Hong Kong insurance regulation update - Regulator Codes of Conduct for Brokers and Agents
With effect from 23 September 2019, the independent Hong Kong Insurance Authority (the IA) will take over regulation of insurance intermediaries from the three existing self-regulatory organisations (the Hong Kong Confederation of Insurance Brokers, the Professional Insurance Brokers Association, and Insurance Agents Registration Board) and administer a new statutory licensing regime.In the run up to this date, the IA has circulated consultation papers on various rules, guidelines and new codes of conduct for insurance brokers and agents. The conclusions on the consultation papers for the codes of conduct were published by the IA on 3 September 2019. These conclusion documents include amended versions of the new (1) Code of Conduct for Licensed Insurance Brokers, and (2) Code of Conduct for Licensed Insurance Agents (the Codes).
The IA has reported that the reaction from the industry to the consultation papers has been largely positive - agreement was expressed on the eight general principles of conduct with complementary standards and practices, as well as the requirements on corporate governance, internal controls and procedures for both insurance agencies and broker companies.
Both of these codes of conduct will be effective from 23 September 2019. The IA has said that, in order to allow sufficient time for transition, it will adopt a flexible approach in considering intermediaries’ compliance with the Codes in the initial period, but expects licensees to comply fully with the codes from 1 January 2020. Whilst the Codes do not have the force of law, they are admissible as evidence in proceedings under the Insurance Ordinance (Cap. 41) before a court and so compliance or non-compliance with the relevant Code may be taken into account in such proceedings.
These regulatory changes have been introduced to strengthen Hong Kong's regime across the financial services sectors as well as improve the quality of service for policyholders. Whilst there will likely be some initial teething troubles as the regulatory demands on market participants increase, the new regime will no doubt continue to develop and adapt. Intermediaries should continue to review systems and controls and identify any deficiencies with a view to being in full compliance by 1 January 2020.