Oct 2021
Licensed insurance broker companies failing to submit their audited financial statements
It has long been a fundamental responsibility for every licensed insurance broker company to submit their audited financial statements and auditor’s reports to the regulator within 6 months of the end of each financial year. These financial documents provide important information on a broker company’s financial status and compliance with key regulatory requirements and serve as an essential regulatory mechanism for ensuring that policyholder interests are safeguarded.
In May 2021, the IA fined two licensed insurance broker companies and suspended the licence of one of them, for failing to comply with this fundamental requirement.
Since these were transitional cases, in taking disciplinary action the IA was required to apply the rules of the self-regulatory body which applied at the time. Going forward, however, this type of contravention can be prosecuted as an offence under the Insurance Ordinance (Cap. 41) and may also adversely impact the fitness and properness of the broker company to continue to be licensed.
Former insurance agent reprimanded and banned from applying for a licence for 5 months
In July 2020, the IA reprimanded a former individual insurance agent and prohibited him from applying to be licensed for 5 months for contravening the Insurance Ordinance and the IA’s Code of Conduct for Licensed Insurance Agents.
The disciplinary action arose from a message the agent sent through his social media account to everyone on his contact list on 23 January 2020 (“Message”), seeking to use the outbreak of the novel coronavirus (“COVID-19”) to encourage recipients of the Message to leave Hubei Province and come to Hong Kong to escape the pandemic and take out insurance from him. The Message was sent at a time when the HKSAR Government was taking steps to limit travel from Hubei Province to prevent the spread of COVID-19. The IA received over 60 complaints about the Message.
The IA concluded that, in sending the Message, the agent had
breached the IA’s Code of Conduct for Licensed Insurance Agents in failing to comply with the policies, procedures and other applicable requirements of his appointing insurer in relation to crossborder selling practices;
carried on regulated activity without integrity in contravention of section 90(a) of the Insurance Ordinance and undertaken an act relating to the carrying on of a regulated activity which, in the IA’s opinion, was or was likely to be prejudicial to the public interest; and
failed to exercise a level of care, skill and diligence that may reasonably be expected of a prudent person who is carrying on regulated activity in contravention of section 90(b) of the Insurance Ordinance.
As a result the former agent was found guilty of one count of misconduct under section 80(1) of the Insurance Ordinance, and not fit and proper person to be a licensed individual insurance agent. In deciding the sanction, the IA took into account all relevant circumstances, including the short duration of the misconduct, the remorse the former agent had demonstrated and his otherwise clean disciplinary record.
It is essential for the insurance market to be founded on trust. That trust depends on licensed insurance intermediaries demonstrating ethical business practices when selling and advising on insurance, through whatever medium of communication they use (whether face-to-face or social media platforms). It is imperative that licensed insurance intermediaries adhere to the ethical business practices required in the Insurance Ordinance and the relevant Codes of Conduct when carrying on regulated activities, so as to ensure trust and confidence in the insurance market is maintained and continually reinforced. The IA has no tolerance for unethical business practices and perpetrators of such practices can expect severe disciplinary penalties.