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Premium Levy

Collection of Premium Levy by the Insurance Authority

From 1 January 2018, the Insurance Authority (“IA”) will start collecting a premium levy (“levy”) from policyholders through insurance companies in accordance with the Insurance (Levy) Regulation and the Insurance (Levy) Order under the Insurance Ordinance (Cap. 41).  The levy rate will start at 0.040% of the insurance premium per policy per policy year and increase gradually to 0.100% (subject to the IA’s latest announcement). The amount of the levy imposed on each policy per policy year will be subject to a cap.

Except for certain policies (including reinsurance business, policies underwritten by authorized captive insurers, and marine, aviation and goods-in-transit business) exempt from the levy by law, policyholders of all new or in-force life insurance policies and general insurance policies (such as travel, motor, property and household insurance) must pay the levy along with their premium payment.

The levy rates and cap of life insurance policies and general insurance policies are as follows:

EmptyPolicy Date / Policy Anniversary Date
begins in the following period
Levy RateLife Insurance Policies
Yearly Levy Cap (HK$)*
General Insurance Policies
Yearly Levy Cap (HK$)
Phase 1 1 January 2018 - 31 March 2019
(both dates inclusive)
0.040% 40 2,000
Phase 2 1 April 2019 - 31 March 2020
(both dates inclusive)
0.060% 60 3,000
Phase 3 1 April 2020 - 31 March 2021
(both dates inclusive)
0.085% 85 4,250
Phase 4 1 April 2021 onwards(date inclusive) 0.100% 100 5,000

 * Except HKD, other currencies are translated at the exchange rate applicable at the date of the transaction.

You can also visit IA’s official website at www.ia.org.hk for details.

 

China Life (Overseas)’s Life Insurance Arrangement on Levy

To assist the Policyholder of life insurance policies to remit the levy to IA, China Life (Overseas) applies the following rules on the life insurance policies with effect from 1 January 2018:

  1. We will deduct the required premium and levy from the payment and/or the premium suspense account of the policy. In case the payment and/or the balance of the premium suspense account of the policy are insufficient to pay for both required premium and levy, we will settle the required premium first.
  2. If Policyholder makes the payment for levy, we will settle the oldest outstanding levy first (if any).
  3. If Policyholder has selected an automatic payment option (e.g. autopay, dividend, cash coupons or guaranteed annuity payment) to settle the premium of the policy, the corresponding levy on the premium shall be settled by the same payment option.
  4. If we have not received the premium payment and advance the premium due by automatic non-forfeiture options (e.g. Automatic Premium Loan, Policy Deposit, etc.) to keep the policy in force according to the policy contract, the corresponding levy on the premium due shall not be settled by the same non-forfeiture option, and Policyholder should make the levy payment by other means. The payment will be used to settle the overdue premiums and interest (if any) first, the remaining balance (if any)  will be used to settle the levy.
  5. If Policyholder have prepaid premiums under the policy, he/she may refer to the “Payment Notice” which will be sent before the modal premium due date. The levy payable will be specified in the notice.

Below is the Frequently Asked Questions (including the administrative procedures) on the collection of levy on life insurance policies.

 

FAQs – Life Insurance

  • 1. Who is Insurance Authority (“IA”)?

    The IA is a regulatory body independent of the Government and the industry. Empowered by the Insurance Ordinance (Cap. 41), the IA's principal function is to regulate and supervise the insurance industry to promote the general stability of the insurance industry and protect policyholders.

  • 2. What is a premium levy (“levy”)?

    Levy is made by the Chief Executive in Council under Section 134 of Insurance Ordinance (Cap. 41).  The levy will be imposed on policyholders and collected by insurers to remit to the IA in order to support the operational cost of IA.

  • 3. When will the Insurance (Levy) Order come into operation?

    The Insurance (Levy) Order will come into operation on 1 January 2018.  All policies with policy inception date on/after 1 January 2018 will be required to pay the levy.  For all existing policies that premiums are required to be paid, levy will be collected from the Policy Anniversary Date in 2018.

  • 4. When do I need to pay levy?

    Policyholder must pay levy together with premium. 

  • 5. What if I do not pay the levy on time?

    Policyholder must pay levy together with premium.  If the Policyholder does not pay the levy on time, the IA may impose on the policy holder a pecuniary penalty of up to HK$5,000. The IA may recover outstanding levy as a civil debt due to it.

  • 6. What is the levy rates prescribed under The Insurance (Levy) Order?

    The amount of levy is calculated as a percentage of premium.  The levy rates prescribed under The Insurance (Levy) Order on life insurance policies are as follows:

    Empty Policy Date / Policy Anniversary Date
    begins in the following period
    Levy Rate Yearly Levy Cap* (HK$)
    Phase 1 1 January 2018 - 31 March 2019
    (both dates inclusive)
    0.040% 40
    Phase 2 1 April 2019 - 31 March 2020
    (both dates inclusive)
    0.060% 60
    Phase 3 1 April 2020 - 31 March 2021
    (both dates inclusive))
    0.085% 85
    Phase 4 1 April 2021 onwards
    (date inclusive)
    0.100% 100

     * Except HKD, other currencies are translated at the exchange rate applicable at the date of the transaction.

    Example 1

    The next Policy Anniversary Date and Premium Due Date of Ms. Chan’s policy is 1 February 2018.  The annual premium of the policy is HK$9,000.  In the policy year of 2018 (i.e. Phase 1), the amount of levy payable for the premium due of 1 February 2018 is calculated as follows:

    (Required Premium) HK$9,000 x (Levy Rate) 0.040% = HK$3.6

    Given that the yearly levy cap in Phase 1 is HK$40 and the calculation result of the amount of levy payable for Ms. Chan’s policy is within the cap level, the amount of levy payable for the premium due of 1 February 2018 is HK$3.6, and the total payable (including premium and levy payable) for Ms. Chan’s policy is HK$9,003.6.

    Example 2

    The next Policy Anniversary Date and Premium Due Date of Mr. Lee’s policy is 15 March 2018.  The annual premium of the policy is HK$150,000.  In the policy year of 2018 (i.e. Phase 1), the amount of levy payable for the premium due of 15 March 2018 is calculated as follows:

    (Required Premium) HK$150,000 x (Levy Rate) 0.040% = HK$60

    However, as the yearly levy cap in Phase 1 is HK$40 and the calculation result of the amount of levy payable for Mr. Lee’s policy exceeds the cap level, the amount of levy payable for the premium due of 15 March 2018 is HK$40, and the total payable (including premium and levy payable) for Mr. Lee’s policy is HK$150,040.

    Example 3

    The next Policy Anniversary Date of Mr. Cheung’s policy is 12 May 2018 and the monthly premium is HK$15,000.  In the policy year of 2018 (i.e. Phase 1), the levy payable are as follows (HK$ applies to all amounts in below table):

     

    Premium Due Date Required Premium (1) Levy Rate Levy (2) Total Amount (1)+(2)
    12 May 2018 15,000 0.040% 6.00 15,006
    12 June 2018 15,000 0.040% 6.00 15,006
    12 July 2018 15,000 0.040% 6.00 15,006
    12 August 2018 15,000 0.040% 6.00 15,006
    12 September 2018 15,000 0.040% 6.00 15,006
    12 October 2018 15,000 0.040% 6.00 15,006
    12 November 2018 15,000 0.040% 4.001 15,004
    12 December 2018 15,000 0.040% 0.002 15,000
    12 January 2019 15,000 0.040% 0.002 15,000
    12 February 2019 15,000 0.040% 0.002 15,000
    12 March 2019 15,000 0.040% 0.002 15,000
    12 April 2019 15,000 0.040% 0.002 15,000

    1. The yearly levy cap in Phase 1 is HK$40. From 12 May 2018 to 11 November 2018, the total levy payable is HK$36, hence the levy payable on 12 November 2018 is only HK$4.
    2. The yearly levy cap in Phase 1 is HK$40. Since the total levy payable from 12 May 2018 to 11 December 2018 have been accumulated to the yearly levy cap, Ms. Cheung is not required to pay any levy in the remaining months of the concerned policy year.
  • 7. Can I pay the levy directly to the IA?

    No.  As stipulated in the Insurance (Levy) Regulation, policyholder must pay the levy to the IA through the insurance company.

  • 8. How would China Life (Overseas) deduct the required premium and levy from my payment?

    We will deduct the required premium and levy from your payment and/or the premium suspense account of your policy.  In case your payment and/or the balance of the premium suspense account of your policy are insufficient to pay for both required premium and levy, we will settle the required premium only but not the levy.     

  • 9. If I pay premiums by autopay, or dividend, cash coupons, guaranteed annuity payment or other automatic payment options, will China Life (Overseas) deduct the corresponding levy at the same time?

    Yes. If you selected to pay premiums by automatic payment options, e.g. autopay, dividend, cash coupons and guaranteed annuity payment, we will deduct the required premium and the corresponding levy at the same time (unless it has been rejected by the Policyholder in writing). If you do not accept the aforesaid default arrangement, you may change the payment method to non-automatic payment options to settle the premium and levy. 

  • 10. If I did not pay the premium and my policy is paying by automatic non-forfeiture options according to the policy contract (e.g. Automatic Premium Loan, Policy Deposit, etc.), will China Life (Overseas) deduct the corresponding levy at the same time?

    No. If we have not received your premium payment and advance the premium due by automatic non-forfeiture options (e.g. Automatic Premium Loan, Policy Deposit, etc.) to keep the policy in force according to the policy contract, the corresponding levy on the premium due shall not be settled by the same non-forfeiture option, and you should make the levy payment by other means.  Your payment will be used to settle the overdue premiums and interest (if any) first, the remaining balance (if any) will be used to settle the levy.

  • 11. I have applied for premium prepayment for my policy, will China Life (Overseas) notify me to settle the corresponding levy?

    If you have prepaid premiums under your policy, your may refer to the “Payment Notice” which will be sent to you before the modal premium due date.  The levy payable will be specified in the notice.

  • 12. Will China Life (Overseas) deduct the corresponding levy together with the premium from my bank account if I pay premiums by autopay? If yes, do I need to increase the withdrawal limit by filling out and submitting a Direct Debit Authorization Form?

    If you pay premiums by autopay, we will deduct the required premium and the corresponding levy from your bank account at the same time.  You may seek advice from the bank or reset the withdrawal limit with the bank.

  • 13. I have set a withdrawal limit on my autopay of premium payment, what should I do for the implementation of levy?

    We will deduct the corresponding levy together with the required premium through autopay. If your withdrawal limit on autopay is not enough to pay the premium and levy at the same time, we suggest you to seek advice from the bank or reset the withdrawal limit with the bank if needed.

  • 14. Will my policy be terminated if I failed to pay the levy?

    No.  If you pay the premium without levy, policy will not be terminated. However, if the Policyholder failed to pay the levy in a timely manner, the IA may impose on the Policyholder a pecuniary penalty of up to HK$5,000 and may recover outstanding levy as a civil debt due to it.

  • 15. Can I apply for addition of riders / policy changes if I do not pay levy?

    Even you pay the premium without levy, in order to protect your policy interest, we still accept your application for addition of riders/policy changes. However, if the Policyholder failed to pay the levy in a timely manner, the IA may impose on the Policyholder a pecuniary penalty of up to HK$5,000 and may recover outstanding levy as a civil debt due to it.

  • 16. Is there any impact on my policy coverage and return after the implementation of levy?

    No.