ComplianceOne Insurance Newsletter - Aug 2024
The topics discussed in this monthly newsletter are as follows:
IA Regulatory Updates
1. Statistics showed total gross premium increased in Hong Kong in 2024-1H
On 30 August 2024, the IA released a report highlighting a 5.1% increase in total gross premiums to $310.9 billion for the first half of 2024, showcasing the industry’s resilience and growth.
Key Highlights:
Long Term Business:
Total revenue premiums reached $273 billion (up 5.5%).
Individual Life and Annuity (Non-Linked) business grew by 6.9% to $243.3 billion.
New office premiums increased by 12.3% to $115.9 billion.
General Business:
Gross premiums rose to $37.9 billion (up 2.4%).
Accident & Health business saw a 12.5% increase to $11.7 billion.
Motor Vehicles business grew by 8.5% to $2.8 billion.
SIGNIFICANCE:
These statistics underscore the robust growth and stability of Hong Kong’s insurance sector, highlighting its ability to adapt and thrive amidst changing market conditions. The significant rise in premiums across various segments indicates strong consumer confidence and a healthy demand for insurance products.
This growth not only reinforces Hong Kong’s position as a leading international insurance hub but also emphasizes the importance of maintaining stringent regulatory standards to ensure continued trust and integrity in the industry.
2. The latest “Conduct In Focus” published by the IA provided various guidelines to the industry.
The IA published its latest issue of Conduct In Focus on 16 August 2024, presenting the latest complaint statistics and disciplinary actions. The role of insurance brokers in the life insurance market.
Topics include:
Standards to prevent unlicensed selling, especially to Mainland China visitors.
Fair commission structures.
Best practices for renewal notices.
A call for insurers and brokers to join the SMS Sender Registration Scheme to protect customers from scams.
Benefits of using online self-service portals.
The IA has also restructured its Market Conduct Division to enhance prevention and deterrence. Starting 23 September 2024, the IA will charge fees for processing insurance intermediary licensing applications and related notifications, following the end of a five-year waiver period. This new fee structure aims to sustain the IA’s regulatory functions.
SIGNIFICANCE:
Featured article delves into the role of insurance brokers in the life insurance market, focusing on the standards, controls, and procedures required by the IA.
The issued emphasize that this will continue to be a key focus of future regulatory and enforcement efforts, including a more comprehensive consideration of how to ensure commission structures align with the “fair treatment of customers” principle.
3. Reminder to submit Audited Financial Statements and Auditor’s Report under Section 73(1) of the IO (Cap.41) before the deadline.
The IA reminds licensed insurance broker companies of their obligation to submit audited financial statements and an auditor’s report under Section 73(1) of the Insurance Ordinance (Cap. 41) (“IO”) within six months after the end of each financial year. This requirement ensures transparency and compliance with financial regulations. Failure to comply may result in fines and enforcement actions.
If a broker company cannot meet the deadline due to circumstances beyond its control, it must apply for an exemption under Section 79 of the IO before the deadline.
SIGNIFICANCE:
Applications for extensions submitted from 23 September 2024 onwards will incur a fee. No extensions will be granted after the deadline has passed.
Enforcement News
4. AIA was fined HKD 23 million for delays in identifying politically exposed persons (PEPs)
The IA conducted an on-site inspection of AIA International Limited’s Hong Kong branch under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615).
The IA found issues with the company’s AML system, leading to delays in identifying politically exposed persons (PEPs) and conducting enhanced due diligence. As a result, the IA ordered AIA to submit a report by an independent advisor validating remediation measures and imposed a HK$23 million penalty. AIA has since implemented measures to strengthen its AML controls and governance.
SIGNIFICANCE:
In recent enforcement news, the IA is firmly upholding robust AML controls to maintain trust and integrity in the insurance industry, with a particular emphasis on due diligence process requirements.
5. Former insurance agent was sentenced to prison for mishandling premium payments.
The IA drew public attention with a press release on 26 August 2024, announcing that a former insurance agent was sentenced to three months and two weeks in prison and ordered to pay compensation for misappropriating HK$60,000 in premiums, which led to a client’s policy lapsing in 2021.
The agent was arrested after a police report and pleaded guilty on 22 April 2024, under Section 9 of the Theft Ordinance (Cap. 210). The IA stresses the importance of handling premium payments correctly and advises policyholders to use official payment channels.
SIGNIFICANCE:
The severe consequences of misappropriating premiums in this case serve as a strong deterrent, warning others in the industry against similar actions.
6. IA banned individuals for making use of false documents in applying for registration as licensed insurance agents
The IA has banned four individuals for using false academic certificates to apply for registration as licensed insurance agents between 2014 and 2019.
Three individuals used certificates from a non-existent university in Mainland China, while the fourth used a certificate that the issuing institute confirmed was not valid. One individual received a 23-month ban, and the other three received 35-month bans. The IA emphasizes that using false documents undermines industry integrity and public trust.
SIGNIFICANCE:
The IA emphasizes that using false or forged documents is a serious offense that damages the integrity of the insurance industry. Such actions erode public trust and are unfair to honest practitioners.
[End of ComplianceOne Insurance Newsletter – August 2024]
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The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice.
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