Insurance Authority suspends Tsang Kwong Chi Samuel for two months and fines him $40,000 for misconduct in relation to the arrangement of an employees’ compensation insurance policy
22 December 2023
The Insurance Authority (IA) has taken disciplinary action against Mr Tsang Kwong Chi Samuel (Mr Tsang), a technical representative of a broker company, by suspending his licence for two months and ordering him to pay a pecuniary fine of HK$40,000, on the ground that he was guilty of misconduct.
Between November 2018 and February 2019, Mr Tsang assisted a client to obtain a quotation for an employees’ compensation (EC) insurance policy. On 10 June 2019, the client accepted the quotation and agreed to purchase the policy. Subsequently, on 25 August 2019, Mr Tsang submitted the client’s insurance application form to the insurer by email. However, the email was returned undelivered. Mr Tsang did not realise the insurer had not received the email until 24 September 2019 at which time he re-sent the email to the insurer. The insurer issued an EC insurance cover on a “hold cover” basis (that was valid until 9 June 2020) and informed Mr Tsang that the client needed to provide further documents in order to complete the arrangement of the policy.
Mr Tsang, however, overlooked the matter and did not follow up with the client for the further documents, despite being reminded to do so by the Responsible Officer of his broker company on two occasions between October and November 2019. Because the EC insurance cover only remained on a “hold cover” basis, when it expired on 9 June 2020, no renewal notice was issued. On 26 June 2020, the Labour Department requested the client to show proof of having a valid EC insurance policy. By that time, the client had not renewed the policy (having received no notice of renewal) and, consequently, did not have any valid EC insurance policy in place. In an effort to rectify the incident, Mr Tsang suggested the client to submit the requested documents and renew its EC insurance cover. The insurer issued an EC insurance cover but it was only effective from 2 July 2020, which meant the client was left uninsured for 21 days from 10 June 2020 to 1 July 2020.
The client was charged for contravening section 40 of the Employees’ Compensation Ordinance (Cap.282) (ECO) but the charge was later withdrawn given that it was the client’s first offence.
The fact that the client was left without EC insurance coverage from 10 June 2020 to 1 July 2020 was a direct result of Mr Tsang’s inaction. As a technical representative, Mr Tsang should have appreciated that the client’s EC insurance cover up to 9 June 2020 was only being provided on a “hold cover” basis which meant the cover was contingent on the insurer receiving the outstanding documents it had requested to complete the arrangement of the policy. This meant the coverage could have been vitiated by the insurer at any time in the absence of the outstanding documents being submitted, exposing the client to the risk of not having EC insurance coverage. Further, as a direct result of Mr Tsang’s failure to complete the arrangement of the EC insurance policy by informing the client of the outstanding documents that needed to be submitted, the formalities for the arrangement of the EC insurance policy were never completed, and therefore when the “hold cover” period expired on 9 June 2020 no renewal notice was issued. This resulted in the client not having EC insurance coverage in place when the Labour Department inspected it on 26 June 2020, which led to the client breaching the ECO.
A technical representative of a broker company is licensed to carry on “regulated activities” which, by definition, include arranging contracts of insurance on behalf of clients. In carrying on “regulated activities” a technical representative must exercise the requisite level of care, skill and diligence. Mr Tsang failed his client in this respect. The IA recognises that the facts of this case coincided with the introduction of new EC insurance standardised practices to which insurance intermediaries had to adapt. The IA has taken account of this in mitigation, but it does not excuse Mr Tsang’s failures. The licence which a technical representative holds means that he has to discharge his professional duties in line with the provisions stated in the Insurance Ordinance (Cap.41), despite the difficulties of everyday life he may encounter, such as surge in workload and stressful work environment. Indeed, remaining true to one’s professional responsibilities and standards, despite challenging situations, is the very definition of professionalism and the least that members of the public can expect of licensed insurance intermediaries when engaging them to provide insurance services and expertise.
Mr Tsang’s conduct, therefore, fell below the standards expected of a licensed technical representative of a broker company and prejudiced the interests of his policy holder client as a result. Disciplinary action, in the IA’s view, is therefore justified.
In deciding the disciplinary sanction to be imposed under section 81 of the Insurance Ordinance, the IA weighed all relevant circumstances in balance. It took account of the fact that although Mr Tsang’s misconduct was serious in terms of the level of failure and its potential consequences, his culpable conduct was only momentary and did not involve dishonesty. These mitigating factors, as well as the support shown for Mr Tsang by the Responsible Officer of his broker company, meant the IA has imposed a reduced period of suspension and has offset any longer period with a pecuniary penalty (it being the IA’s view, in the specific context of this case, a suspension is more serious than a fine). The disciplinary action, therefore, reflects these considerations as well as the following relevant factors:
- The interests of the client were severely prejudiced;
- Mr Tsang admitted to his misconduct;
- Mr Tsang’s misconduct did not involve any element of dishonesty or personal interest;
- Mr Tsang followed up on the incident by assisting his client to obtain insurance and explain the situation to the Labour Department;
- Mr Tsang’s otherwise clean disciplinary record; and
- the need to send a message to deter similar conduct.
For further information on the IA’s enforcement work, please see the “Enforcement News” section of the IA’s website. Public disciplinary actions against licensed insurance intermediaries may also be searched on the Register of Licensed Insurance Intermediaries on our website.