Insurance Intermediary Defraud Insurer

An insurance intermediary in Hong Kong has been found guilty of conspiring with two policyholders in a scheme to deceive an insurer into making accident insurance payouts based on falsified injury claims. The conviction, handed down by the Eastern Magistrates’ Courts on Oct. 31, follows an Independent Commission Against Corruption (ICAC) investigation into alleged fraudulent claims.

Life Insurance Fraud - Lalwani Jay Jerome, 35, who was previously affiliated with Asia One Asset Management Limited as a REFERRER , was convicted on 4 counts of conspiracy to defraud, according to Hong Kong Common Law.

Magistrate deferred sentencing to Nov. 19, pending a background report. Bail was granted for Lalwani, who was ordered to pay restitution of approximately HK$52,000 to the insurer.

According to the court proceedings, Lalwani conspired with two policyholders, Tam Kai-chun and Lam In-kwan, to submit claims for injuries they did not sustain. In 2017 and 2018, Tam and Lam had obtained life insurance policies with accident riders from AIA International Limited through Lalwani, who at the time was working as an insurance referrer. These policies covered medical expenses and injury-related compensation, but claims required documentation such as medical receipts and records of sick leave from licensed medical providers.

Investigation Uncovers Falsified Documents - ICAC investigators discovered that the documents submitted by the policyholders and Lalwani, including medical receipts and sick leave notes, were falsified. Tam and Lam did not, in fact, suffer the claimed injuries nor undergo the stated medical treatments.

Based on these fraudulent claims, the insurer was misled into issuing compensation payments totalling over HK$52,000. Both policyholders, Tam, 37, and Lam, 33, were charged separately by the ICAC for their roles in the fraud and had already pleaded guilty. Their cases are set for mention on Nov. 25.

Life Insurance Referrer Model

The Hong Kong Insurance Authority (IA) has issued its latest Conduct - which includes significant updates for the insurance industry, such as new compliance regulations for brokers, the introduction of licensing fees, and refined standards for life insurance brokers, particularly in the context of referral business.

Referral Model - A major highlight in this issue is the IA’s new guidelines for insurance brokers that use referral models, especially those aimed at attracting Mainland China visitors (MCVs).

The IA emphasized that brokers must ensure Unlicensed Referrers do not participate in regulated activities, which includes advising on or selling insurance products. Non-compliance could result in severe consequences, such as suspension or revocation of licenses.

Brokers are now required to implement stringent due diligence processes for referrers, maintain comprehensive records and regularly evaluate compliance with these guidelines. Insurers working with these brokers must also ensure regulatory adherence through well-defined agreements, ongoing training, and regular monitoring. These measures are intended to protect the market’s integrity and ensure fair treatment of consumers.

In tandem with these compliance updates, the IA announced that starting September 23, 2024, fees will be introduced for processing insurance intermediary license applications and related notifications.

This development follows the expiration of a five-year waiver, which began when the regulator took on the regulatory role for insurance intermediaries in 2019. The new fee structure, developed after industry consultation, is designed to cover the costs associated with the IA’s regulatory functions.

Additionally, the fees will fund improvements to the IA’s technology-driven licensing processes and support public education campaigns that aim to help consumers make informed insurance choices.

Other Conduct In Focus Key Topics - The latest issue of Conduct in Focus also covers several other key topics. These include:
- best practices for general insurers when issuing renewal notices;
- the importance of participating in the SMS Sender Registration Scheme to 

  safeguard customers from fraudulent activities; 

- and the advantages of using insurers’ online self-service portals.

Insurance Authority Market Conduct Division Overhaul - In addition, the IA announced the reorganization of its Market Conduct Division into two new divisions: the Conduct Supervision Division and the Enforcement Division, to emphasize both preventive measures and enforcement actions.

As the industry adapts to these new compliance requirements and the introduction of fees, the IA has offered assurances that it will collaborate closely with stakeholders to ensure a smooth transition.

Tik Tok To Tokopedia

A year ago, TikTok’s ecommerce business in Indonesia was thriving. With its viral videos, TikTok had become a worldwide phenomenon, and it was translating its influence into a powerful new revenue stream by letting users buy and sell things while its videos played.

Indonesia was a critical market and the first place where TikTok rolled out this feature. The app, owned by the Chinese tech giant ByteDance, had about 130 million users, nearly as many as it had in the United States. Since its launch here in 2021, TikTok Shop had become one of the most popular places for Indonesians to buy things online.

Regulatory Guideline Change - Then one day, TikTok said it was removing Shop from its app in Indonesia. The government declared that social media platforms would no longer be allowed to process online payments. TikTok was forced to abruptly halt its ecommerce operations.

Some Indonesian officials argued that TikTok was so popular it threatened to monopolise online shopping, while others said it didn’t have the right license. TikTok’s defenders in the industry said the government was acting on behalf of TikTok’s competitors in Indonesia.

The government’s edict did not name TikTok. It didn’t need to. No other app blended social media and ecommerce the way TikTok did.

India Payback - Dealing with official scrutiny is familiar terrain for TikTok. The government in India, once home to the app’s largest audience, banned TikTok in 2020 as payback for a violent border dispute with China. In the United States, TikTok is facing a possible ban that could begin as soon as January after spending years fielding concerns about its influence and security.

But the threat in Indonesia had the potential to deal an especially devastating blow to ByteDance’s ambitions to make a lot of money with ecommerce. ByteDance wanted TikTok to repeat the success of its sister app, Douyin, whose live video shopping business in China topped US$200bil in transaction value in 2022.

Old Wine New Bottle - TikTok executives scrambled for a way to continue to offer ecommerce. Word spread through the Indonesian tech community that TikTok was looking for a local company to team up with. And within weeks, it was ready to buy a stake in Tokopedia, a former startup that had become one of Indonesia’s main ecommerce platforms.

That date had been one of the biggest days for deals on ecommerce platforms in China for years, and the trend had caught on in Indonesia. In recent years, the government promoted it as a day for buying from small businesses.

TikTok Shop restarted as a pilot program under government supervision on Dec 11. As it had before, Shop appeared as a tab within the TikTok app. But now it was decked out with Tokopedia’s logo and signature green branding.

The deeper change was on the back end. When a shopper clicked “Buy”, the checkout process ran on Tokopedia’s system. TikTok Shop was still part of a social media platform. But to satisfy the government, the transaction took place on infrastructure built by an Indonesian ecommerce company.

Tokopedia - was a key player in Indonesia, one half of the Indonesian tech conglomerate GoTo. The companies behind GoTo spent years developing payment and delivery technology that made it possible, in a country of 270 million people and 17,000 islands, to buy things online and receive them in a day or two. The deal integrated these systems with TikTok Shop.

TikTok received majority ownership of Tokopedia, which paid TikTok for the right to operate TikTok Shop in Indonesia. GoTo kept just under a quarter of Tokopedia’s shares, and was promised a cut of profits from future TikTok Shop sales. TikTok paid US$840mil and said it would invest further, up to a total of US$1.5bil, in the combined entity.

Worldwide - where TikTok Shop held nearly 20% of the ecommerce market last year, officials say they are mulling rules for the platform. And the Indonesian government isn’t done regulating the ecommerce industry. This month, Indonesian officials said they had asked Apple and Google to block the Chinese fast-fashion platforms Temu and Shein from app stores in the country.

TikTok Shop is available in eight countries, including the United States and Britain. But the rest are in Southeast Asia, where its transaction value topped US$16bil last year. If the app is banned in the United States, TikTok will depend even more on Southeast Asia to keep its ecommerce ambitions alive.

TGI Friday Blames Covid

Casual American dining chain TGI Fridays filed for Chapter 11 bankruptcy yesterday in the US state of Texas. The bar and grill chain — known for serving up hamburgers, chicken wings and signature cocktails — said its dozens of restaurants in the United States and abroad would remain open to customers while the company uses the restructuring process to “explore strategic alternatives in order to ensure the long-term viability of the brand.”

TGI Fridays Inc, which filed for bankruptcy, owns and operates 39 restaurants in the United States. Not included in the Chapter 11 process are 56 franchise TGI Friday’s locations in the United States and 40 other countries, which are independently owned, the firm said.

Manocha said the Covid-19 pandemic and the company’s capital structure were the primary reasons for its financial issues.