Professional Interpretation

Abstract: In recent years, the number of PRC people who went to Hong Kong for insurance coverage showed a sharp upward trend. Insurance in Hong Kong has the characteristics of low rates, high returns and broad coverage, which are the most important factors that attract PRC policyholders. However, the Hong Kong policy is not suitable for all. People should consider different situations when they decide to buy insurance in Hong Kong. The International Department of Beijing Docvit Law Firm will interpret and analyze several points of insurance in Hong Kong in order to provide references for the relevant parties.

1. Gimmickof exemption from estate tax

According to Article 40, 41, 42 of the Insurance Law of the People's Republic of China,after the death of the insured, whereas there is no clear designation of the beneficiary, the insurance should be considered as the insured's estate in accordance with the "Inheritance Law" for distribution.If there is a clear designation of the beneficiary, the insurance89 is not distributed as a heritage and the estate tax can be evaded.

According to Article 5 of the "Draft Inheritance Tax of the People's Republic of China", the premiums acquired by the heirs for life insurance are not included in the total taxable estate. Only insurers registered in China are exempt from inheritance tax.Therefore, Hong Kong Life Insurance can not avoid inheritance tax for mainland residents.

2. Hong Kong policy should be signed in Hong Kong

Under Hong Kong law, only policies signed in Hong Kong are covered by Hong Kong law. Anyone insuring a Hong Kong policy in mainland China is an illegal "underground policy" and is not protected by the laws of Hong Kong China Insurance Regulatory Commission released the Risk Alert in April 2016, and Hong Kong's policy is not protected by PRC law. Therefore, residents of PRC need to go to Hong Kong to insure and sign the relevant insurance contract. If anyone insures a Hong Kong policy in mainland China, it will not be protected by PRC law.

3. Hong Kong's "Principle of Best Faith" and PRC "Principle of truthful notification"

Hong Kong Insurance Law provides that the insured shall actively tell everyone might be related with the insurance. According to the PRC law, the insured just need to tell the insurance company what they requested.

4. Pay attention to specific terms of the contract

Policyholders should carefully read the insurance clause to avoid contract disputes arising from inaccurate understanding of the terms. Focuses on: health status, history of illness, history of family history, occupation, legitimacy of sources of funds, anti-money laundering obligations, transnational judicial assistance and other information filings and exclusions.

5. Undisputed term

Article 16 of the PRC Insurance Law stipulates that an insurer may not rescind a contract for more than two years from the date of the contract. Therefore, the insurer will not be able to terminate the contract without any cause in that situation.

Under Hong Kong law, if the insured frauds, the insurance company cannot dispute or defend the policy. However, the definition of "fraud" will leave uncertainties for insurers and policyholders.

6. Claims fast, but there is exchange control risk

Hong Kong policy is a global medical hospital insurance, people could claim and obtain insurance no matterin PRC or Hong Kong or abroad. People can get international checks.

However,under the environment of CRS has been officially launched in Hong Kong, and PRC investigates the outflow of capital in violation of regulations and the foreign exchange control has become more stringent, paying premiums, getting dividends, claiming settlement and other difficulties are greatly increased.

7. Dispute resolution in Hong Kong

In the event of a dispute, the applicant has to follow the law in Hong Kong for litigation.Compared with PRC, litigation costs in Hong Kong are higher and people may face higher time cost as well. In addition, the insured may also choose to Hong Kong's insurance administration for claiming. However, the compensation currently available to the Board is HK $ 1 million. Compensation involving with large insurance policies could not be settled through the Board's decision.