Policyholder Corner -
Important lessons for prospective policyholders from Mainland China
May 2023
The disciplinary actions which the IA takes serve to ensure that the standards, practices and requirements in the insurance regulatory framework which protect policyholder interests, are underpinned by the deterrence of proportionate enforcement action if breached.
During the financial year from 1 April 2022 to 31 March 2023, the IA took 13 disciplinary actions against current and former insurance intermediaries in relation to various types of conduct that rendered them not fit and proper to serve in that role. In the previous financial year (1 April 2021 to 31 March 2023), the first during which the IA started to take disciplinary actions, 10 such actions were taken. Our disciplinary process is now running smoothly, like a well-oiled machine.
A number of the disciplinary actions we have taken either relate to matters arising before the border with Mainland China closed due to the COVID pandemic, or are matters that may arise when a person who is not from Hong Kong seeks to buy an insurance policy from a Hong Kong authorized insurer.
With the border now open, Mainland China Visitors can once again take the opportunity to fulfil their insurance needs by buying insurance in the Hong Kong insurance market. As such, in this edition of Policyholder Corner we draw attention to three important lessons for that prospective policyholders from Mainland China can draw from our enforcement and complaints work:
LESSON 1 - Pay premium directly to the authorized insurer, not to your individual insurance agent
The core role of a licensed individual insurance agent is to advise potential policyholders on the suitability of the insurance products offered by the insurers they represent to meet policyholder needs; to facilitate and support the policyholder in applying for a suitable insurance policy; and to service the policyholder throughout the duration of the policy. A licensed individual insurance agent’s role, however, is not to collect premium from the policyholder directly, or to serve as a conduit through which a policyholder should pay premium. An individual insurance agent is, after all, an individual with a personal (not a business) bank account, who is not set up to receive or administer the collection of premium and who must avoid mixing premium with his or her own personal funds. Paying premium to an individual insurance agent risks the money not being passed onto the insurer on time (or sometimes at all). This can result in the insurance being cancelled (or not put in place at all) or automatic premium loans being drawn down without the policyholder being aware of it. We have seen this in our complaints and disciplinary cases and the key lesson which must be learned is: Pay premium directly to the insurer – not through the insurance agent.
LESSON 2 - Fit and proper licensed insurance agents in Hong Kong do not break the law by getting involved with cross border solicitation
Licensed insurance intermediaries in Hong Kong must not breach the relevant laws and regulations in the Mainland which make solicitation of insurance in the Mainland without a relevant licence an offence. Otherwise, this will affect their fitness and properness to continue to be a licensed insurance agent. So be suspicious of persons purporting to be licensed insurance agents from Hong Kong who solicit you in the Mainland to buy insurance from a Hong Kong insurer whilst in the Mainland. Chances are, they are not allowed to do this, and if their principal insurer found out, adverse consequences would follow. When you do come to Hong Kong and buy a life insurance policy in Hong Kong from a Hong Kong insurer, you may be asked to sign an “Important Facts Statement for Mainland Policyholders” (“IFS-MP”) as part of the selling process. By doing this you will confirm that the entire sales process took place in Hong Kong. If you confirm this, and it is later discovered that some part of the solicitation took place in the Mainland, then this could have an adverse impact on the effectiveness of your insurance policy. So please beware of this: Do not participate in any sales activities of Hong Kong life insurance in the Mainland.
LESSON 3 - Do not deal with unlicensed persons offering you insurance
Just because licensed insurance agents from Hong Kong cannot solicit you in the Mainland to buy insurance from Hong Kong insurers, it does not mean unlicensed persons are able to do this. Selling of insurance by unlicensed persons can have catastrophic consequences for policyholders. If a person is unlicensed, he or she has no proven expertise to advise you on insurance and you could find yourself a victim of mis-selling. Do not fall for it: Do not deal with anyone offering insurance who is not licensed to do so. If you are interested in buying insurance from a Hong Kong insurer, then do so while you are in Hong Kong from a licensed insurance intermediary here. You can check that an intermediary is licensed on our website (or with the insurer directly). It is important that you buy insurance from someone who knows what they are doing and who has passed the minimum standards to serve as an insurance intermediary. Do not settle for anything less.
In our disciplinary and complaints work, we see examples of policyholders who wish they had not made the mistakes highlighted above. It is often too late for them. Make sure it is not too late for you. Take heed of the above three lessons.
For the latest news on our enforcement work, please check out our website.