September 2026
In April 2026, the Insurance Authority (“IA”) was hosted by the Hong Kong Federation of Insurers (“HKFI”) to deliver another training session for Key Persons in Control Functions for Intermediary Management (“KPIM”) and those who support them. This year’s training session also marked a milestone, with the launch of the IA’s KPIM Handbook, which was provided to all attendees.
The KPIM role in an authorized insurer – like the other key person roles that authorized insurers must appoint in finance, risk management, compliance, actuarial and internal audit – oversees an important “control function”. Control functions provide check and balance on business activities, helping to ensure that growth and commercial success are not pursued at the expense of fair customer treatment. In doing so, they support insurers’ long-term focus on sustainable profitability and consistent service quality for customers.
The KPIM, in this respect, is tasked with implementing and establishing controls and processes for the licensed insurance intermediaries – both insurance agents and insurance brokers – through which the insurer offers, enters into, and arranges insurance policies with the insurance-buying public. Unlike the other key person roles, the KPIM is unique to Hong Kong. While the control functions of finance, risk management, compliance, actuarial, and internal audit originate from the International Association of Insurance Supervisors’ Insurance Core Principles, the KPIM role is a pure creation of Hong Kong insurance regulation. It was introduced in September 2019 along with the then-new direct regulation of insurance intermediaries.
The creation of the KPIM role reflects the importance of around 120,000 licensed insurance intermediaries to the market. Insurance intermediaries are the industry’s outward-facing representatives and the primary point of contact for insurance customers. How insurance intermediaries discharge their role sets the reputation for the market as a whole.
Given that the Hong Kong insurance market serves policyholders not only from Hong Kong, but also from around the world, insurance intermediaries play a vital role in maintaining Hong Kong’s position as an international financial centre. The dominance of long term insurance products with savings and investment elements in the market – that come with their own complexities and ensure Hong Kong is consistently at or near the top of international lists for insurance density and penetration – also means that maintaining high professional standards of regulated advice and activities is crucial.
For all of these reasons, the KPIM in an insurer performs both an onerous and important task in establishing controls and processes on insurance intermediaries in order to ensure that conduct standards are upheld across the market.
The conduct insurance regulatory framework in Hong Kong is a mix of prescribed requirements that apply in specific situations, and broad principles of ethical conduct that apply to every situation. The KPIM training delivered by the IA reflects both aspects of the framework.
A common trap in compliance is to focus only on the prescribed requirements – ensuring those particular boxes are ticked – while assuming that this is sufficient to address the broader ethical principles. It is not and, indeed, such a limited approach is dangerous. It serves to separate ethical conduct from the prescribed requirements, and thereby ignores the fact that each prescribed requirement has an ethical objective.
Take the financial needs analysis (“FNA”) process for long term products as an example. This is a prescribed regulatory process. But a KPIM who thinks just completing the FNA is enough (because it ticks a regulatory compliance box), is misguided. Unless the ethical purpose of the FNA is recognized – to ensure insurance recommendations are suitable to meet a customer’s circumstances – a black-letter compliance mindset may find it acceptable for figures in the FNA to be stretched and exaggerated to fit a recommendation the intermediary wants to make, rather than identifying the real circumstances of the customer, and allowing a suitable recommendation to emerge from them.
Every control or process established by a KPIM must be designed not only with the requirement in mind, but with the ethical objective underpinning the requirement. The effectiveness of the control must be measured against achieving that ethical objective.
In the IA’s training – and in the KPIM Handbook – we set out a control design process which KPIMs can follow to achieve this.
Another core emphasis of the training over the years, has been on the importance of the KPIM role in establishing, demanding, and serving as a role model for a “treating customers fairly” culture across the agency (and wider intermediary) force of an insurer. To achieve this, a KPIM must work through the agency management hierarchy. KPIMs must continually emphasize the importance of strong conduct ethics and treating customers fairly to agency managers, so that this is cascaded down through the ranks to front-line agents. KPIMs must also call out poor ethical leadership by agency managers. Similarly, KPIMs should reward and recognize strong ethical management by agency leaders, where positive customer outcomes are achieved by the teams and units they lead.
While the KPIM normally sits in the first line of defence (another element that separates the role from the other key person roles), he or she still performs a control function. Any agent or agency manager who is performing well against top-line metrics, but failing to perform against key “treating customers fairly” metrics such as policy persistency, agent turnover, poor disciplinary records, and complaint levels, must be viewed as failing to perform overall. Indeed, the KPIM must ensure that intermediary remuneration and performance measurement, incentivizes ethical conduct and treating customers fairly as much as (or indeed more than) the achievement of top-line numbers.
In this regard, establishing and continually reinforcing a treating customers fairly culture serves as the KPIM’s most important control. That is a core message from the training and the reason a key part of any conduct inspection involves an assessment of the insurer’s culture, specifically across its intermediary force.
In this year’s training we did something different. We gave the KPIMs in the audience (and those supporting them) a case study to brainstorm. The case study highlighted the issue of agent turnover in the market. On a market level, our licensing statistics show continued growth with a constant stream of new recruits seeking to become insurance agents. But more than half of the individuals granted a new licence do not even make it to the end of their first three-year licence period.
This feeds through into the IA’s complaints statistics. A meaningful portion of sales-side complaints involve misleading representations about non-guaranteed benefits, typically from inexperienced intermediaries under pressure to meet targets. Another major complaint category is poor after-sales service from intermediaries who are too focused on new sales to service existing policies, or who have already left the industry early in their careers.
So we presented the audience of KPIMs with the following case study to brainstorm:
As a KPIM, you look at your statistics and see that over 50% of the new insurance agents recruited every year are not even lasting the full term of their first licence. Your complaints data shows a link between the agents that leave and complaints about policies not being sold or serviced properly. What controls or strategies can you put in place to address these problems? (3 minutes to discuss)
The 52 solutions given by the audience in just three minutes are summarized under the following five categories (the bullet points being a selection of the unedited solutions put forward):
A number of solutions focused on getting the recruitment strategy and processes right, to ensure the right people are recruited to be agents through tighter vetting, quality-first selection, and setting long-term career expectations.
It was also recognized that aligning remuneration and incentive structures with long-term performance, policy persistency, and retention, rather than purely short-term upfront sales, must be part of the solution.
Early-stage career and skill development and support post-recruitment was also a theme emphasized in the solutions.
There was full recognition that managing (working through and holding accountable) the agency hierarchy and implementing appropriate controls and processes to do this was a vital part of the solution.
Finally, there was universal recognition of building the right “treating customers fairly” culture. This was linked to targeting and training candidates to be professional insurance agents, who were prepared, motivated, trained, and remunerated to serve customers over the long term.
The IA has been delivering the KPIM training since 2020. We have also been publishing Conduct in Focus since around that time. We have now issued the KPIM Handbook.
Our primary objective in doing all of this has been to support the development of the KPIM role, one which is vital to upholding ethical conduct across the insurance market, by equipping KPIMs to implement practical compliance solutions which aim to achieve fair customer treatment.
So, yes, when we saw the ideas put forward by the audience of KPIMs we did feel a small element of pride. It was gratifying to witness the KPIMs – and those supporting them – coming up with 52 solutions in just 3 minutes, demonstrating their engagement with the training, and their professional commitment to the role they perform. The quality of some of the solutions suggested was also impressive – e.g. asking recruits to produce a 3 to 5 year plan for their careers at the recruitment stage as a means of reinforcing the long-term commitment expected of them – that’s just genius! It was also great to see, in the solutions put forward, support for the work the IA has done in implementing commission spreading requirement on participating policies.
Furthermore, we were delighted by the complete absence of the standard answer we often receive when we consult the market: “It’s the regulator’s job to do something about this – not ours”. Back in 2019, if we had run the same case study, that would probably have been suggestion number one. But in 2026, not one member of the audience jumped to this conclusion. Instead, they embraced their responsibility and accountability as KPIMs. This in itself is a demonstration of how the role has evolved in sophistication over the past 7 years.
We will, of course, take on board the solutions suggested and factor them into our discussions, in our inspections, and in our continued close engagement with KPIMs going forward.
In the meantime, to those who were not able to attend the training: you missed out..
But to those who did attend (and also to the HKFI): we say thank you. For your engagement, your commitment, and for continuing to do the vital work that you do.