Showcasing the social value of insurance amid severe weather events

17 September 2023

Over the past two weeks, various sectors in Hong Kong have been busy dealing with the aftermath of a typhoon and a heavy rainstorm. The insurance industry is no exception, with insurers and intermediaries working diligently to handle claims enquiries and applications. Some are proactively reaching out to their clients to better understand their situation and provide them with professional and reliable support. The incidents have fully demonstrated the importance of insurance as a risk management tool.

Extensive and severe flooding in the territory caused substantial damage to vehicles and property, as well as losses to many retailers. While more concrete figures will be available in a few months, it is expected that the insurance claims arising from the extreme weather events this time may surpass the $3 billion paid out after Typhoon Mangkhut in 2018. The Insurance Authority (IA) is closely monitoring the situation and will collect industry data for further analysis.

We recognise the need for urgent relief among the general public and retailers, who have suffered enormous losses due to the sudden adverse weather events. In view of this, the IA issued a circular to the industry reminding insurers that they should treat customers fairly, process claims applications in a prompt and transparent manner in accordance with the policy terms and conditions, show empathy and understanding of the situation and needs of policy holders, and provide appropriate assistance to help tide them over.

We consider that insurers, when processing claims applications, should provide clear guidance and state the information required for claims submission, update claimants from time to time on the status of their claims, and give sufficient explanation of the claims results to clear up any concerns that the policy holders may have.

While natural disasters are mishaps, insurance coverage does play a role in mitigating losses incurred to those affected. These events underscore the social value of insurance and remind us of the importance of identifying protection needs, proactively managing risks, and addressing protection gaps. Take motor insurance as an example. Currently, only 37% of car owners in Hong Kong have comprehensive insurance protection for their vehicles. Those who have only third-party liability insurance may have to bear all the costs of repair and replacement in the event of an accident. Similarly, small and medium-sized enterprises will be able to reduce their losses in the event of natural disasters or accidents if they take out commercial insurance with property damage and business interruption coverage.

Climate change is a global trend and is likely to give rise to more frequent extreme weather events. Apart from risks brought about by climate change, individuals and businesses should step up their risk management efforts in face of the rapidly changing environment. They should always assess the risks they may face in different scenarios and at different life stages, and take action to reduce and mitigate the risks. Insurance is a vital solution for managing risks and mitigating losses. The IA will continue to provide information on how to address different risks through insurance to maximise its social function.

Finally, I would like to express my gratitude to the insurance sector for their unwavering dedication in providing much-needed services to policy holders. I believe that professional, caring and efficient services offered by the insurance industry will help establish and reinforce the reputation of the Hong Kong insurance industry, promote the robust development of our insurance market, and ensure better and more comprehensive protection for policy holders.

Stephen Yiu
Chairman, Insurance Authority
17 September 2023

(This is a summary translation of the Chinese article. If there is any inconsistency or ambiguity between the English version and the Chinese version, the Chinese version will prevail.)