Hong Kong moving too slowly on reforms in insurance and accounting sectors
While everybody’s focus was on the turmoil hitting stock markets in Hong Kong and mainland China, many may have missed out on a pair of major regulatory reform plans of the city on the insurance and accountancy sectors.
Lawmakers on Friday passed the long-awaited law change to set up the independent regulator Insurance Authority which will replace the government department to handle insurance regulation.
This is a major step forward with a provisional Insurance Authority to be set up as early as the end of this year. The proposal was first mulled two decades ago and sparked intense debate to match international practices by having a strong independent authority to regulate about 200 insurance companies and about 70,000 salespersons and products.
The Office of Insurance of Commissioner focuses on regulation of insurance companies but not the salesperson. This maybe part of the reasons that there are many policyholders in recent years who have complained about being misled by the salespersons about risky investment-linked products.
The new Insurance Authority will tighten the regulation and all salespersons will need to apply for a license from the new regulator which will police their conduct.
However, the government said it would need a two to three year grace period for the 70,000 insurance salespersons to apply for a license which really is just too slow. The talks about setting the authority has been going on for years and the salespersons who want to stay in the industry should be prepared by now.
The insurance policies nowadays are big ticket items with some policyholders buying multi-million contracts. Having a licensed insurance salesperson is important.
So speed up this process, please!
The same speed up call is for the government to accelerate reform of the regulatory auditor. The government last week also announced conclusion of consultations to shift more regulatory power from the Hong Kong Institute of Certified Accountants (HKICPA) to the Financial Reporting Council (FRC).
The government appointed FRC, first established in 2007, has already taken over investigation power from the HKICPA to investigate audit failures. The new reform, which will also allow FRC to handle practice review and discipline accountants, is also aimed at matching the international trend to let an independent non-accountancy body to handle the regulation of auditors.
The reform is good, but again it is moving too slowly. The government now plans to submit the bill for the law change on auditor regulatory reform in October 2016. It needs time for lawmakers to debate so the reform may happen only in 2018.
In a fast changing financial world like Hong Kong, that is just simply too long and too slow.