The following is issued in response to the High Court decision today with regard to an insurance claim litigation:
The litigation demonstrates clearly the need for greater consumer protection in insurance service.
It also highlights the difficulties in using self-regulatory mechanisms in the insurance industry.
The Consumer Council considers the inclusion of a universal clause in accident injury policies that requires "external wound or visible bruise" as condition for claims to be objectionable and detrimental to the interests of the insured.
The insurance industry has maintained that such a clause is intended as an escape clause to prevent sham claims - and not to exclude genuine injuries sustained in accidents that result in internal injuries only.
In reality, the consumers will be at the mercy of the industry. The insured will have to rely, first, on the insurers' liberal interpretation of the clause and, second, on the unanimous commitment of the industry to the Insurance Claims Complaints Board's ruling whenever claims disputes arise. Such may not always be the case as evidenced in this litigation.
The ordinary man-in-the-street in obtaining accident insurance cover would expect to be compensated when an accident has occurred. Thus the escape clause of sustaining "external wound or visible bruise" would be unduly harsh and unconscionable.
The Council is therefore of the view that such a clause in insurance contracts should be outlawed to provide better protection to consumers and enhance the much-needed consumer confidence in the practice of the insurance industry.
The litigation also raises questions of the operation of the Insurance Claims Complaints Bureau specifically and the effectiveness of the self-regulatory mechanism of the insurance industry generally.
The incident reaffirmed the concern of the Law Reform Commission as far back as 1986, which queried the effectiveness of a self-regulatory system to provide adequate protection to consumers as the law of insurance was unfairly weighed in favour of an insurer.
The Government is urged to evaluate the effectiveness of the self-regulatory system and the need for legislation to regulate the insurance industry in Hong Kong.