The recommended rate of increase for motor insurance premiums clearly demonstrates the need for adopting the proposals in the Consumer Council report on competition.
The Hong Kong Federation of Insurers has announced a 50 percent increase in third party motor insurance for private vehicles.
"From the broader perspective, recommended rates, even when they are not mandatory, are looked on as restrictions on competition," a Consumer Council spokesman said today.
"They discourage companies from competing on price and this leads to prices being higher than would otherwise be the case."
In its report, " Competition Policy: The Key to Hong Kong's Future Economic Success", the Council has proposed the introduction of a competition law that would prohibit recommendations on price unless an independent Competition Authority had exempted the practice, because it offered benefits to the public that outweighed the effect on competition.
"The existence of recommendations such as those made by the Hong Kong Federation of Insurers demonstrates the need for the Council's proposals to be adopted," the spokesman said.
"There may be good reasons why, in the case of motor insurance, there should be recommended rates, but these reasons should be explained to an independent Competition Authority, which could decide whether an exemption was justified," the spokesman added.
The spokesman stressed that the Consumer Council is not making any judgement on the justification for the present recommended rate of price rise.
An independent Competition Authority, set up as proposed in the Council's competition report, will be able to address the public concern about such practices.