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Switching a Hong Kong Life Insurance Plan

In the event that a policyholder decides that they would like to switch their life insurance coverage to a new policy, perhaps because the benefits are more competitive, they will have to make a new application for protection with the insurance company they would like to change their coverage to.

As part of that application the policyholder will have to declare that they are fully aware of the outcomes of changing their plan, including any short term losses which will likely arise.

Because of the likelihood of short term losses resulting from a switch of life insurance policy Hong Kong insurance companies have a range of strict regulations to ensure that the policyholder’s interests are being served.

Types of Life Insurance Policy Switches

What is Twisting?

Twisting is defined as inaccurate and misleading statements provided to falsely persuade a policyholder to replace their existing insurance cover with an alternate policy which puts them at a disadvantage.

Twisting exists because life insurance is a complicated topic and it is often difficult even for industry experts to easily identify the best possible life insurance solution for a customer. Because of this nefarious sales agents may falsely persuade a policyholder to switch to an alternate plan when doing so would mean that the policyholder suffers a serious loss.

What is Replacement?

Any purchase of a life insurance plan within 12 months of purchasing a previous policy is considered to be a Replacement, in that the new policy will replace the old.

While the term “replacement” is more neutral than the term “twisting,” there can be detrimental outcomes on the policyholder. Due to this, even if the policyholder is replacing his life insurance coverage for wholly legitimate and beneficial purposes, they will be required to complete a customer declaration stating that the change in coverage is indeed the solution requested.

Customer Protection Declaration Procedures

All applicants for Hong Kong life insurance plans must include a Customer Protection Declaration Form (CPD) Form with the application paperwork.

The Customer Protection Declaration must be completed by the applicant, with the help of the sales agent or broker providing the sales support for the insurance policy. This form must be completed prior to the purchase of a Hong Kong life Insurance Plan in order to ensure that an applicant has all the pertinent information about the suitability of the policy for which they are applying.

The form is also designed to discover any instances of twisting which may have occurred during the sales process and determine whether a replacement policy, if one is being purchased, is suitable for the applicants need.

Declaration of Financial Outcomes

In the Customer Protection Declaration Form the applicant will be asked to provide, with assistance from their insurance intermediary:

  1. Any Estimated Losses: the set up cost of a life insurance plan in Hong Kong is normally two year’s premium payments, or 10 per cent of the premium in should the policyholder have a single premium life policy. Justification must be given if the loss of switching to a new policy is less than the setup cost of the existing policy.
  2. Annualized Premiums: The insurance intermediary is required to provide the annualized premiums for the new coverage, and whether this is higher than the premiums for the existing policy with the same sum insured.
  3. Guaranteed Cash Values: The insurance intermediary is required to assist the applicant in disclosing the existing policy’s guaranteed Cash Values, if any, against the new policy’s guaranteed Cash Values, if any, on the policy anniversary dates immediately following the applicant’s 65th birthday.

The disclosure of the potential financial outcomes of purchasing the new life insurance policy, prior to the purchase actually occurring, is intended to help provide an accurate illustration to the policyholder with regards to the expected performance of both the old and new policies.

Insurability and Claims Eligibility Implications

After the applicant has submitted their coverage proposal to the insurance company providing the new policy, the insurer will examine the applicant’s insurability under the new policy. If, for example, the applicant has developed a major medical condition since the start of their old life insurance plan, they may be denied coverage by the new insurance provider.

Furthermore, it is important to note that the Suicide Exclusion and Incontestability Provision will re-start at the commencement of any new insurance plan. This means that the applicant will have to complete the waiting period for both these clauses before he is able to receive their full benefit under the policy.

As such, the Customer Protection Declaration will clearly illustrate the expiry dates of the Suicide Exclusion and Incontestability Provision on the applicant’s current policy, as well as identify the future expiry dates of these clauses on the new policy.

Other Policy Switching Implications

Finally, the Customer Protection Declaration will require the applicant to provide additional details, with the assistance of their intermediary, which will identify any gaps within the coverage as well as the applicant’s reason for switching plans.

As part of this the applicant and intermediary are required to provide information about any riders or coverage benefits which are currently provided by the existing Hong Kong life insurance policy, but which are excluded or not applied on the new plan. Additionally, explicit details must be provided as to why the new life insurance plan is a better fit for the applicant than the existing policy, as well as provide details on alternative options which may have been recommended to the applicant by the insurance advisor.

Free Life Insurance Advice in Hong Kong

If you would like to learn more about the regulations of switching life insurance coverage in Hong Kong, or if you would like to learn more about how to obtain a new life insurance plan, please Contact Us to speak with a CCW Global Insurance Broker today.

In the event that you would like to receive a free quote comparing a range of leading Hong Kong life insurance plans please complete the short form at the top of this page. Once you have submitted your request an expert life insurance advisor will contact you directly to further discuss your coverage options. You can read more about this process by clicking Our Life Insurance Quotes.

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