Hong Kong government seeks HK$650m funding to set up Insurance Authority
The government is seeking a funding of HK$650 million to set up the Insurance Authority, which will regulate the 80,000-odd insurance salespeople in the city and crack down on misselling and other malpractices, a government official told lawmakers of the Financial Affairs Panel on Monday.
While some lawmakers are concerned that government grant may not be sufficient for the new regulator, one of them criticised the funding model for making policyholders pay more than insurers.
Eddie Cheung Kwok-choi, deputy secretary for Financial Services and the Treasury told lawmakers in the monthly Financial Affairs Panel meeting that the government will need the sum to operate the regulator for its first five years.
“The funding is needed as seed money for the new regulator before it can collect sufficient money from the levy to be paid by policyholders and licence fees paid by insurance companies and salespeople,” he said
Those fould guilty by the Insurance Authority of misconduct will face a range of penalties, from having their licence suspended or revoked to a maximum fine of up to HK$10 million.
This will be different from the current regime of the Office of the Commissioner of Insurance. As a government department, the office only regulates insurance companies but not their agents or bank staff who sell policies. These salespeople currently need to just register with their industry body in a self-regulatory model.
“The insurance salespeople in Hong Kong now do not need to apply for any licence. The new Insurance Authority will end this self-regulatory system and all salespeople would need to apply for licence from the authority and be subject to its regulation,” Cheung said.
The new authority to be set up next year will have 240 staff and an annual budget of HK$200 million.
“The long-term target is for the Insurance Authority to be financially independent of the government, with about 70 per cent of its expenditure met by the levy paid by policyholders and the rest by insurance companies and insurance salespeople,” Cheung said.
Legislator Leung Kwok-hung criticised this funding model.
“Why should policyholders pay a larger portion of the funding cost? It should be the insurance companies who should pay more to support the authority,” Leung said, adding he would demand more discussion on the funding model.
“Consumers are the users of the insurance industry and a better regulation would benefit them. The levy will be capped at HK$100 per year for per life policy and HK$5,000 per general policy. It is very reasonable and affordable,” Cheung said in response.