Hong Kong residents urged to steer clear of unlicensed insurance sellers

Regulator outlines protective measures

Hong Kong residents urged to steer clear of unlicensed insurance sellers

Insurance News

By Roxanne Libatique

The Insurance Authority of Hong Kong (IA) has issued a stern warning to Hong Kong residents to be vigilant against unlicensed insurance sellers.

Peter Gregoire, head of conduct supervision and general counsel at the IA, emphasised the importance of dealing only with licensed insurance intermediaries to avoid the risks of mis-sold insurance policies.

Unlicensed insurance sellers target Mainland China visitors in Hong Kong

Gregoire highlighted that unlicensed individuals are increasingly targeting Mainland China Visitors (MCVs), who have significantly contributed to the growth of Hong Kong’s insurance market.

In the first quarter of 2024, MCVs brought in HK$15.6 billion in new office premiums for life insurance, making up nearly 25% of the sector’s new office premiums.

Recent inspections and investigations by the IA have revealed that unlicensed sellers often misrepresent themselves as “referrers” or “introducers” while providing unauthorised advice and promoting specific insurance policies. This practice not only violates Hong Kong law but also exposes consumers to significant risks, including the purchase of unsuitable insurance products.

Hong Kong Insurance Authority’s actions against unlicensed insurance sellers

Gregoire reiterated that unlicensed insurance selling is a criminal offense in Hong Kong, punishable by fines and up to two years of imprisonment.

“The Insurance Authority has zero-tolerance for such pernicious activities which might place policy holders in jeopardy and risk undermining confidence in the insurance market,” he said.

In response to this growing issue, the IA, in collaboration with the Independent Commission Against Corruption (ICAC), launched a crackdown on unlicensed selling in April.

A follow-up circular was issued in May, urging insurers and brokers to strengthen their controls on referral business to prevent unlicensed activities.

How can Hong Kong residents protect themselves from unlicensed insurance sellers?

Gregoire advises Hong Kong insurance consumers to:

  • ask for the insurance seller’s business card to verify their licensing information;
  • check the IA’s Register of Licensed Insurance Intermediaries to confirm the seller’s credentials; and
  • contact the seller’s appointing insurer or agency for further verification if necessary.

He emphasised that licensed intermediaries are required to pass relevant exams, demonstrate a minimum level of expertise, and adhere to regulatory standards, ensuring they act in the best interest of their clients.

“The IA works on multiple fronts to combat unlicensed selling. Through supervision, we monitor the adequacy of governance and controls in the insurance sector on this issue. In particular we will be assessing whether remuneration structures are being aligned with the ‘treating customers fairly’ principle, are fair, equitable and reasonable, and not being used to incentivise unlicensed selling,” he said. “Through intelligence gathering and mystery shopping, we root out red-flags for unlicensed selling and take appropriate action. Through enforcement, we hold to account any person who sells insurance without a license or assists in doing this.”

The IA will continue to monitor the insurance industry’s governance and control measures to combat unlicensed selling. Public education campaigns have also been launched to inform consumers, especially MCVs, about the risks and the importance of dealing with licensed intermediaries.

Gregoire urges Hong Kong residents to make informed decisions by seeking advice from licensed professionals, thereby protecting their long-term financial health.

Earlier this month, the IA warned Hong Kong residents about a surge in fraudulent phone calls falsely claiming to be associated with the regulator.

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