Regulation of Insurance Intermediaries in Hong Kong 香港保險中介人的規管

Basic Requirements of the Licensing Regime for Regulation of Insurance Intermediaries 監管保險中介人的持牌制度的基本規定

Before 23 September 2019, intermediaries were regulated by three self-regulatory organisations: the Insurance Agents Registration Board under the Hong Kong Federation of Insurers, the Professional Insurance Brokers Association and the Hong Kong Confederation of Insurance Brokers. Under the new regime in the Insurance Ordinance (Cap. 41), the IA licenses and supervises intermediaries directly, and self-regulation came to an end. Intermediaries registered on that date were deemed to be licensed for a transitional period.

The basic rule is that anyone who carries on a regulated activity in the course of business must hold a licence from the IA. Doing so without one is an offence. Regulated activities mainly include negotiating or arranging an insurance contract; inviting or inducing (or attempting to invite or induce) a person to enter into an insurance contract; inviting or inducing a policy holder to make a material decision, such as making a claim, surrendering or switching a policy; and giving regulated advice.

There are five types of licence. On the agent side there are the licensed insurance agency, the licensed individual insurance agent and the licensed technical representative (agent). On the broker side there are the licensed insurance broker company and the licensed technical representative (broker). Broker licences are issued only to companies. There is no 'individual broker' licence, so an individual works for a broker company as a technical representative (broker).

Licences are also divided by line of business: general business, long term business (excluding linked long term business) and linked long term business. A licensee may carry on regulated activities only in the lines they are licensed for. The IA keeps a public register of licensed insurance intermediaries so that anyone can check whether a person is licensed.

Authorized Insurer’s Relationship with its Agents 獲授權保險人與其代理人的關係

An insurance agent is the agent of its appointing insurer and is authorised, through an agency agreement, to act on the insurer's behalf. Under the law of agency the insurer, as principal, is bound by what the agent does within its authority, whether express, implied or apparent. So a premium that a client pays to an agent authorised to collect premiums is normally treated as paid to the insurer.

Licensed insurance agencies and licensed individual insurance agents are appointed by authorized insurers. A licensed technical representative (agent) carries on regulated activities on behalf of the licensed insurance agency it works for, and that agency is itself the insurer's agent.

A licensed insurance agent may be appointed by no more than four authorized insurers, and no more than two of them may be long term insurers. The limit is meant to keep agents loyal to their appointing insurers and familiar with their products.

Insurers must choose and supervise their agents with care. For example, they must appoint only licensed persons, keep proper internal controls and notify the IA as required when an appointment begins or ends. An agent's misconduct can make the insurer liable and can also lead to regulatory action against the insurer itself.

Multiple Capacities of Licensed Insurance Intermediaries 持牌保險中介人的多重角色

An agent represents the insurer, while a broker represents the policy holder (the client). Their loyalties conflict, so the same person cannot act both as a licensed insurance agent and as a licensed insurance broker. For example, a licensed individual insurance agent cannot also be a technical representative (broker), and an authorized insurer cannot appoint a licensed insurance broker company as its agent.

A licensed intermediary may also hold other financial licences or registrations, for example with the Securities and Futures Commission or as a Mandatory Provident Fund intermediary. Authorized institutions such as banks may also carry on insurance business as licensed insurance agencies.

An intermediary who acts in more than one capacity must tell the client clearly in which capacity they are acting in a given transaction (for example, as a particular insurer's agent or as a broker). They must also manage conflicts of interest properly, so that the client is not misled about whose side the intermediary is on.

Grant of Licence 發牌

The IA grants a licence only to an applicant who is fit and proper. The factors include education, professional qualifications and experience; the ability to carry on regulated activities competently, honestly and fairly; reputation, character, reliability and integrity; financial status and solvency (for example, whether the person is bankrupt); and any criminal convictions or disciplinary action by other regulators.

An individual applicant must be at least 18, meet minimum education requirements and pass the relevant IIQE papers: Papers I and II for general business, Papers I and III for long term business, and Paper V in addition for linked long term business.

A licensed insurance agency and a licensed insurance broker company must each appoint at least one responsible officer. For an agency, the responsible officer must be a licensed technical representative (agent); for a broker company, a licensed technical representative (broker). The responsible officer must also be fit and proper and is responsible for making sure the firm complies with conduct requirements. Broker companies must also meet financial requirements, such as minimum paid-up capital and net assets, professional indemnity insurance and proper handling of client money.

A licence is normally valid for three years, and the licensee must apply to renew it before it expires. The IA may attach conditions to a licence and reconsiders at renewal whether the licensee is still fit and proper.

Other Regulatory Measures 其他監管措施

Licensed intermediaries must comply with the statutory conduct requirements and with the IA's Code of Conduct for Licensed Insurance Agents and Code of Conduct for Licensed Insurance Brokers. These include acting honestly and fairly, acting in the client's best interests, making proper disclosure and giving suitable advice. Licensees must also complete a set number of continuing professional development hours each year, including some on ethics or regulations.

The IA has powers of inspection and investigation. Where a licensee is guilty of misconduct or is no longer fit and proper, the IA may impose disciplinary sanctions: a public or private reprimand, suspension or revocation of the licence, a ban on applying for a licence for a period, and a pecuniary penalty. The penalty can be up to HK$10 million or three times the profit gained (or loss avoided) through the conduct, whichever is greater. Imprisonment is a criminal penalty that only a court can impose; it is not an IA disciplinary sanction.

A person affected by a specified decision of the IA may apply to the Insurance Appeals Tribunal for a review. Members of the public can complain to the IA about an intermediary's conduct, while disputes over policy claims can go to the Insurance Complaints Bureau.