ComplianceOne Insurance Newsletter – Dec 2024
The topics discussed in this monthly newsletter are as follows:
1. IA Proposes Cap on First-Year Commissions for Savings Insurance Policies
2. Asian Insurance Forum 2024 Concludes with Record Participation and Key Insights
3. Change of Managers for Tahoe Life Insurance Company Limited to maintain stability
4. Stephen Yiu Kin-wah was reappointed as the Chairman of Insurance Authority
5. IA publishes revised Guidelines on Cybersecurity and Guideline on Actuary’s Report
IA News Updates
1. IA Proposes Cap on First-Year Commissions for Savings Insurance Policies
The IA is consulting the industry on new regulatory measures for the sale of participating savings insurance policies, aiming to address sales malpractices. The IA proposes capping the first-year commissions at 65%, down from the current rates which can exceed 90%.
The IA suggests a transition period of 6 to 9 months, with implementation as early as mid-2025. This change is expected to impact around 100,000 insurance intermediaries in Hong Kong. For more details, please refer to the original source – Stheadline 2024-12-17
Reasons for the Proposal
This initiative follows the IA's May 2024 circular and Annex, which highlighted issues such as unlicensed referrers, high first-year commissions leading to "orphan policies" and inadequate after-sales service. The Conduct in Focus – August 2024 also addressed the need for better claims handling and provided guidance on regulatory matters which meant to be a best practice only, but the IA now seeks to formalize these practices into regulatory requirements to ensure better compliance and consumer protection.
Industry Reactions and Concerns
The proposed cap on first-year commissions has sparked significant reactions within the industry. Currently, commissions for brokers can reach up to 90%, while agents typically receive 30-40%, depending on the policy term and the company. The IA's proposal aims to curb these issues by spreading the remaining 35% of commissions over the second to sixth years for policies with periodic payments.
SIGNIFICANCE:
The IA's initiative is part of a broader effort to enhance consumer protection and ensure fair treatment of policyholders. The proposed measures also include setting upper limits on projected returns and establishing a comparison platform for dividend realization rates.
2. Asian Insurance Forum 2024 concludes with record participation and key insights
The Asian Insurance Forum (“AIF”) 2024, themed Rising to the Challenge amidst Global Volatility concluded with over 2,400 attendees. The forum featured insightful speeches and panel discussions by over 20 esteemed speakers, focusing on global supervisory priorities, bolstering the headquarters economy, and insurance solutions in wealth management.
Keynote speakers included:
Mr. John Lee, Chief Executive of the HKSAR;
Mr. Stephen Yiu, Chairman of the IA;
Mr. Jonathan Dixon, Secretary General of the International Association of Insurance Supervisors (“IAIS”); and
Ms. Luo Yanjun, Director General of the Personal Insurance Supervision Department of the National Financial Regulatory Administration (“NFRA”).
A significant announcement was that Hong Kong will host the 2026 International Association of Insurance Supervisors (“IAIS”) Annual Conference.
Impact on the Insurance Sector
The forum underscored the pivotal role of insurance in mitigating uncertainties and fostering sustained progress. It highlighted Hong Kong's leadership in the insurance sector and the opportunities for regional integration and cooperation, particularly within the Guangdong-Hong Kong-Macao Greater Bay Area.
SIGNIFICANCE:
The AIF 2024 showcased Hong Kong's strategic position as a global financial center and a hub for asset and risk management, emphasizing the importance of insurance in navigating global volatility and driving future growth.
3. Change of Managers for Tahoe Life Insurance Company Limited to maintain stability
The IA appointed new managers for Tahoe Life Insurance Company Limited (“Tahoe Life”) due to ongoing financial and governance issues. On 17 December 2024, Mr. Glen Ho and Mr. Ivan Chan of Deloitte Touche Tohmatsu were appointed as Joint and Several Managers, joining Mr. Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd.
The IA announced to take full control of Tahoe Life, effective on 26 July 2024. This decision follows a series of supervisory interventions since mid-2020 to protect policyholders' interests. For more details of the Tahoe Life case, please refer to ComplianceOne Insurance Newsletter – Jul 2024 (Topic 8) or IA Enforcement News.
Impact on Policyholders
These appointments follow the resignation of previous appointed manager Mr. Derek Lai and Mr. Forrest Kam. The change in management will not affect the terms and conditions of existing policies. Policyholders are encouraged to carefully consider their circumstances and avoid making hasty decisions, as life insurance products are long-term commitments.
SIGNIFICANCE:
The IA's proactive measures aim to maintain stability and trust in Tahoe Life's operations, ensuring policyholders' interests are safeguarded during this transition period.
4. Stephen Yiu Kin-wah was reappointed as the Chairman of Insurance Authority
The Government announced new appointments to the IA effective from 28 December 2024. The Chief Executive has reappointed Mr. Stephen Yiu Kin-wah as Chairman of the IA. Additionally, the Financial Secretary has reappointed nine incumbent Non-Executive Directors (“NEDs”) and appointed three new NEDs.
Mr. Yiu expressed his enthusiasm for the new appointments, highlighting the valuable experience and fresh perspectives the new NEDs will bring. He also conveyed deep appreciation for the contributions of outgoing NEDs Dr. Evelyn Lam, Dr. Ares Leung, and Professor Anna Wong in setting the corporate vision and strategic goals of the IA.
SIGNIFICANCE:
The reappointments and new appointments bring a wealth of expertise to the IA, ensuring continued strong leadership and effective regulatory oversight.
IA Regulatory Updates
5. IA publishes revised Guidelines on Cybersecurity and Guideline on Actuary’s Report
The IA has published and revised two important guidelines to enhance regulatory compliance and operational standards within the insurance industry. Both guidelines incorporate feedback from authorized insurers to ensure practical and effective implementation.
GL20: Guideline on Cybersecurity
Attachment: Revised GL20
Effective from 1 January 2025, the revised GL20 introduces the Cyber Resilience Assessment Framework (“CRAF”) that provides prescriptive guidelines on risk assessment and control principles to assist authorized insurers in implementing their cybersecurity frameworks effectively. The CRAF aims to bolster the cybersecurity resilience of insurers.
GL35: Guideline on Actuary’s Report of Investigation in respect of Long Term Business
Attachment: GL35
Effective from 31 December 2024, the GL35 sets out expectations for actuarial reports and introduced in view of the enactment of the Insurance (Submission of Statements, Reports and Information) Rules (Cap. 41S). It outlines the IA’s expectations for the minimum scope and content of actuarial reports required under section 18 of the Insurance Ordinance (Cap. 41).
[End of ComplianceOne Insurance Newsletter – November 2024]
For more details, please click on the title of the topic above.
=================================
~ Make It Right Today, Better Tomorrow ~
=================================
The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice.
For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607.
Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong
Tel: (852) 39550277 www.complianceone.hk