【Cooling-off Period】What is the insurance cooling-off period? What procedures are required to cancel a policy?

Insurance products usually include a Cooling-off Period clause, allowing policyholders a reasonable amount of time to review the policy terms and reconsider their purchasing decision. If they ultimately conclude that the product is not suitable for them, consumers can cancel the policy during the Cooling-off Period, and the insurance company must refund the premiums paid and the premium levy. The Cooling-off Period not only protects consumers’ rights and interests, but also indirectly reduces insurance practitioners’ incentive to use high-pressure sales tactics.

Except for TravelCare, most insurance products on the market have a cooling-off period. However, among these products, only life insurance and Voluntary Health Insurance Scheme (VHIS) plans have cooling-off periods established in accordance with the Insurance Authority’s Guidance Note on Cooling-off Period (GL29) and the requirements of the Food and Health Bureau, respectively, while the cooling-off periods for other products are handled in accordance with industry practice.

Unlike the cooling-off periods for other products on the market, the life insurance cooling-off period does not begin on the date the policy contract is signed. According to the Insurance Authority’s guidelines, the cooling-off period for life insurance is 21 days, starting from the date the policy or cooling-off period notice is delivered to the policyholder or their designated representative. The key point is the time at which the physical or electronic policy is received, whichever is earlier. If the policyholder has still not received the policy within 9 days after the cooling-off period notice is delivered, they should contact the insurance company.

It depends on the type of policy. Holders of “non-investment-linked” policies (excluding “non-investment-linked single-premium” policies) are entitled to a full refund of the premiums paid. For “investment-linked” and “non-investment-linked single-premium” policies, the insurance company has the right to deduct a “market value adjustment” from the premiums paid when refunding the premiums, to compensate for any losses incurred as a result of liquidating the investments made with the premiums. Therefore, the refunded premiums may not be equal to the premiums paid.

Table: Amount refunded during the cooling-off period for different types of life insurance policies

The Voluntary Health Insurance Scheme has a 21-day cooling-off period, which is only the minimum requirement. In fact, some products in the market offer a cooling-off period of up to 30 days. During the cooling-off period, policyholders have the right to cancel a newly purchased policy and receive a full refund of the premiums paid, unless they have received or are entitled to receive compensation as a result of a claim.

As mentioned above, except for certain products which are subject to a 21-day cooling-off period as required by regulations, other products provide such a period in accordance with industry practice. In addition, in response to the development of the pandemic, the Insurance Authority introduced temporary facilitation measures allowing insurance companies to sell certain protection-type insurance products without face-to-face interaction, including qualifying deferred annuity policies, Voluntary Health Insurance Scheme products and term life insurance policies. Such products may be sold through a remote underwriting sandbox without the need for audio or video recording; however, important product information must be clearly disclosed to customers at the time of sale, and the cooling-off period for the relevant policies must also be extended to not less than 30 days.

The Insurance Authority’s guidance does not apply to group policies. In addition, the guidance does not apply to certain life insurance policy transactions, including increasing premiums to enhance the sum assured under an existing policy; exercising an inflation protection clause to increase the sum assured; adding new supplementary benefits to an existing life insurance policy; and exercising a conversion option, such as converting a term policy or term supplementary benefit into a whole life insurance policy.

Although the cooling-off period gives consumers the right to cancel their policies within a specified period without providing any reason or justification, the procedures for cancelling a policy during the cooling-off period vary among insurance companies. Policyholders are therefore advised to understand the cancellation procedures in advance to avoid unnecessary delays.

Note: 
1. References: Insurance Authority, Voluntary Health Insurance Scheme  
2. Last updated: 12 August 2022.

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.