• Sat
  • Dec 20, 2014
  • Updated: 10:30am
White Collar
PUBLISHED : Tuesday, 08 July, 2014, 1:10am
UPDATED : Tuesday, 08 July, 2014, 1:10am

Insurers should always act in clients' best interests

But industry's opposition to requirement to do so in law is perplexing


Enoch Yiu is the chief reporter of business pages at the Post. She writes feature stories with a focus on regulatory issues, stock exchanges, the Securities and Futures Commission, accountancy, insurance, pension and other financial industry development issuse. She has a weekly column, White Collar, covering the latest issues in the professional industry and also hosts podcasts and video programs on SCMP.com. She is the author of two books.

Lawmakers are debating a government reform plan to introduce a new law to set up the Independent Insurance Authority. Going by the debates, it appears there are no strong objections to establishing the body but there is an interesting discussion over a provision in the new law requiring insurers and their agents to act in the best interest of the policyholders.

This debate is a surprise to many. Common sense assumes all financial professionals, including the insurance sector, should act in the best interests of their clients.

But what has come out after several committee meetings is that some insurance industry representatives told lawmakers they are not comfortable with the new law containing the principle requiring intermediaries "to act honestly, fairly, in the best interests of policyholders/potential policyholders and with integrity".

They argue that the principle may lead customers to initiate lawsuits and say it is vague to define what is "in the best interests" of policyholders.

White Collar does not understand why insurers are so worried about this clause. For the public, if they have spent tens of thousands of dollars to purchase the policies, it is because they trust the insurance company and their agents.

It would be a shame if policyholders placed such trust in the companies and their salespersons while they in turn do not want to follow the principle to act in the best interest of their customers.

There are always opportunities for customers to sue the company or the salesperson but that should happen only when the company is doing something harmful to their clients. For the majority of insurers and agents who are doing a good job, they do not need to worry.

We should also have a good read of the Hong Kong Federation of Insurers' Code of Practice for Life Insurance Replacement, which was issued in 2010 and has the same principle of acting in the best interests of policyholders.

Since then, we have not heard of many policyholders rushing to sue their insurers or salesmen.

The Life Underwriters Association has also published a Code of Ethics. Clause 1 of their Code reads: "A life underwriter shall place the interests of his clients before his own and shall advise them to the best of his ability without bias and without regard for his own personal advantage".

Why do these insurance industry bodies have their own version of a code of conduct requiring their members to act in the best interests of their clients, but are so firmly opposed to adding a similar line in the law? It just doesn't make any sense.

The whole idea of setting up the new Insurance Authority is to have a regulator to protect the policyholders' interests. It would not work if the law did not require the insurers and their salespersons to act in the best interest of their customers.

The city has almost 11 million insurance policies and policyholders paid HK$290.7 billion in premiums last year.

These customers should be well protected. Our lawmakers should take into account their interests and require insurers to act in the best interests of clients - all the time.



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This article is now closed to comments

There was an expose' that in the U.S., one insurance company would reject first applications of any claims regardless of their validity.
Surely insurance companies first responsibility is to their shareholders, not their customers?
It makes perfect sense - the industry here offers very poor value for money and terrible service compared to, for example, the UK
Until commissions between competing products and insurers are clearly stated advice is always likely to be biased.


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