Government stands by best interest clause in proposed insurance law
Consumer protection provision will remain in insurance bill, the government says
The government said it will not agree to insurance industry requests to scrap a provision in proposed legislation requiring all insurance salespeople to act in the "best interest" of their clients.
Deputy secretary of financial services Eddie Cheung Kwok-choi said the provision was needed to protect the public.
"The Mandatory Provident Fund legislation also has the same provision requiring all intermediaries to act in the best interest of members. Many insurance agents are selling MPF policies already and they have no problem with that," Cheung said.
The best interest provision is generating the most heat in Legislative Council debates on the topic before lawmakers vote some time next year on establishing a new regulator for the insurance industry in 2016.
The proposed Insurance Authority would replace the Office of the Commissioner of Insurance, overseeing companies and issuing licences to the city's 70,000 insurance salespeople, who currently do not need a license to operate.
The Hong Kong Federation of Insurers (HKFI), representing the industry, is opposed to the best interest provision. Chief executive Peter Tam said the industry supported policy holder protection, but the proposed provision would lead to lawsuits.
"Best interest is a vague and subjective concept. It sets a very high expectation standard for insurance agents, and that may easily lead customers to launch lawsuits and claims against intermediaries," he said.
Tam suggested that the best interest provision not be included in the law itself, but added to the code of conduct of the Insurance Authority, which would allow the regulator to penalise agents who acted improperly.
Cheung said the government did not see the need to scrap the provision, citing the HKFI's own Code of Practice for Life Insurance Replacement - issued in 2010 - that also says agents must act in the best interest of policyholders.
"The HKFI has the same code and it did not have a problem with it," Cheung said. "The Insurance Authority, after it is set up by the bill passed by lawmakers, will issue guidelines on the conduct requirements."
The Law Society of Hong Kong also expressed concern over the best interest provision in its submission to lawmakers.
The society said because agents were hired by insurers and had to act in their interests, they might not be able to act in the best interests of clients.