"The punishment might hurt people who want to enter the industry and so affect its development," said Peter Tam, chief executive of the federation.

A consultation on the government's proposed standardised medical insurance plan will be rolled out at the end of this year.

The government has estimated that plans must cost at least HK$3,600 a year to meet its minimum requirements.

It intends to allow Hongkongers to decide whether to buy the insurance, but those plans that cost less would not qualify.

Federation chairman Thomas Lee Mun-nang, who is also vice-president and assistant general manager at American International Assurance, said the federation is still in discussions with the government about the available plans and their prices.

The group opposed a price floor for the plans, as that would undermine the free market.

The federation said the HPS should ensure free competition among medical insurers to improve and expand product offerings for the benefit of consumers.

Some banks have stopped offering investment-linked assurance schemes (ILAS) recently, as starting from the end of last month, regulators have required a higher level of disclosure to protect consumer interests.

Lee said some insurers have also temporarily suspended the sale of ILAS, to ensure that the selling process meets the new rules.

Last month, the Hong Kong Monetary Authority dealt its first punishment for mis-selling ILAS. A former HSBC employee was suspended from the banking register for three years. Tam said the federation's Insurance Agents Registration Board had punished agents found mis-selling ILAS, but this had not been made public.