12 March 2024
The Insurance Authority (IA) has taken disciplinary action against Mr Lam Kwan (Mr Lam) by suspending his licence for seven months on the ground that he is not a fit and proper person after having taken out an insurance policy without the client’s knowledge or consent and for motives other than the client’s best interests.
In December 2020, Mr Lam completed an insurance application in the name of one of his clients. He signed the application as if he was the client without the client’s knowledge or consent and paid the first year premium of HK$8,009.66.
The client discovered the insurance policy when she was reviewing her other policies issued by the same insurer via the insurer’s electronic portal. As the client had not been in Hong Kong at the time the application was purported to have been signed by her and had given no authorization for Mr Lam to apply for the policy on her behalf, after raising the matter with Mr Lam without satisfactory explanation, she complained to the IA.
The insurance policy subsequently lapsed for non-payment as the client did not elect to reinstate it.
During the subsequent investigation, it was discovered that in December 2020 Mr Lam had informed the client that he had enrolled her in a lucky draw being run by his principal insurer. He then completed the application form for the insurance policy, signed it as the client and submitted it to the insurer. When the insurance policy was issued, he told the client that she had won the lucky draw and the prize was an insurance policy. The client had informed him, however, that she was not in Hong Kong at the time.
It turned out, there was no lucky draw run by the insurer. According to Mr Lam’s subsequent admissions in the investigation, he had signed the application form as the client and arranged the policy for the client, making up the story that she had won it in a lucky draw. His stated motivation for doing this was to make it look as though he had sold more insurance policies, so as to gain a higher ranking in the insurer’s “annual list” and thereby inspire his team to do more business.
Mr Lam did not financially benefit from his actions (quite the opposite in fact). The policy cost him HK$8,009.66 and he received HK$4,001.48 in commission. His actions, however, crossed the clear bright line between right and wrong which licensed insurance intermediaries must never cross. The deceitful practice of utilising a fictitious lucky draw to mask the act of applying for an insurance policy without a client’s consent, was clearly unethical and demonstrative of a lack of integrity and character as to impugn the perpetrator’s fitness and properness. Not only did he deceive his client, he also deceived his principal insurer. The motivation of seeking to rank higher on the insurer’s “annual list” and supposedly wanting to inspire his team to do more business, further aggravates the disreputable nature of his actions. As a leader of a team, Mr. Lam should have known better. He has let down himself, his team, his principal, the insurance industry, but most of all his client.
The IA acknowledges Mr Lam’s cooperation in accepting the disciplinary action by way of an agreement which has resulted in prompt resolution of this matter1. It is also recognised that his admissions and contrition serve as a first step in rehabilitating his character (and he can work further to restore his fitness and properness by reflecting on his actions during his 7-month suspension).
In deciding the disciplinary sanction to be imposed under section 84 of the Insurance Ordinance (Cap. 41), the IA weighed all relevant circumstances in balance, including that:
This case also highlights several important take-aways:
Firstly, it serves as a warning to licensed insurance intermediaries never to use deceitful practices to seek to trick clients. Any regulated person who uses a fictitious lucky draw, a non-existent “time-limited offer”, or other such fake promotions designed to induce a client into a buying decision, can expect swift and harsh punishment from the IA.
Secondly, the case serves as a reminder that even when a lucky draw or time-limited discount or promotion is true, a prospective policy holder should not let the sense of fear of missing out, or “FOMO”, which these promotions aim to foment, disproportionately influence or serve as a distraction in making a buying decision. Always take enough time to understand the terms and conditions of the insurance policy and make an informed decision based on your insurance needs.
Thirdly, in this case the client discovered the problematic insurance policy by checking her e-portal account with the insurer. This reinforces the value of policy holders regularly checking on their insurance coverages through facilities like e-portals provided by insurers. This is always good practice in managing one’s personal finances.
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.
Ends
Note:
1Pursuant to section 84(1) of the Insurance Ordinance (Cap. 41), at any time when the IA is contemplating exercising a power under section 81, it may, if it considers it appropriate to do so in the interests of policy holders or potential policy holders or the public interest, by agreement with the person concerned (a) exercise a power that the IA may exercise in respect of the person under section 81; and (b) take an additional action that the IA considers appropriate in the circumstances of the case.