HKFI launches check scheme for insurance agents

The scheme aims to prevent problematic agents from moving between firms.

The Hong Kong Federation of Insurers (HKFI) has launched a reference checking scheme for insurance intermediaries, effective from 1 September. 

“One bad apple spoils the whole barrel” so the old adage goes. In the context of the Scheme, the phenomenon of “rolling bad apples” refers to those few individual insurance intermediaries who, in seeking to evade the consequences of their poor conduct, resign from one principal and seek appointment with a new principal without their problematic behaviour being disclosed,” the Hong Kong Insurance Authority (HKIA) said in a statement.

“These isolated “bad apples” must not be allowed to spoil the reputation of the insurance market, by continuing to roll from one principal to another without accountability for their actions,” it added.

The scheme aims to prevent problematic agents from moving between companies without their conduct being disclosed. 

Authorised insurers must now conduct reference checks for prospective agents who have worked with other insurers in the past seven years. 

The details are outlined as follows:

• Section 13AE of the Insurance Ordinance (IO) requires that authorized insurers get IA approval to appoint key persons in control functions, including the KPIM, responsible for managing licensed insurance agents and ensuring compliance with IO and IA guidelines.
• The IA expects Long Term Insurers and their KPIMs to establish internal controls for onboarding new insurance agents, including thorough due diligence to assess their suitability for regulated activities. The board of directors and controllers, including the Chief Executive, along with the KPIM, are responsible for these internal controls. Inadequate controls may question the fitness and propriety of these individuals and the insurer’s ability to manage conduct risk, leading to potential IA actions such as intervention, inspection, investigation, or disciplinary measures.
• Participation in and compliance with the Scheme is considered a minimum internal control for assessing prospective agents' fitness and propriety. Non-participation or failure to meet Scheme obligations may indicate systemic weaknesses, prompting closer IA scrutiny of the insurer’s recruiting and onboarding controls and management fitness. This could also lead to increased scrutiny and delays in licensing applications for new and renewing insurance agents.
• The Scheme relies on participants to fulfil their obligations as Recruiting and Responding Insurers. Repeated failure to meet these obligations may result in a report to the IA (conductsupervision@ia.org.hk) for further action.

The HKIA supports this initiative to maintain industry integrity and protect policyholders.