ComplianceOne Insurance Newsletter – Mar 2025
The topics discussed in this monthly newsletter are as follows:
1. IA and HKMA Clarify Regulatory Framework for Indexed Universal Life (IUL) Products
2. IA publishes its Annual Report 2023-24
3. Insurance Complaints Bureau Releases 2024 Claims Complaint Statistics and Case Review
4. Macau Prepares for a Modernized Insurance Framework
5. PAObank Secures Insurance Agency License and Forms Strategic Partnerships
6. First Case of Insurance Broker Fined for Late Submission of Financial Statements
7. Suspension of Chan Lok Wang’s Insurance License for falsification client signature
IA News Updates
1. IA and HKMA Clarify Regulatory Framework for Indexed Universal Life (IUL) Products
On 7 April 2025, the IA and Hong Kong Monetary Authority (“HKMA”) issued a circular to chief executives of authorized insurers, institutions, and licensed insurance intermediaries, addressing the growing interest in Indexed Universal Life (“IUL”) insurance products among high-net-worth clients. The circular clarifies the application of the insurance regulatory framework to IUL products, ensuring policyholder protection and fair treatment.
Classify Scope:
IUL products combine life insurance with a cash value component tied to financial indices (e.g. stock market indices), offering premium payment flexibility. Unlike traditional universal life insurance, the cash value is linked to index performance, classifying IUL as Class C (linked long term) business under the Insurance Ordinance (Cap. 41).
Regulatory Application:
As Class C business, IUL products fall under guidelines such as GL15 (Underwriting Class C Business) and GL26 (Sale of ILAS Products), alongside cross-referenced GL28 (Benefit Illustrations) and GL30 (Financial Needs Analysis).
However, recognizing IUL’s hybrid nature with traditional universal life features, certain GL16 (Underwriting Long Term Insurance Business) provisions also apply. For IUL products sold exclusively to Professional Investors (“PIs”) as defined by the Securities and Futures Ordinance (Cap. 571), adjustments to GL15 and GL26 requirements are permitted to balance practicality and protection.
Key Highlights:
Some Class C provisions are less relevant to IUL or require tailored application.
Traditional universal life elements necessitate select GL16 compliance.
For PI-only sales, certain GL15 and GL26 rules can be offset without compromising safeguards.
SIGNIFICANCE:
This clarification responds to industry enquiries amid rising demand for IUL products, offering a practical framework that aligns innovation with regulatory oversight. It ensures robust protection for sophisticated investors while fostering market growth.
The Annex to the circular details specific guideline provisions and their adjusted application for IUL products targeting PIs, which insurers and intermediaries must follow.
2. IA publishes its Annual Report 2023-24
The IA released its Annual Report 2023-24 on 19 March 2025, titled "Striding towards a Sustainable Future."
This report showcases the IA’s pivotal role in guiding Hong Kong’s insurance industry through a challenging year, spotlighting key achievements such as:
Risk-based Capital (RBC) Regime
The IA successfully implemented the RBC regime, a framework that requires insurers to maintain capital aligned with the risks they underwrite. This ensures financial stability, protects policyholders, and positions Hong Kong as a leader in global insurance standards.
Insurance-linked Securities (ILS) Market
Progress in developing the ILS market has allowed insurers to transfer risks to capital markets, enhancing risk management and attracting international investors. This strengthens Hong Kong’s reputation as a premier financial hub.
Conduct Supervision and Disciplinary Enforcement
The IA intensified its efforts to oversee conduct and enforce disciplinary measures, ensuring that insurers and intermediaries uphold high ethical standards. These actions safeguard policyholder interests and bolster trust in the industry.
SIGNIFICANCE:
Through these initiatives, the IA is not only addressing today’s challenges but also laying a foundation for the long-term sustainability of Hong Kong’s insurance sector. The report reflects a commitment to resilience, innovation, and policyholder protection in an ever-evolving global landscape.
The complete Annual Report 2023-24, along with an engaging abridged animated version, is now available on the IA website.
3. Insurance Complaints Bureau Releases 2024 Claims Complaint Statistics and Case Review
The Insurance Complaints Bureau (“ICB”) in Hong Kong released its 2024 claims complaint statistics on 27 March 2025, showing a rise in disputes, particularly in medical and travel insurance. Of the 646 cases received, 356 were resolved, with 111 complainants receiving over HK$10 million in total compensation, the highest being HK$120,000.
The 356 resolved cases showed the following distribution:
Policy term interpretations: 54% of cases, the most common issue.
Exclusions: 16.5% of cases.
Non-disclosure of facts: 15.5% of cases.
Leading policy types causing disputes were:
Hospitalization/medical insurance: 46% of cases.
Travel insurance: 27% of cases.
Key Case Examples:
Medical Insurance Dispute:
A policyholder insured in 2018 declared good health but later clarified on the policy issuance date that a 2017 hospital record (using her social security card) belonged to her father due to liver issues. In 2023, diagnosed with breast cancer, she claimed compensation, but the insurer initially denied it, citing non-disclosure of liver conditions diagnosed as primary biliary cirrhosis. The ICCP investigated, noting she provided a 2022 normal liver ultrasound report, indicating she was unlikely to have had liver disease in 2017. The ICB ruled in her favor, ordering the insurer to pay HK$120,000.
Travel Insurance Dispute:
A policyholder planned a trip but a blizzard halted train services for three days, delaying his scheduled trip. The insurer offered 50% of the trip delay limit, arguing no specific train ticket was booked. The ICCP found the delay due to "adverse weather" was covered, supported by evidence like hotel bookings, and recommended full compensation, which the insurer accepted.
SIGNIFICANCE:
The 2024 data reflect the ICB’s role in balancing consumer protection with industry practices, particularly as medical and travel insurance disputes rise.
Those cases illustrate the ICCP’s emphasis on objective evidence and fair interpretation, suggesting policyholders need accurate disclosures and insurers clear term explanations. It serves as a reference for insurers and policyholders, highlighting communication and evidence’s role in reducing disputes, especially in an increasingly complex insurance environment for medical and travel policies.
4. Macau Prepares for a Modernized Insurance Framework
The Monetary Authority of Macau (“AMCM”) is laying the groundwork for the new Insurance Intermediaries Law (Law No. 15/2024), set to take effect on 1 August 2025.
Key changes in the law include:
Extending license validity to two years
Introducing pre-approval and notification requirements for specific actions
Expanding suitability assessments for intermediaries
Enhancing the AMCM’s supervisory powers
The AMCM has taken proactive steps to ensure a smooth transition. Recently, it joined an exchange session hosted by the Macau Financial Society, briefing representatives from banks, insurers, brokerages, and corporate agents on the law’s details.
SIGNIFICANCE:
These updates go beyond mere administration—they align Macau’s standards with global best practices, boosting the sector’s competitiveness and resilience.
This landmark legislation replaces the outdated Decree-Law No. 38/89/M, in place for 36 years, and aims to bring the regulatory framework for insurance intermediaries into the modern era. With 7,798 licensed intermediaries as of 30 April 2024, this sector is a vital pillar of Macau’s financial ecosystem.
Market News
5. PAObank Secures Insurance Agency License and Forms Strategic Partnerships
On 5 March 2025, PAObank – a leading digital bank in Hong Kong, has been granted an insurance agency license by the IA. This milestone allows PAObank to act as an intermediary. PAObank will provide customers with a range of general and life insurance products, all accessible through a seamless, fully online purchasing experience.
The IA-issued license empowers PAObank to broaden its financial services by offering insurance solutions. As an insurance agency, PAObank will distribute products from its appointing principals China Ping An and FWD to its growing customer base.
Strategic Partnerships
PAObank has partnered with two powerhouse insurance providers: China Ping An Insurance (Hong Kong) Company Limited and FWD Life Insurance Company (Bermuda) Limited. These collaborations unlock a broad spectrum of insurance offerings, ranging from general policies such as motor, travel, and home insurance, courtesy of Ping An, to life insurance solutions provided by FWD.
Digital Innovation
PAObank is redefining convenience by harnessing advanced fintech and API technology. By syncing its digital platform with those of Ping An and FWD, the bank offers a streamlined, entirely online process for purchasing insurance. Customers can now browse options, choose coverage, and finalize policies in just a few clicks without any paperwork or branch visits required.
SIGNIFICANCE:
PAObank 's entry into the insurance business is not only a major step forward for its business, but also demonstrates its determination to build a comprehensive financial services platform. Through its collaboration with Ping An Hong Kong and FWD, relies on the professional advantages of the United Insurance Group to provide customers with high-quality insurance products, while combining its banking digital technology advantages to meet the market's urgent demand for convenient financial services.
This "bank + insurance" (bancassurance) model is not unfamiliar in Hong Kong, but PAObank has taken this traditional cooperation to a whole new level with its fully online service model. Customers can purchase reliable protection for themselves and their families in just a few simple steps.
Enforcement News
6. First Case of Insurance Broker Fined for Late Submission of Financial Statements
On 19 March 2025, a licensed broker company was convicted by the Eastern Magistrates’ Courts and fined $26,060 for failing to submit audited financial statements within the required six-month deadline, on two occasions. This is the first such conviction by the IA.
Case Overview
The licensed broker company, was found guilty of contravening section 73(1) of the Insurance Ordinance (Cap. 41). The company failed to submit its audited financial statements, auditor’s report, and auditor’s compliance report within the mandatory six-month period following the end of its financial year—on not one, but two separate occasions.
As a result, the court imposed a fine of $26,060.
SIGNIFICANCE:
These documents are more than just paperwork—they are vital tools for assessing whether a broker meets the regulatory standards necessary to responsibly handle public insurance business. Regulators (including IA) relies on them to ensure transparency, accountability, and trust within the industry. Failing to submit them on time can signal potential issues with a broker’s operations and erode public confidence.
This case highlights the need for strict adherence to regulatory requirements to uphold industry standards and public trust.
7. Suspension of Chan Lok Wang’s Insurance License for falsification client signature
On 12 March 2025, the IA suspended Mr. Chan Lok Wang’s insurance license for four months. The suspension follows his falsification of a client’s signature on a policy surrender form.
Case Overview
In December 2022, Mr. Chan, having inherited a client from colleagues at his company, received a partially completed surrender form signed by the client to terminate one of their two long-term insurance policies. Mistakenly assuming the client intended to surrender both policies, Mr. Chan photocopied the original form, completed it with details for the second policy, and submitted it without verifying the client’s intentions. Consequently, both policies were cancelled.
In determining the four-month suspension, the IA considered several factors: Mr. Chan’s admission of his misconduct, the internal disciplinary measures already imposed by his insurer, and his full cooperation throughout the IA’s disciplinary process.
SIGNIFICANCE:
[End of ComplianceOne Insurance Newsletter – March 2025]
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