Crooked Hong Kong insurance agents claim extra commissions off junior staff
ICAC highlights new industry scam as corruption cases almost double in three years
Corruption complaints against the insurance industry have almost doubled in three years, with senior agents in the industry implicated for a new tactic in which they falsely claim commissions from subordinates.
According to the Independent Commission Against Corruption (ICAC), the number of complaints against insurance companies rose from 19 in 2013 to 35 last year. There were 21 cases in 2014 and 24 in 2015.
Tommy Lui Kar-chung, chief investigator in the ICAC’s operations department, said the manager and supervisor of a team (the up-line agent) would receive an overriding commission if their down-line agents procured an insurance policy.
He said when the senior made a deal with a client, the senior secretly named the junior as the purchasing agent on the policy forms to deceive more commissions from the company.
“Many proposed insurers were not aware that the buyer’s name on the documents they signed was not the agent they knew. They trusted the agent too much and sometimes even signed on blank pages,” said Lui, adding that the tactic was new to the graft-buster.
“The down-line, who made no effort at all, can also receive commissions. On top of the overridding commissions, the supervisor asked the junior for a rebate out of his or her pocket to earn extra.”
Lui said it sounded a good deal to the down-line agents, usually newcomers who needed to hit monthly sales targets to secure their jobs. Some did not realise they were being used until they received commissions from deals they knew nothing about.
In May 2013, a 46-year-old senior unit manager of an insurance company was put behind bars for 16 months after she asked three other insurance agents to sign a number of insurance policy application forms as the handling agent and submitted 41 bogus forms to the company.
The trio paid her over HK$563,000 from their monthly allowances and commissions, even though they had never met the policy applicants. The court sentenced the trio to up to 240 hours of community service.
Lui admitted there were loopholes in the industry’s daily operations and it was not easy for investigators to prove a problematic agent had submitted forms to the company himself or herself as many firms used collection boxes or clerks to gather and transport documents.
“Still, they really received the commissions as shown on bank records. It is hard for them to explain.”
Lui said other common corruption practices in the industry included employees faking education qualifications, agents assisting a proposer to claim medical expenses by using bogus or inflated receipts, and agents diverting business to other agents for higher commissions.
“The brokers made the insurers believe they were signing up for company A’s service, but actually the documents were from company B,” Lui said.
Fourteen people were arrested last year for corruption in the insurance industry and 11 people were prosecuted. In 2015 there were 13 arrests and six prosecutions.
Offering, soliciting or accepting a bribe and use of a bogus document by an agent with intent to deceive his principal are corruption crimes that carry a penalty upon conviction of up to seven years imprisonment and a fine of HK$500,000.