On 23 September 2019, the Insurance Authority in Hong Kong will take over regulation of insurance agents and brokers from the self-regulatory bodies (SROs), which are the Hong Kong Federation of Insurers, Hong Kong Confederation of Insurance Brokers, and the Professional Insurance Brokers Association.

Under the new insurance intermediary regime, anyone carrying on “regulated activities” must be licensed. Regulated activities are broadly defined to include negotiating or arranging a contract of insurance, inviting or inducting a person to enter into a contract of insurance or to make a material decision, and giving regulated advice. Please refer to our previous article about licensing of employees of insurers here.

The new regime also includes statutory conduct requirements for insurance intermediaries under sections 90 and 91 of the Insurance Ordinance Cap. 41. The Insurance Authority has issued two codes of conduct for licensed insurance agents and insurance brokers setting out the fundamental principles of professional conduct and to inform and explain the statutory requirements. The fundamental principles include honesty and integrity, exercising care, skill and diligence, disclosure of information and conflicts of interest. Such principles are consistent with the principle of the fair treatment of customers enunciated by the International Association of Insurance Supervisors. The codes of conduct can be accessed from the Insurance Authority’s website and please refer to our article on the consultation here.

One particular issue discussed in the consultation conclusions for both codes of conduct was about “referral of businesses” which refers to when a person refers a prospective client to an insurance agent or an insurance broker. The Insurance Authority expressed that referrals are not entirely free from regulatory concerns and if the person making the referral is not licensed, the person must not carry on any regulated activities. The Insurance Authority also expressed concerns about referral fees linked with referrals and that they must not in any way incentivise unlicensed persons to carry on regulated activities. Referrals may be an issue that requires further regulatory consideration.

There is a transition period for existing intermediaries for three years. Existing insurance intermediaries who are validly registered with SROs before 23 September 2019 will be deemed licensees during the transition period. For any pending insurance intermediary applications, applicants will need to make a fresh application to the Insurance Authority after commencement of the new regime.

Most of the current guidelines and codes issued by the SROs will continue to apply as set out in the List of Applicable Rules published by the Insurance Authority, which can be accessed on its website.

Insurance agents and their appointing insurers and insurance brokers are minded to review the new regime and the codes of conduct, and ensure that they are compliant when the new regime commences on 23 September 2019.