"Balloon crash victim compensation raises concerns for insurance market regulation" reported on a tragic hot air balloon accident that occurred in Egypt in February 2013. The update touched on:
- the accident;
- the victims' travel insurance arrangements; and
- the wider ramifications for reform in the existing insurance regulatory regime in Hong Kong.
On June 7 2016 the Hong Kong Coroner's Tribunal reported the findings of its inquisition in respect of the accident.(1) In addition to the core issues such as cause of death, the coroner addressed the issues of travel insurance in the context of the accident.
On February 26 2013 19 tourists lost their lives in the deadliest hot air ballooning disaster in history. Nine of the victims were Hong Kong citizens travelling abroad. The coroner summarised her findings as follows:
"Having heard all the evidence I accept and find that:
Injury causing death
The medical causes of death for all of the deceased were multiple injuries and burns.
Time, place and circumstances at or in which injury was sustained
All nine deceased died in the morning of 26 Feb 2013 during a hot-air balloon ride over Luxor City when the balloon caught fire during the flight after the landing procedure had started. The fire was due to hose full leak at the upper portion of the forward right hose connected to the burner number 193. Such fire also caused serious and direct injury to the balloon pilot who was unable to do anything to control the fire.
Conclusion as to the deaths
I find the conclusion as to the deaths of all deceased to be death by accident." (emphasis added)
It was reported that three of the nine Hong Kong victims had purchased travel insurance policies from Assicurazioni Generali SpA through the travel agent arranging the tour, Kuoni Travel (China) Ltd. The remaining six victims purchased their insurance from China Merchants Insurance Company Ltd. The Generali travel insurance policy covered compensation for aerial activities, including hot air ballooning, while the China Merchants policy did not.
The coroner's report dealt with the issue of travel insurance. It referred to the following description of the hot air balloon ride that was provided to the victims before they embarked on the ride:
"Go on a hot air balloon ride in Luxor to view the beauty of Nile and Luxor. This activity includes breakfast and insurance. An aviation certificate will be issued: Approx. 45 minutes (the entire trip takes approx. 2.5 hrs: USD 190 for all age groups."
The coroner found that the description of the hot air balloon ride pertaining to insurance was ambiguous. When asked for an explanation, a Kuoni representative could provide only a vague answer as to the meaning of the description and admitted that Kuoni had simply copied and translated the information given in the hot air balloon operator's leaflet. In the coroner's view, such an ambiguous clause was more likely to mislead customers into believing that the hot air balloon activity was covered by their own travel insurance or by the operator's insurance, when in fact it was not. Had participants been warned more clearly and specifically that their insurance would not cover the hot air balloon activity, they might have reconsidered their decision to participate in the activity.
The coroner found that Kuoni had not acquired sufficient information on the hot air balloon activity for its own risk assessment before offering the activity to its customers, and that because the participants had joined a travel group, there was a likelihood that Kuoni would have a higher threshold of responsibility to conduct sufficient risk assessments before offering certain activities and to disseminate sufficient information about those activities to its participants.
Pursuant to Section 44(2) of the Coroners Ordinance (Cap 504), the coroner at an inquest may make recommendations designed to "bring to the attention of a person who may have power to take appropriate action any deficiencies in a system or method of work which are disclosed by the evidence at the inquest and which are of public concern".
Towards the end of the report, the coroner provided recommendations to the Travel Industry Council (TIC) and Kuoni relating to travel insurance and compensation:
"Recommendations to Travel Industry Council (TIC)
3) TIC to set out clear and specific guidelines for travel companies that customers should be reminded that their travel insurance may not cover activities involving certain degree of risk…
6) TIC to set out safety guidance and advertise to customers as to the importance of obtaining details of travel policy insurance and information on activities involving risk before enrolment.
Recommendations to Kuoni
3) Kuoni to provide sufficient information to customers about activities involving certain risk and remind them in more specific and clear terms that activities involving risk may not be covered by their travel insurance."
Although the coroner at the inquest did not specifically make recommendations to the Office of the Commissioner of Insurance (OCI), it is likely that Hong Kong's insurance regulator will consider appropriate action concerning insurers that offer travel insurance products. Insurers selling travel insurance policies will need to keep abreast of any new regulations which the OCI may implement, to ensure that those who purchase travel insurance understand the extent of their coverage, particularly concerning potentially risky activities.
In addition, any recommendations of the coroner that the OCI might be considering must be viewed against the backdrop of the OCI's imminent handover of responsibility to the new Independent Insurance Authority (IIA). The primary function of the IIA is to promote proper standards of conduct and to protect insurance policyholders. The IIA will be empowered to:
- issue licences;
- regulate the selling of insurance in Hong Kong; and
- prosecute and discipline vendors of insurance for misselling and regulatory non-compliance.
Compared to the current self-regulated regime, the IIA will be given enhanced powers to oversee the regulation of insurers and insurance intermediaries, including the power to impose penalties for misconduct on members of the industry and to impose disciplinary penalties ranging from suspension or revocation of licences to imposition of fines.
In light of the coroner's recommendations, the insurance industry will be closely watching how Hong Kong's new insurance watchdog will react and what sort of regulatory measures will be put in place so that the travel insurance issues arising from the Egyptian hot air balloon tragedy do not happen again.
For further information on this topic please contact Kevin Bowers at Howse Williams Bowers by telephone (+852 2803 3648) or email (firstname.lastname@example.org). The Howse Williams Bowers website can be accessed at www.hwbhk.com.
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