The proposed insurance authority will have the power to temporarily suspend insurance companies or their staff even before the completion of disciplinary procedures.
This would well exceed the power of other regulators such as the Securities and Futures Commission, which can do the same with securities firms or their staff but only after disciplinary procedures are completed.
A government official said yesterday said the power would only be exercised if the authority felt such action was needed to safeguard public interest.
"The temporary-suspension power is a stop-gap damage control measure to protect consumers as it may take a long time for the Insurance Authority to complete disciplinary procedures," she said. Companies or individuals could always appeal such a decision.
The new power has been suggested in the second round of the consultation paper released by the government yesterday. Views on it will be collected in the next three months.
Among other new suggestions, all insurers must hire senior executives to act as the responsible officer for handling internal control issues, and existing insurance agents will have a three-year grace period to apply for a licence from the authority.
Unlike Britain, Australia and Singapore, whose insurance sectors are regulated by an independent body, Hong Kong's insurance companies are overseen by the government's Office of the Commissioner of Insurance. The office, which has about 90 staff, has no power to control agents and brokers, who belong to different self-regulated bodies.
Secretary for Financial Services and the Treasury Chan Ka-keung said the establishment of the authority "is in line with the international practice for financial regulators to be independent of the government".
The government first proposed to set up the authority in 2003 but dropped the plan due to opposition from the industry. A round of consultations in 2010 received more supportive views, but insurers demanded a second consultation on the details.
As a result, the government has missed the original target to set up the body next year. It will now table the drafted law next year for lawmakers to debate, before a vote in 2014.
The authority will be set up in 2015 with about 240 staff and an annual budget of HK$200 million. The government will provide HK$500 million to set it up. It then will be funded by licence fees paid by insurers and agents and levies paid by policyholders.
The authority will have the power to regulate all insurance companies and their 70,000 salespeople. The Hong Kong Monetary Authority will work with the authority to undertake surveillance and investigative work of banks' insurance departments.