IA warns over unlicensed insurance sales

Hong Kong’s Insurance Authority has cautioned brokerage firms against using unlicensed individuals to promote the sale of policies to mainlanders.

This came after an insurance broker and a referrer were arrested last month for allegedly breaches in selling policies to mainland visitors, following an unprecedented joint operation by the IA and the Independent Commission Against Corruption.

The investigation is still underway, IA said.

In a circular issued to licensed brokerages, IA said there are insurance brokers still relying on unlicensed individuals to perform regulated activities without actual supervision by the concerned brokerage companies.

As far as non-compliant practices are concerned, unlicensed individuals refer clients from mainland China to buy long-term insurance policies with savings and investment elements and the insurers would pay them referral fees in reward. The intermediaries then return rebates to the clients, which is prohibited, to purchase more long-term policies.

While the brokerage firms usually do not perform adequate regulated activities in respect of the clients, policy buyers are allegedly asked to sign statements asserting that all the regulated activities are carried out by the brokers in Hong Kong when they are not.

IA said it is also looking into other insurance brokerage firms and licensed insurance companies suspected of pursuing such business model in selling long-term insurance policies.

The authority reiterated to the industry that referral must be conducted in a manner compliant with the code. Brokerage firms must also uphold three principles, putting in place adequate control, process and risk management in the design, implementation and actual adoption of the referral model.

It said licensed insurers must make sure that referrals are made by authorized intermediaries and in line with the regulatory framework of the insurance industry.