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Personal Accident (PA) and Sickness Insurance

(a) Basic intentions and scope of cover

PA insurance was the first major class of accident insurance, originally developed to deal with a demand arising from the many accidents involving the early railways. Its basic intentions have remained constant, although the scope of cover has widened over the years.

The policy cover may be described under three main headings:

  1. Lump sum benefits: As the name suggests, these are single amounts payable in the event of death or other specified injury arising from an accident.
  1. Weekly benefits: These are periodic payments related to temporary total (i.e. 100%) disablement or temporary partial (i.e. less than 100%) disablement. The benefit is calculated weekly, but payments are usually made monthly during disablement, subject to a maximum period (often 104 weeks) of payment.
  1. Medical expenses: The expenses must arise from accidental injury and are subject to a limit any one event.

To expand slightly on (i) and (ii) above:

  1.  Compensation under (i) above is usually expressed as a percentage of a sum specified in the policy (often called the Principal Sum Insured). Death merits a 100% benefit so does total permanent disablement (as defined). Any one of the specified major injuries (such as Loss of Two Limb and TotalLoss of Sight) also merits a 100% benefit. Lesser, but still serious and permanent, injuries have lower percentages, ranging from, for example, 50% for the loss of sight in one eye, to as low as 5%, for example, for the loss of a single finger joint. The table of specified benefits included in the policy may be quite detailed.
  1. Weekly benefits apply for temporary disablement from the insured’s usual occupation, although other policy wording may relate to “any occupation” or some other description.  There are usually two divisions for this cover: Temporary Total Disablement and Temporary Partial Disablement, obviously providing different amounts of compensation.

(b) Limitations and exclusions

  1.  Accidental bodily injury: Its definition frequently includes such words as “physical injury from accidental, external, violent and visible means”. Some policies use somewhat different wording, but each is very likely to insist that the injury/disablement only arises from the accident. Customary wording includes a phrase such as “solely and independently of any other cause result in ......”.
  1.  Injury/disablement definitions: These will vary between insurers, but typically the following will apply:
  1. Permanent means lasting for at least 12 months, at which time there is no reasonable hope of improvement.
  2. Loss of limb means physical separation at or above the wrist or ankle, or permanent loss of use of such a limb.
  3. Loss of sight means total and irrecoverable loss of all sight in the eye(s) concerned.
  1.  Time limits: Insured death or disablement must take place within 12 months (or some other specified period) of the injury concerned. Of course, special circumstances (e.g. a long-lasting coma and then death) would merit sympathetic consideration. 
  1. Benefit limitations: Policies usually provide that there is no accumulation of benefits, except for weekly benefits entitlement followed by the death of the insured person. As stated, temporary benefits are normally limited to 104 weeks. 
  1. Exclusions: There are a number of these and they may be considered under various headings:
  1. Fundamental risks which would include war, nuclear and, increasingly these days, AIDS.
  2. Hazardous activities, such as dangerous sports (mountaineering, winter sports, etc.) and aviation, other than as a fare-paying passenger.
  1. Anti-social activities which include suicide, deliberately self-inflicted injury, abuse of alcohol or other substance.
  1. Other exclusions, for example, childbirth or pregnancy and whilst on duty with the fire or armed services.

(c) Premium basis

Quite a number of individual features (e.g. age) may have underwriting consequences, but the standard premium calculation is based upon the insured’s occupation. All occupations will be classified according to their potential accident risk into as few as three or seven or more classes. Other things being equal, premium rates will be the same for male and female risks.

(d) Sum Insured

Cover may be purchased on the basis of one or more units, each having a table of benefits. Alternatively, individual sums insured may be selected for different kinds of benefits. Technically, there is no limit to the sums to be insured, since the insured has an unlimited insurable interest in himself. In practice, however, insurers would be reluctant to issue cover for amounts well in excess of normal requirements, or where weekly benefits represented far more than the insured is very likely to be earning.

(e) Other features

  1. Group policies: Increasingly, PA cover may be provided as a “fringe benefit” by employers. Cover under such policies may be restricted to working-hours only, but is more likely to be on a 24 hours basis.
  1. Sickness cover: The above comments refer almost exclusively to Accidents Only covers. Sickness benefits may be included within the policy, but these will only be for Temporary Disablement benefits. Death from sickness, for example, is never covered under a PA policy, it being deemed a life insurance risk. Because of a perceived higher morbidity (sickness) rate, sickness insurance premiums for female risks may be higher.

Note: Sickness cover, whilst traditionally linked with PA insurance, is now unlikely to be included with PA policies in Hong Kong. PA policies in Hong Kong may therefore be said to be Accidents Only policies.

  1. Other policies: Frequently, PA benefits are given as part of a “package” policy cover with other classes of insurance. They are frequently added to life insurance policies, for example. In general insurance, also, PA benefits may be part of the cover for a number of policies, e.g. travel insurance, money policies (attacks on staff carrying cash) and household insurances. They may also sometimes be added as an extra benefit, e.g. with motor policies.
  1. Cancellable: PA policies normally represent annual contracts, which may or may not be renewed. In addition, policies normally allow the insurer to cancel the policy during its currency.
  1. Age limits: Although premiums are not based on the age of the insured person, policies usually specify an insurable band of ages (e.g. 16 to 65 years).
  2.