Insurance lawyers weigh in on incoming Hong Kong intermediary regime

Agents, brokers, and insurers reminded to review the new regime and ensure compliance by September 23

Insurance lawyers weigh in on incoming Hong Kong intermediary regime

Insurance News

By Gabriel Olano

With Hong Kong’s Insurance Authority poised to take over regulation of insurance agents and brokers from the self-regulatory organisations on September 23, intermediaries and other related parties must take heed of the new regulatory regime.

In anticipation of the change, two insurance law experts, Tow Wu Lim and Jenny W. Y. Yu, partner and counsel, respectively, at international law firm Mayer Brown, have authored a legal update regarding the upcoming change.

According to the piece, under the new insurance intermediary regime anyone carrying out ‘regulated activities’ must be licensed. These regulated activities are broadly defined to include negotiating or arranging a contract of insurance, inviting or inducting a person to enter into a contract of insurance or to make a material decision, and giving regulated advice.

Furthermore, the new regime also contains statutory conduct requirements for insurance intermediaries under sections 90 and 91 of the Insurance Ordinance Cap. 41. The Insurance Authority has issued two codes of conduct for licensed insurance agents and insurance brokers, which lay out the fundamental principles of professional conduct and inform about and explain the statutory requirements, the update said. The fundamental principles intermediaries must abide by include honesty and integrity, exercising care, skill and diligence, disclosure of information, and conflicts of interest.

Such principles are consistent with the concept of fair treatment of customers enunciated by the International Association of Insurance Supervisors, the authors said.

The update also tackled an issue discussed in the consultations for both codes of conduct, which was about ‘referral of businesses’. This refers to when a person refers a prospective client to an insurance agent or an insurance broker. According to Lim and Yu, the Insurance Authority has expressed that referrals are not entirely free from regulatory concerns and if the person making the referral is not licensed, then the person must not carry out any regulated activities.

“The Insurance Authority also expressed concerns about referral fees linked with referrals and that they must not in any way incentivise unlicensed persons to carry on regulated activities,” the update said. “Referrals may be an issue that requires further regulatory consideration.”

There will be a three-year transition period for existing intermediaries. Any existing insurance intermediaries that are registered with the self-regulatory organisations before September 23, will be deemed licensees throughout the transition period. Meanwhile, those with pending applications will have to file a new application with the Insurance Authority.

“Insurance agents and their appointing insurers and insurance brokers are reminded to review the new regime and the codes of conduct, and ensure that they are compliant when the new regime commences on September 23,” the update said.

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