How car insurance premiums are calculated in Hong Kong

Calculator to illustrate how car insurance premiums are calculated in Hong Kong

If you own a car, or plan on buying one in Hong Kong you likely already know that you must purchase car insurance for your vehicle before you are legally allowed to drive it in the city. The thing is, when you start looking at plans you will likely come to find that there is a fairly wide variance in premiums. To help, we have created this article which focuses on how car insurance premiums are calculated in Hong Kong.

Before we look into the different factors insurers will consider it is important to note that there is no set calculation that must be used by all insurers when offering motor insurance plans. Rather, insurers will price their plans utilizing a wide variety of factors.

Because every business is different, there will be external factors that have an impact on what they charge for insurance. For example, the number of claims submitted vs paid out, goals of the company, and competition all have a varying impact on the price. That said, there are a number of factors used by all insurers. Here we will look at eight common factors that insurers will use when quoting a price for car insurance in Hong Kong.

The make or value of your car

The type of car you drive will certainly have an impact on how car insurance premiums are calculated in Hong Kong. For example, the insurance for a new Toyota Corolla will be far lower than a brand new BMW 7. The reason for this is primarily due to the value of the car.

If a car is worth more, insurers will need to pay out more should there be an accident or should the vehicle need to be repaired or replaced. This higher risk means you will need to pay more to ensure that you are covered.

But it's not just different models where you will see higher premiums. If you have added aftermarket parts to your vehicle and want them to be covered by the insurer you will need to list them when you apply for coverage. If the parts you have added drastically increase the value of your vehicle then you will likely end up paying more for insurance.

One thing to be aware of here is that some insurers might not provide coverage for vehicles with extensive aftermarket modifications, so it is important to shop around.

The size of your car's engine

As you likely know, cars of the same make will come in different models, often with more expensive models having a bigger engine among other things. As such, one of the first questions you will be asked when you talk with Kwiksure or an insurer will be the size of the engine (usually in cubic centimeters, or cc).  

Simply put, the bigger the engine the faster you can go. This means there is a higher risk of an accident and a higher cost to replace parts after an accident. Therefore, insurers will generally quote a higher premium for a vehicle with a bigger engine.

In other words, if you are considering that sleek BMW M760i (which comes with a 6,592cc v12 engine), know that you will be paying considerably more for insurance than say a BMW 740 Li which has a V6 engine and about half the total engine capacity.

The mileage of your car

We don't mean how far you can drive your car in between fill ups. What this pertains to is how much you drive your vehicle. A newer vehicle with a higher number of miles (or kilometers) driven on it will translate to a higher premium.

The reason for this is because if you drive your vehicle more, you face a higher risk of being in an accident. Insurers will generally quote a lower premium if you occasionally drive your vehicle.

Your driving history

Aside from the type of car you want to insure, this is arguably the most important factor influencing how car insurance premiums are calculated in Hong Kong. If you do not have a clean driving history e.g., a high number of demerit points or a history of accidents/serious driving offences you will pay more for insurance.

Insurers will want to know whether you have had any accidents or submitted any claims in the past three years. Many will also ask if you have been convicted of a serious driving offence (e.g., careless driving, dangerous driving, or drunk driving) or have accrued more than 8 demerit points in the same time period.

If you have had any of the above, then you will be paying more for your insurance.

It's not just your driving history in terms of accidents and tickets that insurers will consider. In fact, they will also look at how long you have been driving and even your age. If you are a new driver or are under the age of 21 to 25 (depending on the insurer) you will pay more for insurance.

The reason for this is newer drivers tend to have a higher risk of being in an accident. Unfortunately, there is usually little you can do about this but try to be a safe driver.  

How you intend to use the vehicle

Insurers in Hong Kong will have a strict set of terms and conditions around how you can use the vehicle while you have the coverage you select. For example, if you purchase private car insurance and use your car to make money e.g., as a delivery service, you will be in breach of the contract. Should you be in an accident while doing this the insurer has the right to deny any and all claims against your policy.

It is important to be up-front with the insurer about how you intend to use your vehicle. Yes, in some cases you will pay more for coverage but the cost of repairing any damages will be much higher than the cost of car insurance.

Your occupation

Believe it or not, some motor insurance companies in Hong Kong will take your job into account when developing a premium. In many cases, this relates to the factor above. Some occupations usually rely on a vehicle e.g., salesperson. If you are, say a rep for a luxury brand there is a much higher chance you will use your own vehicle.

This means you will face a higher chance of being in an accident. Higher risk will result in a higher premium. It would, therefore, be a good idea to discuss your premium and position with any insurer you are working with. It might be that your role actually is defined differently by the insurer and is attached to a slightly lower premium.

If you have a No Claims Discount (NCD)

Some insurance plans, especially those that offer comprehensive coverage, will include a NCD. This is a discount given to drivers who drive claims and accident-free for a set period of time (usually one year). Each year of safe driving can see an increase in your NCD, up to 60% in fact.

Insurers in Hong Kong who offer the NCD will often allow you to take it with you when you move companies. So, if you have an existing discount, this will likely impact the premium you are quoted when you start to look at other insurers.

It is important to note here that not every insurer will accept existing NCD, so be sure to check about this before signing up for a new plan.

Type of coverage you want

There are two types of car insurance in Hong Kong:

As you can probably guess, the type of coverage you select will influence the price of car insurance in Hong Kong. Plans that offer comprehensive coverage will cost more than third party coverage simply because they cover more.

How can you impact how car insurance premiums are calculated in Hong Kong?

The factors above are all focused on things insurers will consider when quoting a price for car insurance. Is there any way you can impact how car insurance premiums are calculated in Hong Kong? Yes!

There are a large number of insurers in the city, and as we stated above they will offer different prices for coverage. This means that you can influence how much you pay for car insurance by simply shopping around. This can take a fair amount of time, so one of your best options would be to work with a broker like Kwiksure.

Kwiksure works with major car insurers in the city and our advisors know the industry inside and out. This allows them to quickly review the different coverage options for your vehicle and come up with a plan that meets your needs and budget.

Contact us today to learn more about how our advisors can help you find car insurance in Hong Kong.

The above information is for reference only. Kwiksure takes no responsibility for the accuracy and timeliness of the information. For the coverage, mode of compensation, benefit limit and premium levels of any specific insurance plan, please refer to the relevant policy terms.