy holders in accordance with the law1. The levy rate will start at 0.04% of the insurance premium per policy year and increase gradually to 0.1%. The amount of the levy imposed on each policy will be subject to a cap.
Except for certain policies2 exempt from the levy by law, policy holders of all new or in-force life insurance policies and general insurance policies (such as travel, motor, property and household insurance) must pay the levy along with their premium payment. The IA will collect the levy from policy holders via the insurance companies.
The insurance companies will inform policy holders of the arrangement through various channels (e.g. anniversary statements). Policy holders can contact their insurance companies for details about the premium levy on their policies.
"As an insurance regulator independent of both the Government and the industry, the IA has to be financially independent and recover its operating costs in the long run. The IA will manage its financial resources prudently and mitigate the impact on policy holders by adopting an incremental approach in imposing the premium levy,” said Mr John Leung, Chief Executive Officer of the IA.
In Phase 1 (1 January 2018 to 31 March 2019), for life insurance policies with single or annualised premiums at or above $100,000, policy holders will pay only $403 at most per policy year. For general insurance policies with annual premiums at or above $5 million, the cap will be $2,000 per policy year.
Details of the levy rates and caps are set out below:
|Phase 1||Phase 2||Phase 3||Phase 4|
1 January 2018 to
31 March 2019
1 April 2019 to
31 March 2020
1 April 2020 to
31 March 2021
1 April 2021
As stated in the law, if a policy holder does not pay the levy as required, the IA may impose on the policy holder a penalty of up to $5,000, and may recover the outstanding levy as a civil debt due to the IA.
A dedicated IA webpage (www.ia.org.hk/en/levy) has been set up to explain the premium levy collection arrangement. More publicity materials, including a promotional leaflet and a short video, will be launched in the coming months.
The IA has taken over the regulation of insurance companies from the Office of the Commissioner of Insurance since 26 June 2017 and will directly regulate insurance intermediaries through a statutory licensing regime within two years, to provide more comprehensive protection for policy holders. The Insurance Ordinance empowers the IA to collect a premium levy from policy holders, authorization fees from insurance companies and fees from users for specific services, with a view to achieving financial independence in the long run.
1The Insurance (Levy) Regulation and the Insurance (Levy) Order under the Insurance Ordinance (Cap. 41).
2Reinsurance business, policies underwritten by authorized captive insurers, and marine, aviation and goods-in-transit business are exempt from the levy.
3Group life insurance policies with medical protection offered by employers will be subject to the levy cap for general insurance policies.