Date: 27 February 2023
The IA issued a circular on 27 February 2023 reminding authorised insurers that they have an inherent incentive and commercial responsibility to manage their fraud risk. Fraudulent claims erode an insurer’s financial position (on which genuine insurance claimants rely to cover their losses) and the costs of fraud are ultimately passed onto policyholders by way of increased premiums.
A key industry initiative in this respect has been the establishment of the Hong Kong Federation of Insurers (“HKFI”)’s Insurance Fraud Prevention Claims Database (“IFPCD”) which currently covers motor insurance and medical insurance claims and mirrors industry-led initiatives in other developed insurance markets.
The IFPCD was designed as a tool with self-learning capability to detect potential fraudulent claims so that insurers could trigger focused investigation speedily whilst continuing to ensure the prompt settlement and payment of genuine claims and thus improving customer experience and the public image for the industry as a whole.
The IA notes that, although it may not be tasked with or empowered to adjudicate whether or not a claim is payable under terms and conditions of an insurance policy (and disputes in this respect fall outside its statutory ambit), it is responsible for ensuring that insurers have adequate policies and procedures in place in relation to the manner in which claims are handled.
When assessing the adequacy of measures put in place by authorised insurers to combat fraudulent claims, the IA indicates that it will take into account whether an insurer participates and is an active member of the IFPCD, contributes data to the database as required and uses its output to expeditiously identify and investigate suspicious cases.
The IA also notes that authorised insurers who do not actively participate in the IFPCD can expect a greater degree of scrutiny and will need to explain, as and when required by the IA, what measures they are taking to combat fraudulent claims and how these measures strike a sound balance between investigating potential fraud whilst ensuring genuine claims are settled in a fair and prompt manner.
Link to circular
Link to the Guideline on the Corporate Governance of Authorized Insurers