Download - 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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Disciplinary ActionsOffence Reference
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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Disciplinary ActionsOffence Reference
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