If you’re so busy managing and growing your business that just the thought of spending time researching business insurance policies makes you break out in a cold sweat, we’re here to help. This guide to insurance for startups and small businesses covers the key points that business owners need to know and will help you to navigate the local insurance market.
Businesses in Hong Kong have a range of different options when it comes to their corporate insurance. From mandatory coverage to optional policies that can be vital in an emergency situation, it can be difficult to understand what, exactly, is needed for your company. Let’s start with the legal requirements.
Employee’s Compensation Insurance – It’s the Law
The only form of mandatory insurance coverage businesses in Hong Kong are required to purchase is Employee’s Compensation Insurance (also known as EC Insurance) that will protect the business in the event that an employee injuries themselves in the normal course of their employment.
Under chapter 282 of the Laws of Hong Kong all employees, whether full-time or part-time, are to be protected by an EC insurance policy which will compensate the worker should they suffer from an injury or occupational disease while “on the job.”
This type of policy can be extremely basic, or be expanded to include benefits for coverage like critical illness provisions and office contents protection, but will generally be priced based on the number of employees working at a company and those employees’ salaries.
However, many startup companies tend to operate out of a home office during their early trading days and there is a reluctance on the part of many Hong Kong insurance companies to offer EC coverage in “work from home” scenarios. This is mainly due to the difficulty in determining whether an accident is occurring on a professional or domestic basis.
The route to coverage for businesses that are operating from a private residence (and not in a commercial property) can be slightly protracted, but the gist of it is this: businesses which have been declined coverage from at least 3 different locally based insurers can apply to receive EC protection via the government run Employees’ Compensation Insurance Residual Scheme Bureau. In fact, if you have been unable to successfully obtain EC insurance coverage from a general insurance coverage you will have to purchase your EC plan through the government – you really have no other choice.
When you successfully obtain an Employee’s Compensation Insurance policy (whether through the government or a private insurer) you will be given a Certificate of Insurance (CI). This certificate is a red and white document which should be displayed in your office at all times. It is important to display it because the labour department will conduct random spot checks on businesses to ensure that the coverage is in place, and failure to hold a valid certificate or not displaying suitable proof of coverage can mean a fine of up to HK$100,000 and imprisonment for two years.
EC insurance is an annually renewal policy, and you should update your coverage each year if you employ more workers or your existing staff have a change in salary.
Office Contents Insurance – Staff and Assets Protected Together
A majority of general insurance companies in Hong Kong provide comprehensive office contents or shop insurance packages. Generally these products do exactly what they say on the tin, and will insure your business’ contents against theft, loss, or accidental damage.
As mentioned above, it is actually possible to package your office contents insurance and employee’s compensation insurance coverage into a single policy, giving you maximum flexibility and convenience in that you only have a single type of insurance to deal with each year.
From petty cash through to computers and copiers (or even your corporate artworks if you managed to secure significant funding!) an office contents insurance policy should be strongly considered by any young company, simply because trying to replace all those assets in the event of a theft can be a large budget hit and cause significant operational issues.
Professional Indemnity Insurance – Errors Can Happen
With Hong Kong being home to a large number of service based companies, it is important to remember that accidents can happen – especially when giving advice to a large number of clients.
Professional Indemnity Insurance, also known as Errors and Omissions Insurance, protects businesses against accidental errors that may happen during the normal course of their business. This type of policy will indemnify a company against claims made by customers which are rooted in assertions of wrongdoing or negligence.
For example, a type of Professional Indemnity Insurance plan is also known as “Medical Malpractice” insurance – which would, as the name infers, protect a doctor against claims of negligence from a patient (misdiagnosing a patient or recommending the wrong type of treatment).
Professional Indemnity insurance is often a legal requirement depending on the industry a company is in – insurance brokers are one type of business which is required, from a regulatory perspective, to hold an active PI insurance policy at all times.
Doctors, lawyers, architects, financial intermediaries and institutions, IT service providers, and any organisation which gives advice to customers should strongly consider implementing Professional Indemnity coverage – even if it isn’t required from a legal standpoint.
Cyber Events Insurance – Operating in a Digital Business Environment
One of the biggest risks faced by businesses in the modern age is their exposure to cyber criminals – from risky clicks exposing your internal servers to malware, through to targeted hacks and ransomware events, there are myriad ways for cyber criminals to inflict major damage to most digital age businesses.
Cyber Events Insurance is a complete enterprise cyber management solution which is tailored to the needs of the organisation receiving the protection. By including the exact coverage benefits needed for your organisation’s requirements costs can be contained while you satisfy your operational due diligence.
Coverage on offer under a cyber insurance plan includes Data Loss and Restoration, Business Interruption Protection, E-Vandalism Costs, Privacy Liability, and a range of other bespoke solutions.
With premiums based on the coverage benefits included in the policy, the business’ annual revenue, and the industry the organisation is operating in, a Cyber Insurance policy is an efficient way to ensure that your company is properly secured against the major cyber threats facing companies globally.
Definitely not a legal requirement for most industries, Cyber is becoming more of a hot topic from a holistic risk-management perspective, and as the number of Cyber crimes in Hong Kong increases this type of insurance could prove pivotal for your business should a cyber event occur.
Finding the Coverage That’s Right for Your Company
So there you have it, some of the top insurance considerations for startup businesses in Hong Kong. Because there are so many different types of business insurance available locally (more than it’s possible to go over in this brief outline) it is imperative that you take the time to shop around, get a range of different quotations and offers, and really understand the biggest risks faced by your organisation.
For more information about the types of policies available for your business, speak to the team at CCW Global.
(This post was originally published in April 2015 and updated in March 2017)
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