THE planned crackdown by the Insurance Commission on unregulated sales of insurance products in Hong Kong is to be welcomed.
In recent years this industry has seen an explosive growth with more than an estimated 20 per cent of the population covered under domestically bought insurance contracts. An insurance contract is a piece of paper, a blob of ink and a promise to pay at sometime in the future, or so the industry saying goes.
What is critical from the consumer's point of view is that the insurance companies selling products in Hong Kong have a reasonable chance of being around in 20 years' time when some of these products are due to pay. The Insurance Commission's crackdown on sales of unauthorised insurance products is a step towards closing a loophole that has plagued the industry for years.
Hong Kong is a very popular place for insurance companies around the world, which are looking to where the insurance product buyers will be in the next century. China is an obvious new market to break in and hence Hong Kong is a great place to base ahead of that market's expected opening in the decade ahead. No wonder why Hong Kong has been inundated by insurance companies and the Insurance Commission has been trying to curtail their numbers.
To avoid accusations of establishing a closed shop or the industry becoming moribund from poor competition, a concession was made to outside insurers. This concession allowed in unauthorised products if a client asked about it or if there was no alternative locally.
The Insurance Commission crackdown comes in the wake of abuse of this concession. It could be used by shady foreign insurers to make big sales in the territory without obtaining full authorisation of comprehensively meeting Hong Kong rules for selling insurance here. The Insurance Commission is acting in the interests of the consumer in the short term.
