Is guaranteed renewal a beautiful misunderstanding? The wording “automatic renewal” in mainland medical insurance is regulated. Will Hong Kong follow suit? (July update)

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In recent months, the Mainland introduced a new policy regulating the use of terms such as “automatic renewal” and “guaranteed renewal” in short-term health insurance products, resulting in many short-term health insurance products being withdrawn from sale. In relation to renewals, many insurance products in both Mainland China and Hong Kong use similar terms, giving customers the impression that they can obtain long-term protection. In reality, are there lesser-known pitfalls associated with so-called “automatic renewal”, “guaranteed renewal” or the term commonly used for Hong Kong medical insurance, “guaranteed renewability”? For readers planning to take out medical insurance on a long-term basis, how can they avoid suddenly being refused cover? What lessons can Hong Kong learn from the Mainland’s new policy? Today, 10Life explores these issues with you.

Short-term health insurance products in the Mainland may not use terms such as “automatic renewal”

The coverage period of short-term health insurance in the Mainland is generally one year or less. In the past, some Mainland insurance companies used terms such as “automatic renewal” and “guaranteed renewal” as selling points, causing people to mistake short-term health insurance for long-term products. However, at the time of renewal, insured persons might still be required to submit a health report again. Alternatively, once the amount of claims under a product exceeded expectations, the insurance company might withdraw the product from sale, leaving insured persons unable to renew their cover.

To avoid misleading consumers, in mid-January this year, the China Banking and Insurance Regulatory Commission issued the Notice on Regulating Issues Relating to Short-term Health Insurance Business (the “Notice”; see Note 1), requiring Mainland insurance companies not to use expressions such as “automatic renewal” and “guaranteed renewal” in the terms and promotional materials of short-term health insurance products, and even requiring them to include a “renewal not guaranteed” clause (see Note 2). Products that did not comply with the requirements of the Notice were also required to cease sales before 1 May 2021. In addition, insurance companies were required to disclose the comprehensive claims ratio of short-term health insurance, enabling customers to assess whether the products would continue to be sold in the long term.

“Guaranteed renewability” is common in Hong Kong medical insurance. Can consumers feel reassured?

Hong Kong medical insurance generally has a coverage period of one year and is often marketed as offering “guaranteed renewability”, allowing insured persons to renew their cover up to a specified age. During this period, insured persons must of course pay their premiums on time, but will not need to undergo underwriting again even if they have previously made a claim.

However, “guaranteed renewability” may still not apply to products that have been withdrawn from sale. If an insurance company has miscalculated the risks, suffers losses because medical insurance claims exceed expectations, or has other reasons, it may still have the right to withdraw the product and refuse to renew the insured person’s cover. At that point, if the customer’s health has changed or they have previously made a claim, it may not be easy to take out a new policy. Exclusions or additional premiums may be imposed. Furthermore, “guaranteed renewability” does not necessarily mean that the coverage remains the same. When a product is insufficiently profitable, the insurance company may still issue a notice before the policy anniversary to adjust, revise or change the policy’s coverage, thereby adversely affecting consumers’ rights.

Compared with general medical insurance, Voluntary Health Insurance Scheme plans offering “guaranteed renewability to age 100” are clearly subject to greater regulation. Unless the insurance company is no longer authorised under the Insurance Ordinance to underwrite the cover, ceases to be a product provider registered with the Government under the Voluntary Health Insurance Scheme, or the insured person gives written notice that they do not wish to renew (Note 3), the policy may be renewed automatically. At renewal, the insurance company may not arbitrarily delete or reduce the coverage or benefit amounts under its Voluntary Health Insurance Scheme plan (please see our earlier article for details). Compared with general medical insurance, the terms of the Voluntary Health Insurance Scheme are more favourable to consumers (see Table 1 below).

Figure 1: Comparison of renewal provisions for Voluntary Health Insurance Scheme and non-Voluntary Health Insurance Scheme plans

Medical insurance plan	Details of renewal provisions
Voluntary Health Insurance Scheme¹	(a) Except where our company is no longer authorised under the Insurance Ordinance to underwrite this provision and coverage, ceases to be a product provider registered with the Government under the Voluntary Health Insurance Scheme, or the policyholder gives our company written notice before 【enter a number of days not exceeding 30】_____ that they have decided not to renew this provision and coverage in accordance with Section 3 of Part II, this provision and coverage will be renewed as follows: this provision and coverage will be automatically renewed on terms and coverage no less favourable than those of the latest version of the Standard Plan terms and coverage published by the Government at the time of renewal (except for Section 7 of Part I, Sections 1(b) and 5 of Part VI, and any other exemptions approved by the Government from time to time). In the renewal circumstances set out in paragraphs (a) to (c) above, any other amendments to the terms and coverage shall apply to all policies in the same category, and must not conflict with paragraph (a), (b) or (c) above (as applicable), or result in a reduction in the limits of indemnity applicable to this provision and coverage, or an increase in coinsurance or deductibles, compared with the position before renewal.
Non-Voluntary Health Insurance Scheme²	Subject to the terms and conditions set out in this policy, you have the right to guaranteed renewal and may renew the policy on each policy anniversary by paying the annual premium applicable at that time in advance, provided that this plan remains available for renewal at that time. We reserve the right to determine the terms and conditions of renewal.
Notes: 1. Extracted from Section 1 of Part 4 of the Voluntary Health Insurance Scheme Certified Plan Policy Template (revised July 2020) published by the Food and Health Bureau. 2. Extracted from the terms of a non-Voluntary Health Insurance Scheme plan of an insurance company. 3. The bold and italicised sections were added by 10Life. 4. The above information was provided by 10Life and updated as at 9 June 2021. It is for reference only and does not constitute a sales proposal.

We asked the Insurance Authority whether it would take reference from the measures in the Mainland’s Notice and regulate the use of “guaranteed renewability” in medical insurance. The Insurance Authority replied that “guaranteed renewability” generally means that, after the policy takes effect, the policyholder does not need to submit a new application each year and the insurance company will not conduct underwriting again, regardless of whether their health condition has changed.

Regarding how to ensure that the coverage of a “guaranteed renewability” product is not reduced at renewal, the Insurance Authority responded that, under the Guideline on Medical Insurance Business (Guideline 31), if an insurance company makes material revisions to the features, terms or conditions of a medical insurance policy during the renewal period, it should give the policyholder sufficient prior written notice before the policy renewal date or the date on which the revisions take effect.

Although Hong Kong medical insurance may still use terms such as “guaranteed renewability”, consumers should remain alert to the limitations involved, such as arrangements when a product is withdrawn from sale. A few years ago, many Mainland Chinese people took out Hong Kong medical insurance, but differences between the laws and regulations of the two jurisdictions should not be overlooked.

Notes:

Click here to read the Notice on Regulating Issues Relating to Short-term Health Insurance Business.
A “renewal not guaranteed” clause may at least contain the following: The insurance period of this product is one year (or no more than one year). When the insurance period expires, the policyholder must reapply to the insurance company for this product and, subject to the insurer’s agreement, pay the insurance premium to obtain a new insurance contract.
For details, please refer to Section 1 of Part 4 of the Voluntary Health Insurance Scheme Certified Plan Policy Template (revised July 2020) published by the Food and Health Bureau.
The above information was provided by 10Life and updated as at 23 July 2021. It is for reference only and does not constitute a sales proposal.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.

10Life Editorial Team

Our team of professional content researchers focussing on insurance

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10Life Editorial Team

Our team of professional content researchers focussing on insurance

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Is guaranteed renewal a beautiful misunderstanding? The term “automatic renewal” in mainland medical insurance is regulated. Will Hong Kong follow suit? (Updated July 2021)

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