Mr. Chan broke his leg on a slippery floor and was admitted to Queen Mary Hospital (QMH). He was diagnosed with a fracture of the right femur and was operated on immediately. After staying in QMH for 14 days, he was transferred to MacLehose Medical Rehabilitation Centre (MMRC) on his doctor's referral for physiotherapy treatment for 50 days.

After being discharged from MMRC, Mr. Chan submitted his hospital cash benefit claim to his medical insurance company. However, his medical insurance company settled only the 14 days hospital cash benefits for his hospital confinement in QMH, but refused to pay the remaining 50 days hospital cash benefits for his stay in MMRC.

Why did Mr. Chan's medical insurance company reject his hospital cash benefit claim for his confinement in MMRC?

Despite the fact that Mr. Chan was referred to MMRC by his attending doctor, his insurance company decided that his confinement in MMRC did not satisfy the policy definition of Hospital, which contains specific reference stating that it does not include “establishments for convalescence and rehabilitation”. Therefore, Mr. Chan's confinement in the rehabilitation centre was not eligible under a claim for hospital cash benefit.

Some customers may not be aware of the difference between a hospital and a rehabilitation or convalescence centre. Although patients might have been referred by their doctors, confinement in these rehabilitation centres is not usually regarded as hospital confinement and is therefore not covered by medical insurance policies.

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Cosmetic or plastic surgery is common in Hong Kong. However, they are usually excluded by most medical insurance policies. In this issue, we will share a case from the Insurance Claims Complaints Bureau (ICCB).

The insured attended a hospital due to significant weight loss resulting in excess soft tissue and striae. He stayed in hospital for three days and received an operation to remove the excess soft tissue and striae.

When the insured was discharged from hospital, he submitted his hospital income benefit claim to his medical insurance company, but it was rejected. Why did the insured's medical insurance company reject his claim?

Although the insured's attending doctor confirmed that the surgery that he had received was not cosmetic-related surgery, the insured's medical insurance company believed that his condition was not an illness and the surgical treatment was not necessary and was for cosmetic purposes only. As such, the insured's medical insurance company, based on the exclusion of his medical insurance policy which excludes any illness, injury, hospitalisation, surgery or charges caused directly or indirectly by cosmetic or plastic surgery or any elective surgery, rejected the insured's hospital income benefit claim.

The insured filed his case with the ICCB. After investigation, the Complaints Panel was of the view that the surgical operation received by the insured was only cosmetic or elective surgery that falls within the policy exclusion. ICCB agreed with the insurer to decline the claim.

As cosmetic or plastic surgery is usually not related to injury or illness nor medically necessary, most medical insurance plans in Hong Kong have an exclusion that excludes coverage for cosmetic or plastic surgery. Therefore, customers are advised to inform their insurance agents, brokers or their medical insurance companies before receiving any non-emergency operation so they fully understand the policy details and therefore avoid any argument.

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Mr. Chan purchased insurance on Institute Cargo Clauses A on a shipment of leather gloves. The shipment was delivered by sea from Hong Kong to Hamburg. The sale was on CIF terms with an invoice value of USD100,000.

Upon arrival in Hamburg, the container carrying the shipment was delivered by truck to the consignee’s warehouse. The consignee appointed a marine surveyor to witness destuffing. The container was in sound condition externally. However, upon opening the container, the surveyor found that the majority of the leather gloves were affected by mould and/or wet damage. The surveyor could not find any hole or defect in the container through which external water could gain entry.

Question:
Is the damage to Mr. Chan’s goods recoverable from his cargo insurer?

Answer:
According to the surveyor’s report, as the container was found in sound condition externally without any hole or defect, it constituted prima facie evidence that the mould and wet damage probably arose from the inherent nature of the leather gloves, as leather has a tendency to absorb surrounding moisture.

The loss could probably have originated from the usually high relative humidity in Hong Kong in March when the goods were stuffed in the container. During the voyage, the action of temperature variation during different times of the day led to the release of moisture from the goods. The moisture condensed inside the container panel and finally dropped into the goods.

According to Institute Cargo Clauses A, Exclusion 4.4 states “In no case shall this insurance cover loss, damage or expense caused by inherent vice or nature of the subject-matter insured.” So, Mr. Chan’s loss was excluded by his marine cargo policy.

It is very important to maintain a high level of quality control over the drying process when preparing leather products as they are easily damaged by moisture. When shipping these products, silicon gel should be put inside the container to absorb moisture to provide better protection for the products.

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Mr. Kwan was admitted to a hospital in China for 14 days due to severe stomach pain. He was diagnosed as having gastritis. No operation was performed and Mr. Kwan was treated with medication only during his hospitalisation.

After being discharged from hospital, Mr. Kwan submitted his claim for hospital cash benefit and hospital expenses to his medical insurance company. However, his medical insurance company settled only the first 3 days of hospital cash benefits and corresponding medical expenses for his hospital confinement, but refused to pay for the remaining 11 days hospital cash benefits and medical expenses incurred.

Why did Mr. Kwan's medical insurance company reject part of his claim?

When the insurance company enquired about Mr. Kwan's medical record, it was found that Mr. Kwan's stomach pain was alleviated considerably by the 3rd day and his attending doctor only continued to give Mr. Kwan gastric medicine for the rest of his hospitalisation. The insurance company also discovered that Mr. Kwan had taken home leave from 1pm to 8 pm daily starting from the 4th day onwards.

Therefore, Mr. Kwan's medical insurance company rejected Mr. Kwan's claim for hospital cash benefit and medical expenses incurred from the 4th day to the 14th day on the grounds that the corresponding period of hospital confinement was medically unnecessary.

As discussed in previous medical insurance tips articles, medical insurance only provides cover for medically necessary hospital confinement. Insurance companies will pay for a reasonable length of hospital stay and corresponding expenses depending on the medical condition and treatment of the patient.

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Most of the disputes concerning non-disclosure of material information are related to the medical history of applicants. What follows is an example quoted from The Insurance Claims Complaints Bureau (“the Bureau”):

Mr. Lee took out critical illness insurance when he was aged 23 without declaring any medical history, so the insurance company issued a policy to Mr. Lee at standard terms and conditions. Unfortunately, Mr. Lee was diagnosed with a brain tumour a few years later and filed a claim with his medical insurance company. During the claim investigation, the insurance company found that Mr. Lee had hepatitis B which he had acquired from his infected mother. As such information was not disclosed when he took out the insurance, his insurance company declined his critical illness claim for the reason that material information had not been disclosed.

Mr. Lee complained to the Bureau that it was not until he was hospitalised for his brain tumour, that he learnt from his mother that he was a hepatitis B carrier. Although a diagnosis was made when he was aged 11, he did not remember the details of the consultation when he took out his critical illness insurance.

After investigation, the Complaints Panel decided that there was no evidence showing that Mr. Lee had attended any follow-up consultation or treatment which would have alerted him to his hepatitis B carrier status. Therefore, the Complaints Panel was of the view that it was not reliable to expect an 11-year-old boy to have fully understood the implications of being a hepatitis B carrier. The Complaints Panel also believed that it was very likely that Mr. Lee was not aware of his hepatitis B carrier status when he took out his critical illness insurance when he was 23 years old.

In conclusion, based on the above information, the Complaints Panel disagreed with the insurance company’s decision to reject his claim for non-disclosure of material information and ruled in favour of Mr. Lee.

Although there is no evidence of non-disclosure in the above case, non-disclosure of material information may result in policy repudiation and claim rejection, even though the non-disclosed information is unrelated to the claimed illness. Customers are advised to disclose all information accurately when applying for insurance to avoid unnecessary disputes.

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Ms. Lee took out critical illness insurance in early January this year. Five weeks later, she experienced severe stomachache and was admitted to hospital. After various investigations, she was diagnosed as suffering from colon cancer.

She then filed a critical illness claim with her insurance company, but it was rejected on the grounds that it fell within the 60-day waiting period of her critical illness insurance.

Three months later, Ms. Lee was diagnosed as suffering from ovarian cancer. She then filed another critical illness claim with her insurance company. However, after investigation and with reference to the medical reports from Ms. Lee’s attending doctor, it was found that the ovarian cancer was metastasis which originated in the colon. As Ms. Lee’s ovarian cancer was secondary to her previous colon cancer and as her primary colon cancer was diagnosed within the 60-day waiting period of her critical illness insurance, the insurance company rejected Ms. Lee’s claim.

Most critical illness insurance policies contain a waiting period clause stating that the symptoms of illnesses appearing within a specified number of days following the inception date of a policy are excluded, except those which are caused by accident. It is suggested that when customers take out critical illness insurance, they should take note of the length of the waiting period of the policy. The shorter the waiting period, the greater the protection.

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Based on the insurance principle of Utmost Good Faith, insurance companies assume that customers provide precise, true and complete information of their health status when applying for medical insurance. However, once this principle is violated, insurance companies have the right to repudiate the policy. Below is an example illustrating this principle.

Mr. Wong underwent a medical check-up when he took out medical insurance two years ago. He told the medical examiner that he had hypertension in the past. After the check-up, the medical report showed that there was a left atrial enlargement. After risk assessment, the insurance company added a 50% premium loading on Mr. Wong’s medical insurance policy.

Three months ago, Mr. Wong was diagnosed with bilateral cataract. Cataract extraction and intraocular lens implantation was performed. After discharge from hospital, Mr. Wong submitted his claim for medical expenses to his medical insurance company, but was rejected on the ground of non-disclosure of material information.

Why did Mr. Wong’s medical insurance company reject his claim?

In fact, Mr. Wong was diagnosed as suffering from posterior vitreous detachment (PVD) three years prior to the medical insurance application. He alleged that his attending doctor never told him that he was suffering from any eye disease and pointed out that his suffering of PVD was not related to the bilateral cataract.

However, the Complaints Panel found from the record of Mr. Wong’s attending doctor that Mr. Wong was diagnosed with eye disease and was recommended to have periodic check-ups. Because Mr. Wong's non-disclosure of this information would affect the underwriting decision of the insurance company, the Complaints Panel agreed with the insurance company's decision to reject Mr. Wong's medical expenses claim and repudiate his medical insurance policy.

To avoid unnecessary disputes and in order to enjoy comprehensive coverage, customers should disclose all medical history when applying for medical insurance.

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Apart from an insurance company's operation costs and profit, its premiums depend on the underwriting risK which, in turn, depends on probability. Below are the major criteria to determine marine insurance premiums:

Insured interest
The risk of the insured interests being damaged will be in direct proportion to the marine insurance. For example, the risk of damage to fragile items such as glass products is higher than that of metal. Therefore, other things being equal, the marine insurance premium for transporting glass products is higher than that of metal products.

Sum insured
Jewellery is much smaller than an ordinary chair in terms of size, however, its value and, consequently, its sum insured, is much higher. So, other things being equal, the marine insurance premium for transporting jewellery is higher than that for an ordinary chair.

Risk of voyage
Transportation arrangements of different countries vary. An insurance company will use international intelligence and the past history of the carrier to determine the marine insurance premium. Generally speaking, the higher the number of transshipments or temporary storage requirements for consolidation during the voyage, the longer the voyage will take and therefore, the higher the risk of cargo being damaged.

Cargo clauses
The most common marine cargo insurance coverage includes Institute Cargo Clauses A, Institute Cargo Clauses B and Institute Cargo Clauses C. Clauses A provides the most comprehensive coverage while Clauses C covers the least. Therefore, the premium for marine cargo insurance with Clauses A is higher relative to that with Clauses C.

If these calculations seem complicated, simply call your insurance representative at MSIG and we'll be pleased to provide professional advice and a marine insurance quote for your cargo.

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With China’s economy growing rapidly from strength to strength, manufacturers’ demands for machinery are also on the rise. As a result, cargo insurance for the transportation of machinery is even more important.

Mr. Chu transports used machinery from Europe to China and uses the market value of the machinery (HK$200,000) to be the sum insured for cargo insurance. Unluckily, the machinery is damaged in transit and Mr. Chu files a claim with his insurance company which deducts 20% from his compensation. Why was Mr. Chu’s compensation reduced?

Some people may not be aware that their cargo is under-insured as they usually take the market value of their cargo to be the sum insured. Unintended under-insurance is especially common when taking out cargo insurance for transporting used or second-hand goods.

The insured should disclose to the insurer that the goods are used goods when taking out cargo insurance. Customers are also advised to check that the sum insured is the new replacement value of the used machinery at the final destination and also add all freight, landing charges and duty into the sum insured. If the insured does not take these precautions and the market value of used goods is less than that of new replacement goods because of depreciation or partial loss, an “average” may be applied and the insured may need to bear some loss.

The rationale behind this is that if the gross value of the goods arriving at the destination is higher than the sum insured when loss arises, the insurer may consider it as under-insured and may apply an “average”. Compensation will be deducted in proportion to the amount of under-insurance and the insured may need to bear the difference as a loss. 

To safeguard against any unintended under-insurance, please contact your MSIG account handler for further assistance.

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An insurance company’s assessment of the appropriate sum to insure used machinery is usually based on two factors:

1. Whether there is a great difference between the machinery’s market value and its new for old value as the sum insured. For example, the market value of the used machinery is HK$500,000, but its new for old value is HK$2,000,000. Due to the great difference in the two values, customers are advised to declare and explain the reasons for the difference to the insurance company for their underwriting calculations of the sum insured.
2. An insurance company usually requires the insured to include related miscellaneous expenses/charges into the sum insured. For example, if the insured has paid in advance for storage of machinery after arrival and if the machinery was damaged during transit, the insured will bear a loss of the advance payment for storage. Therefore, the insured should include all related expenses to protect against any potential loss.

In conclusion, customers should disclose all details to the insurance company, so the insurance company can work out an appropriate sum insured for used machinery.

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