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Regulation of Insurance Intermediaries


Introduction

With effect from 23 September 2019, the Insurance Authority (“IA”) is the sole regulator to license and supervise all insurance intermediaries in Hong Kong.  The IA is responsible for supervising insurance intermediaries’ compliance with the provisions of Insurance Ordinance (Cap.41) (“IO”), and the relevant regulations, rules, codes and guidelines issued by the IA.  The IA is also responsible for promoting and encouraging proper standards of conduct of insurance intermediaries, and has regulatory powers in relation to licensing, inspection, investigation and disciplinary sanctions.

The regulatory regime for insurance intermediaries is activity-based.  Under section 64G of the IO, a person must not carry on a regulated activity, or must not hold out that the person is carrying on a regulated activity, in the course of business or employment, or for reward unless the person holds an appropriate type of insurance intermediary licence or is exempt under the IO.  It is an offence for contravening section 64G of the IO.
 

Regulated Activity

Under section 3A(a) of the IO, a person carries on a regulated activity if the person does any of the following acts (Part 1 of Schedule 1A to the IO):

  • the act of negotiating or arranging a contract of insurance
  • the act of inviting or inducing, or attempting to invite or induce, a person to enter into a contract of insurance
  • the act of inviting or inducing, or attempting to invite or induce, a person to make a material decision
  • the act of giving regulated advice

 
Under section 3A(b) of the IO, a person makes a material decision if the person makes a decision in relation to a matter specified below (Part 2 of Schedule 1A to the IO):

  • the making of an application or proposal for a contract of insurance
  • the issuance, continuance or renewal of a contract of insurance
  • the cancellation, termination, surrender or assignment of a contract of insurance
  • the exercise of a right under a contract of insurance
  • the change in any term or condition of a contract of insurance
  • the making or settlement of an insurance claim


Under section 3A(c) of the IO, a person gives regulated advice if the person gives an opinion in relation to a matter specified below (Part 3 of Schedule 1A to the IO):

  • the making of an application or proposal for a contract of insurance
  • the issuance, continuance or renewal of a contract of insurance
  • the cancellation, termination, surrender or assignment of a contract of insurance
  • the exercise of a right under a contract of insurance
  • the change in any term or condition of a contract of insurance
  • the making or settlement of an insurance claim

 

Types of Licensed Insurance Intermediaries 

Under the IO, there are five types of licensed insurance intermediaries:



Licensed Insurance Agents
 
Licensed Insurance Brokers

1. Licensed Insurance Agency 
    (Insurance Agency Licence)
 
2. Licensed Individual Insurance Agent 
    (Individual Insurance Agent Licence)
 
3. Licensed Technical Representative (Agent) 
    (Technical Representative (Agent) Licence)
 

1. Licensed Insurance Broker Company 
    (Insurance Broker Company Licence)
 
2. Licensed Technical Representative (Broker) 
    (Technical Representative (Broker) Licence)



 

 

Licensing Requirements

A person who wishes to carry on a regulated activity in Hong Kong may apply to the IA for an appropriate insurance intermediary licence under the IO.  The IO requires the applicant to be a fit and proper person to carry on regulated activities in the lines of business concerned.  Section 64ZZA of the IO provides the matters that the IA must have regard to in determining the fitness and properness of the applicant.  To enhance transparency of the relevant regulatory requirements, a Guideline on "Fit and Proper" Criteria for Licensed Insurance Intermediaries under the Insurance Ordinance (Cap. 41) was issued by the IA.
 

Conduct Requirements

Licensed insurance intermediaries are required to comply with the statutory conduct requirements set out in sections 90, 91 and 92 (where applicable) of the IO and the relevant requirements set out in the codes of conduct issued under the IO.  The IA has issued two separate codes of conduct, namely the Code of Conduct for Licensed Insurance Agents and the Code of Conduct for Licensed Insurance Brokers.  These codes promulgate principles of conduct and related standards and practices with which licensed insurance agents and licensed insurance brokers are ordinarily expected to comply in carrying on regulated activities.
 

Transitional Arrangements for Insurance Intermediaries

Under the Insurance Companies (Amendment) Ordinance 2015, there are transitional arrangements for insurace intermediaries and responsible officers of insurance agencies / chief executives of insurance brokers who were registered with the Insurance Agents Registration Board set up by The Hong Kong Federation of Insurers, The Hong Kong Confederation of Insurance Brokers and Professional Insurance Brokers Association (collectively, "Self-regulatory Organizations" (“SROs”)), including a transitional period of 3 years after commencement of the new regime (“Transitional Period”).   Besides, licence fee will be waived for 5 years from the commencement of new regime. 

Deemed Licensees and Responsible Officers

  • All insurance intermediaries who were validly registered with the SROs immediately before the commencement of the new regime are deemed to be licensees under the new regime during the Transitional Period. During the Transitional Period, arrangements will be made for deemed licensees to apply for formal licences granted by the IA.
  • All responsible officers of insurance agencies and chief executives of insurance brokers who were validly registered with the SROs immediately before the commencement of the new regime are deemed to be responsible officers of the relevant insurance agency or insurance broker company (as the case may be) under the new regime during the Transitional Period.

 

Pamphlet on What Insurance Intermediaries Need to Know About the New Regime