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.