insurance compliance jan08 update

7/28/2019 Insurance Compliance Jan08 Update

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Mandatory Compliance Training

forInsurance / MPF Intermediaries2008


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Objectives To advise the relevant laws andregulations relating to the insuranceagency businesses/MPF

To go through the Insurance AgencyServicesCompliance Manual

To let associates and supervisorsunderstand their obligations oncompliance and how to discharge theobligations


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Regulatory Authorities Office of the Commissioner ofInsurance (OCI)

Hong Kong Federation of Insurers(HKFI)

Insurance Agents Registration Board

(IARB) Mandatory Provident Fund Schemes

Authority (MPFA)


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IARB Insurance Agents Registration Board(IARB)

assess whether the insuranceintermediaries meet the fit andproper requirements

registration of insuranceintermediaries

receive and handle complaintsrelated to insurance affairs


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Rules, Codes and

Guidelines Code of Practice for theAdministration of Insurance Agents(May06)

Illustration Standards for UniversalLife (Non-Linked) Policies (2002)

Code of Practice for Life Insurance

Replacement (May06) Customer Protection Declaration

Form (Jan05/May06)

Initiative on Need Analysis (May06)


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Rules, Codes and

Guidelines Guidelines on Misconduct (Jun04) Guidelines on Handling of Premiums(Jun04) Guidelines on Effective Date of

Registration of Insurance Agents,Responsible Officers and TechnicalRepresentatives (Jun04)

Guidelines on Compliance with CPD (Jun05) Cooling-off Initiative (Jan03) Revised Guidance Note on Prevention of

Money Laundering and Terrorist Financing

(Jul06)


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StructureInsurance Company

Insurance Agency

Technical

Representatives

Responsible

Officer


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Registration Fit & Proper Criminal Offence

Bankruptcy or Winding Up Misconduct (Professional Body) Non-compliance with the Code

If any of the above occurs, please notifyour Responsible Officer or ComplianceDepartment within ONE business day!


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Registration Registration not exceeding 3 years andre-register no earlier than 3 monthsbefore expiration

Insurance agent is prohibited fromrepresenting more than 4 insurers, ofwhich no more than 2 shall be long term

insurers RO/TR of an insurance agent is prohibited

from being a RO/TR of another insuranceagent

Illegal cross-border selling activities


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Registration General Insurance Long Term Insurance

Investment Linked Long TermInsurance- not entering into discussion withcustomers on underlying securities unlessalso registered as SDS for Type 1/Type 4regulated activities under HKMA Register

Information Card


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Rules of Conduct Identify as insurance intermediary actingon behalf of the Bank and the relevantinsurance companies

disclose the registration number if sorequested

Identifies his registration number on his

business cards if they are distributed give advice only on those matter in which is

competent to deal with


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Rules of Conduct Explain the cover afforded by eachpolicy recommended

Ensure the prospective policy holderunderstandswhat he is buying

explain the differences when making

comparisons with other type ofpolicies


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Rules of Conduct Treat all information supplied by theprospective policy holder as

confidential (need to know basis) Not making inaccurate or misleadingstatements, either fraudulent,

reckless or negligence


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Rules of Conduct Not impose any charges in addition to thepolicy premium without disclosing theamount and purpose of these charges

before the binding of the policy Not pay any part of any commission or

discount allowed to any related party(director, partner or employee of any

insured) as an inducement to place thebusiness


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Rules of Conduct Not influence the prospective policyholder when assisting client to

complete the proposal or applicationform

explain the consequences of fraud,

non-disclosure and inaccuracies tothe prospective policyholder anddraw his attention to the relevantstatements in the proposal form


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Rules of ConductLong Term Insurance Business make every reasonable effort to ensure that the

policy proposed is suitable to the needs and

resources of the prospective policy holder Not pay or offer to pay any rebate of premium,commission or other incentive not specified inthe policy as an inducement to any prospectivepolicy holder

explain the long term nature of the policy and theconsequences of early discontinuance orsurrender


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Rules of Conduct Investment Linked Insurance:brochure and illustration document

Difference between guaranteed andprojected benefits

Past performance may not be a guide

to future performance


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Business Cards On the business cards, there MUSTbe:

Their IARB registration numbers(COP)

Names shown on their Identity Cards(either in full Chinese or English)

(HKFI memo Feb 26, 2003)


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Illustration Standards Ensure adequate disclosure of relevantinformation on policy features and benefits,investment returns and surrender values toenable informed decision

Only such sales proposals and illustrative figuressupplied by the Principal and use the wholeillustration

Clearly state the level/basis of calculation of all

costs and charges payable Sign on the illustration document by proposed

policy owner


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Code of Practice for Life

Insurance Replacement New version effective on May 1, 2006 Prevent mislead of clients into changing existing

life insurance which may creates a real or

potential disadvantage to the client Act in good faith and best interests of client Within 12 months before or after a new policy

effected, an existing life insurance policy orsubstantial part has lapsed, surrendered orconverted to paid-up or extended-term insurance(internal replacement covered)

Complete Customer Protection Declaration (CPD)form


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Customer Protection

Declaration Form New version effective May 1, 2006 Revised Explanatory notes Must be completed before the client

agrees or makes a decision in relation tothe purchase of a new life insurance policy discover any replacement ensure that explanation of the important

consequences has been given ensure client fully understands the important

consequences


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Customer Protection

Declaration Form Must stated the implication ofreplacement: Financial Implication: Real or Potential

Disadvantages e.g. set up cost 2 yearspremium of existing policy(ies)

Insurability Implication: Real or

Potential Disadvantages (e.g. review ofthe health status) Claims Eligibility Implication: Real or

Potential Disadvantages (e.g. suicide

clause/contestability period)


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Initiative on Needs

Analysis New version on Feb 1, 2007 (no opt out) Personal particulars (of the potential

policy holder, e.g.DOB, address, contact no.martial status, occupation)

Needs and Analysis(e.g. financialincome/outgo, usable assets, liabilities, familycommitments,.)

Evaluation and Recommendationtotalprotection needs/reasons forrecommendations

Signature of the selling agent and date ofthe completion of the Form


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Needs Analysis Signed by policy owner and file copy of the Form for insurancebasic plan with:-

sum insured of HK$2,000,000 or above Or annualized premium ofHK$20,000 or single premium HK$200,000

Agents Report filed for all amount to insurance company

Valid for 1 year if purchase additional insurance coverage fromsame insurer

Complete Investment Profile Questionnaire Exception Approval and Customer Suitability Confirmation if risks

of underlying funds are higher that customer risk profile

Vulnerable Customer Policy


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Guidelines on

Misconduct On no account will associate askcustomers to sign blank or

incomplete forms/forged signature Any alternationto the forms must

be initialed by the customer

Prescribed Customer ProtectionDeclaration completed for lifeassurance policy


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Guidelines on Handling

of Premiums Chequewritten in favour of theinsurer

Credit card/direct deposit/banktransferfrom customers account tothe insurer

Must not mixed customers moneywith agents personal funds


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Guidelines on EffectiveDate of Registration of

Ins Agents, RO/TR Notice of Confirmation of

Registration Information Card/business card withregistration number

No holding out before that


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Cooling-off Initiative

Give new life insurance policy holder achange to re-think within a reasonableperiod for a long term commitment

decision Cooling-off period the later of:-- 21 days after application signed- 14 days after policy issue date

- 14 after CPD form copied to existingpolicy insurer- 5 days after deliver of the policy orNotice of availability of policy and theexpiry date of Cooling-off


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Cooling-off Initiative Inform prospective policy holders of theCooling-off rights and expiry date

Deliver policy to policyholders within areasonable period of time after policy isissued (internal arrangement within 9 daysand complete the log)

Obtain a refund of the premium paid(linked policies and non-linked singlepremium life policies may apply marketvalue adjustment)

G id N t P ti


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Guidance Note on Preventionof Money Laundering &

Terrorist Financing Long term business Authorized FI subject to HKMA Guideline

on Prevention of Money Laundering

Specific examples of suspicioustransactions or money laundering case inAnnexes F & Ge.g. early termination, using single premiuminsurance contract which is inconsistentwith customers apparent standing,

Revised Guidance Note effective on July 1,2006


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Disciplinary Actions Issue a reprimand Suspend or terminate the

appointment Such other actions as the IARB

thinks fit

Di i li A ti


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Disciplinary ActionsOffence Reference

1. Inaccurate information 1 to 3 years

2. Mishandling of Premiums/monies 1 to 3 years

3.Breach of Code of Practice for Life Insurance

Replacement1 to 3 years

4. Twisting of Policies 3 years

5. Understating disadvantages on CPD Form 1 to 2 years

6. Obtaining benefit by improper/unauthorized

means

1 to 3 years

7. Making inaccurate or misleading

representation on policy sold outside HK

3 years

8. Making inaccurate or misleading

declaration/representation

1 to 3 years

9. Aiding others to make inaccurate or

misleading declaration/representation

2 years


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10. Effecting Policy without Authority 1 to 3 years

11. Failure to make reasonable effort to ensure

the policy meets the Needs of the policyholders

1 year

12.

Requesting clients to sign blank or incomplete

forms 1 to 3 years

13.

Failure to take reasonable effort to deliver

policy within the cooling-off periodDepending on

circumstances

14.

Failure to disclose previous records of

bankruptcy, criminal offence or disciplinary

action taken by other professional bodies

Depending on

circumstances


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15. Having been declared bankrupt

Until bankruptcy

order is discharged/

debts are repaid unless

there are exceptional

circumstances

16. Having been convicted of a criminal

offence or disciplined by a

professional body

Depending on

seriousness of offence/\

Severity of penalty

(refer to Notice issued on July 31,

2007)


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Continuous Obligations Comply with all relevant regulations andcodes/guidelines

Comply with the requirements of the

Continuing Professional Development(CPD) Programme 3 years transitional(ended on July 31, 2005)- 5 Core Credits

- 10 Non-core Credits- Effective Aug 1, 2005, 10 hoursaccredited course


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CPD Programme Retain the supporting evidence of allCPD activities undertaken

Maintain appropriate records for atleast 3 years

Failure to comply: refusal of renewal

of registration or de-registration


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Investment-linked insurance(OCI I Lens 7/07)

Major considerations in purchasing allocation of premiums towards protection and

investment; type and level of protection need, investmentobjectives, risk profile of the fund and time horizon ofpolicy

Should older people purchase- in general, less needs for life protection. Assess ability tosustain payment of premiums, take into account high initialcosts and possible early surrender charges

Costs and benefits of purchasing

- flexibility by top up, withdrawal, switch funds, vary levelof protection, enjoy premium holidays, invest in wide rangeof funds. Fees and charges include insurance coveragecharges, policy/admin charges, fund management fees,surrender charges, bid-offer spread of units and fundswitching charges. If fund does not perform well, value ofunits may be inadequate to meet insurance coveragecharges.

nvestment- in e Assurance


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nvestment- in e AssuranceSchemes (SFC Dr Wises

Column 9/07) How much customer can set aside every month or

every year for making regular premium payments.

How long customer want to invest, taking intoaccount any charges that customer may incur ifhe/she decides to withdraw the money orsurrender the Scheme early.

How much risk customer can take as the return ofthe Scheme will depend on the performance ofthe underlying investments that customerchooses.


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Insurance Selling & Servicing

to PRC/other Residents Attend the training course organized byMassMutual and passed the test andreceived licence from MassMutual

Well versed with the Application Guide forChinese Residents, Underwriting Rules and PolicyAdministration Rules and Workflow onVerification of Identification and TravelDocuments re application from PRC residents

No selling to customers from Iran, North Korea,Cuba, Congo, Cote dIvoire and Sudan


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Complaint Handling Verbally or in writing Customer Complaint Control Sheet

Unsettled over 14 days


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MPFACode of Conduct for MPFIntermediaries (5th edition Oct 1,

2005) Information about clients

financial situation

- risk preference- investment knowledge, experienceand objectives


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MPFACode of Conduct for MPF Intermediaries(5th edition Oct 1, 2005)

Information for clients

Principal brochure,- Key features of MPF schemes andconstituent funds, guarantee nature

- identify with MPF Card/MPFCertificate (Oct 1, 2005) Discussion of underlying securities

(RA1/RA4)


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MPFA Client assets not receive cash paymentand client payments are made payable tothe trustee of MPF scheme

Guide to Registration as MPFIntermediaries

Align the expiry date of individualintermediaries with those of sponsoringcorporate intermediaries

Guide to CPD for MPF Intermediaries 10 hours (20% of which on core subjects)


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Question 1Please select periods below which arerelevant to the cooling-off period:-

a) 21 days after application signed

b) 7 days after policy holder pays the 1stpremium

c) 14 days after policy issue date

d) 14 after CPD form copied to existingpolicy insurere) 5 days after deliver of the policy or

Notice of availability of policy and the

expiry date of Cooling-off


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Question 2a) Cooling-offInitiative

b) Standard

Illustration forNon-linked LifePolicy

c) Initiative on

Needs Analysisd) Code of Practice

for LifeInsurance

Replacement

i) Need Analysis Form(G43)/AgentsReport (G01)

ii) Customer ProtectionDeclaration Form

iii) IllustrationDocument

iv) Notice of availabilityof policy and theexpiry date ofCooling-off


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Question 3For applying Investment LinkedInsurance Products, is it required to

complete the Investment ProfileQuestionnaire of the Bank?


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Regulations Case

StudyCase 1 False representation on insurance policies soldoutside Hong Kong (3 yrs suspension)

Use of Forged Document (3 yrs suspension)Obtain commission by deception (3 yrs suspension) no record of allegation, reduced 3 months and ranconcurrentlyMay involve criminal offence, report to Police

R l ti C


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Regulations CaseStudy

Case 2Agent ARequesting complainant to sign on incomplete forms

(1 yr suspension)Twisting (3 yrs suspension)Aiding and abetting another agent to make falserepresentations to obtain commission from anotheragent (2 yrs suspension)

Agent BFalse representation (1 yr suspension)Obtain commission by deception (3 yrs suspension)


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Regulations Case

Study (contd)Case 3 misappropriation of premium (3 yrs

suspension)May involve criminal offence, report toPolice

Case 4Declared bankrupt and found fit/not fit andproper to continue acting as an insurance

agent


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Thank You