The government will proceed with the long-awaited insurance regulatory reform by submitting a bill at the end of this month to set up an independent Insurance Authority in 2015, a move that would tighten regulation over the 80,000 insurance sales people in the city.
The reform, to be debated by lawmakers before a possible vote next year, is seen as badly needed given the many complaints against sales people in relation to investment-linked policies in recent years. The 80,000 do not need to apply for licences and are only required register with their own industry bodies, a self-regulation model that would go extinct if the Insurance Authority is set up.
"An independent Insurance Authority … will have a wider power than the current insurance commissioner as the authority will have power to license and regulate the conduct of all 80,000 insurance salespersons in town," said Au King-chi, the Permanent Secretary for Financial Services and the Treasury, in a media briefing yesterday.
"This will enhance policyholders' protection. This will bring Hong Kong in line with the international practices of countries like Britain, Australia and Singapore that also have independent insurance regulators for the industry and the salespersons."
If the lawmakers approve the bill next year, the government will set up the new regulator with 240 staff and an annual budget of HK$200 million.
The authority will be financed by a 0.1 per cent levy on all newly paid insurance policy premiums and the licence fee will be paid by insurance companies and agents.
The Insurance Authority will be run like the Securities and Futures Commission and the Hong Kong Monetary Authority, which are public bodies but do not need to get funding from the government.
All sales people would be allowed to continue to work for three years before they need to apply for licences from the new authority, to give them time to prepare. Like the SFC, the proposed Insurance Authority will have the power to impose a range of penalties on those found guilty of misconduct, ranging from suspension or revocation of their licences and a maximum fine of HK$10 million.
The government first attempted to launch an insurance authority in 2003, but the plan was shelved after strong opposition from the industry. The proposal was raised again in 2011 and the industry finally accepted the change after two rounds of consultations and government determination to push ahead with the reforms.
Au said the authority would also be responsible for developing the local insurance industry and seek ways to help local insurers work in the mainland.
She said the government and the SFC would also discuss regulations on investment-linked insurance products as these are investment fund products that are not regulated by the SFC.
Au said the government would like to see more disclosure on these products, while the new Insurance Authority and the SFC would work together to consider how to regulate these products so as to protect policyholders.