On 26 June 2013, the Financial Services and the Treasury Bureau (FSTB) published the Consultation Conclusions of Key Legislative Proposals (Proposals) on Establishment of an Independent Insurance Authority (IIA) (Consultation Conclusions) after a 3-month public consultation completed in January 2013.
After considering the comments by the respondents on the Proposals, the FSTB proposed to make refinements to the Proposals in relation to (i) functions of the IIA, (ii) compositions of the Board of the IIA, (iii) appointment of an additional responsible officer (RO) for every corporate licensee and authorised insurer, (iv) inspection and investigation powers and (v) specified power of suspension. With regard to the other areas covered in the Proposals, the FSTB concluded that the relevant proposals are appropriate subject to certain clarifications and will therefore be retained.
In particular, the FSTB insisted on imposing a high standard of “best endeavours” on the ROs in ensuring observance of internal controls and procedures for conduct compliance by the corporate licensee and authorised insurer and their respective tied agents. The Consultation Conclusions proposed that the IIA will promulgate guidelines to set out examples of actions that are expected to be taken by the ROs.
It is further noted that despite an insurance agent being statutorily defined as an agent or subagent of one or more insurers and the FSTB acknowledging that insurance agents are under a contractual principal-agent relationship with their appointing insurers, the FSTB is determined to impose a requirement on insurance agents to prioritise the policy applicant’s interest over the interest of their appointing insurer in case in the event of any conflict. This requirement would represent a significant change to the traditional laws of agency and the obligations of an agent to his principal. The Consultation Conclusions proposed to provide in the legislation that any contract term which contravened the statutory “best interest” duty would be unenforceable.
The FSTB proposed to introduce the amendment bill into the Legislative Council in the 2013/14 legislative session with a view to establishing the IIA in 2015.
Details of the Consultation Conclusions can be found on the FSTB’s website here.