We previously blogged at here and here about the new requirements introduced by the Hong Kong Federation of Insurers (HKFI), the Hong Kong Monetary Authority (HKMA), the Hong Kong Confederation of Insurance Brokers (CIB) and the Professional Insurance Brokers Association (PIBA) respectively with regard to the sale of investment-linked assurance scheme (ILAS) products and disclosure of insurance intermediaries’ remuneration on the sale of ILAS products.
With regard to the disclosure of insurance intermediaries’ remuneration, it is noted that the requirements imposed by the HKMA on authorised institutions (e.g. banks) which are involved in the sale of ILAS products are quite specific both in terms of level and range. On the other hand, the HKFI, the PIBA and the CIB only require (as minimum standards of practice) insurers and insurance brokers to disclose the existence of that remuneration and to make specific disclosure of the level and range of such remuneration only when asked by the policy holders or potential policy holders.
These discrepancies between the requirements imposed by the HKMA and the corresponding requirements imposed by the HKFI, the PIBA and the CIB could create an uneven playing field against banks who are involved as insurance intermediaries in the sale of ILAS products as they are regulated and required by the HKMA to adhere to a higher standard of practice.
Following the publication of these requirements, there have been news reports indicating that banks are cutting back on the sale of ILAS products. According to a news article published by the South China Morning Post on 24 June 2013, HSBC has withdrawn product-specific sales incentives for front-line staff in 2013 to reduce the chance of mis-selling by employees who earn bonuses on selling ILAS products. With several other major banks following suit and shelving ILAS products, insurers may find it difficult to distribute ILAS products through traditional bancassurance arrangements.
Recently, Insurance Insight published on 1 August 2013 that AXA had entered into a partnership with SingaporePost enabling AXA to sell its life insurance products through SingaporePost’s retail network in Singapore from 2015. While that arrangement was not prompted in response to the enhanced requirements on disclosure of insurance intermediaries’ remuneration imposed by the regulators in Hong Kong, it may suggest an alternative channel for insurers to distribute their ILAS products and other insurance products in Hong Kong.