The Hong Kong Insurance Authority (HKIA) will take over the regulation of insurance intermediaries from the three self-regulatory organisations in mid-2019.(1) Given that there are several sets of competence standards across these organisations, it is necessary to consolidate and update them in line with the statutory requirements to improve protection for policyholders.(2)
On 28 September 2018 the HKIA held a public consultation on two guidelines under the Insurance Ordinance (Cap 41). It provided guidelines on the following for licensed insurance intermediaries:
- criteria for being fit and proper; and
- continuing professional development (CPD).
A person must meet certain standards to be fit and proper in order to obtain the requisite licence from the HKIA. This commences at the licence application stage and applies for the duration of the registration.(3)
The proposed guideline for being considered fit and proper contains a non-exhaustive list to which the HKIA will refer in order to determine whether an individual licensee is eligible. This list can be grouped into three categories:
- education, qualifications or experience;
- reputation, character, reliability and integrity; and
- financial status or solvency.
As insurance products continue to become more sophisticated, it is increasingly important that licensed insurance intermediaries understand them. The proposed CPD guideline aims to streamline and standardise CPD requirements. This includes setting a minimum education requirement and raising the minimum requirement of CPD hours.(4)
Minimum education requirement To ensure a certain level of professional competency, the HKIA has proposed to update the minimum education requirement, which includes having proficient language and numerical skills. The proposal also takes into account the new Section 90 of the ordinance in which insurance intermediaries are to:
- exercise a level of care, skill and diligence that may reasonably be expected of a prudent person who is carrying out a regulated activity;
- offer advice only on matters in which the intermediary is competent; and
- be aware of the particular circumstances of the policyholder.
The HKIA will recognise the contribution and value of longstanding industry practitioners registered under a self-regulatory organisation. In its transitional arrangement, the HKIA proposes to exempt:
- those who have already been granted a licence by a self-regulatory organisation;
- those previously and validly registered by a self-regulatory organisation within the two-year period immediately before the commencement date of the new licensing regime; and
- individuals registered under a self-regulatory organisation with at least 15 years of industry experience.
CPD requirements The HKIA has also proposed raising the annual requirement of CPD hours for licensed individuals from 10 hours to 15; three of which must be related to ethics or regulations. Subject to the HKIA's approval, online courses (up to five hours) and training courses offered by the self-regulatory organisations and other similar regulatory bodies should be recognised. During each assessment period (1 August to 31 July of the following year), the HKIA proposes that individual licensees report their qualified CPD activities on a CPD declaration form.
During the first assessment period, the HKIA will permit a lower annual minimum requirement of 10 CPD hours (ie, not the regular 15 hours) and waive the requirement to attend CPD activities related to ethics or regulations.
The two-month public consultation period closed on 30 November 2018. The HKIA is in the process of reviewing comments submitted by the public.
For further information on this topic please contact Michael Withington at Howse Williams Bowers by telephone (+852 2803 3688) or email ([email protected]). The Howse Williams Bowers website can be accessed at www.hwbhk.com.
(2) The HKIA consultation on the new regulatory regime for insurance intermediaries titled "Consultation paper on draft guidelines on the fit and proper criteria for licensed insurance intermediaries under the Insurance Ordinance (Cap 41) and continuing professional development for licensed insurance intermediaries".
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