HKIA warns against unlicensed insurance sales to MCVs

New office premiums for life insurance bought by MCVs reached HK15.6b.

The Hong Kong Insurance Authority (HKIA) is warning the public of its recent findings where there has been an increasing reliance on unlicensed salespersons targeting mainland China (MCV). 

“As case in point, during the first three months of 2024, new office premiums for life insurance bought by Mainland China Visitors (MCVs) reached HK$15.6b and accounted for almost 25% of all new office premiums from the life sector,” 

These individuals, despite claiming only to "refer" or "introduce" MCVs to insurance products, often exceed their roles by providing advice, making recommendations, and actively promoting specific insurance policies without the necessary licenses or qualifications. 

This misconduct places MCVs at significant risk of being mis-sold insurance products.

The implications of unlicensed selling are severe under Hong Kong law, constituting a criminal offence punishable by fines and up to two years of imprisonment. 

The IA has adopted a zero-tolerance stance toward such activities, conducting joint operations with the Independent Commission Against Corruption (ICAC) and issuing industry circulars to reinforce strict controls on referral business. These measures aim to safeguard policyholders and maintain confidence in the insurance market.

Why does unlicensed selling harm consumer interests?

1. Lack of Regulatory Oversight: Licensed insurance intermediaries are required to meet stringent regulatory standards, including passing exams, demonstrating expertise, and maintaining ethical conduct. They are duty-bound to act in clients' best interests, ensuring that recommendations align with their financial needs and risk tolerance.
2. The complexity of Insurance Products: Particularly in the case of life insurance with savings and investment components, policies are long-term commitments with variable benefits tied to factors like insurer profits and investment performance. Expertise in explaining these complexities and guiding suitable choices is crucial for protecting consumers' financial interests.
3. Misrepresentation and Mis-selling: Unlicensed individuals lack accountability and may mislead consumers about their qualifications or the suitability of insurance products. They may resort to tactics like offering rebates or misrepresenting themselves as licensed, jeopardizing the validity of policies and leaving consumers with unsuitable coverage.

How can consumers protect themselves?

To mitigate the risks associated with unlicensed selling, consumers, especially MCVs, are advised to:

1. Verify Licensing: Request and verify the business card of any person offering insurance services. The card should display their name, official license number, type of license, and the name of the appointing insurer or agency.
2. Consult the Register of Licensed Insurance Intermediaries: This official register maintained by the IA lists all licensed insurance intermediaries in Hong Kong. Consumers can cross-check the details provided by the salesperson against this register to ensure legitimacy.
3. Seek Confirmation: Contact the appointing insurer or agency directly to verify the legitimacy of the intermediary if there are any doubts or discrepancies.

The IA emphasises consumer empowerment through awareness and education. They have launched public campaigns to educate MCVs and the broader public about the risks of unlicensed selling and the importance of dealing exclusively with licensed professionals when purchasing insurance.