'Most insurance companies in Hong Kong focus on sales figures and turnover. They are paying huge commissions to their salespersons or brokers to compete for business but they do not have sufficient systems in place to vet their agents and customers,' he said.

'The recent spate of life agency frauds is a wake-up call to Hong Kong insurers. Performance improvements will be necessary in agency vetting and warning systems have to improve.'

In September, the Insurance Authority issued a warning to insurers after seven of Hong Kong's leading life insurance groups were alleged to have been cheated out of at least $80 million in commission payments by local brokers.

According to industry sources, insurance brokers are selling long-term investment-linked insurance savings plans and receiving a large upfront commission - 50 per cent to 100 per cent of the first-year premium paid by the policyholders.

On a 20-year, $20,000-a-month savings plan the upfront commission payment could exceed $200,000.

After a few monthly contributions were paid - and the commission fees received - the policies were cancelled.

The insurers have reported the cases to the police.

Mr Whalley said a better vetting system was needed so that insurers would have improved knowledge on the background of their sales agents.

He pointed out, for example, that in Britain all insurance companies were required to report complaints they have received regarding their agents to the Financial Services Authority.

Local insurance companies typically hire agents or brokers without checking their backgrounds or employment records, he said.

An ever-expanding sales force may produce good sales figures but without a vetting system in place those sales may become meaningless if fraud should arise.

Mr Whalley said insurance companies should also have a warning system to check on potential fraud cases involving clients, after a number of recent incidents involving policyholders who defrauded firms.

Last month, a 53-year-old Hong Kong businessman was sentenced to seven months in prison at Eastern Magistracy for attempting to deceive MassMutual Asia of more than $700,000 by making a claim on an insurance policy bought for a mainland woman he said was his sister.

As evidence, he produced a death certificate and said his sister had died after being struck by lightning.

However, an investigation by the Independent Commission Against Corruption found he had no relationship with the woman, who was still alive and had no knowledge of the policy.

It was discovered that the bogus death certificate had been obtained from a funeral parlour.