October 2013 Issue No. 205 Independence of Insurance Authority (IIA)
The first meeting of the Working Group to Facilitate Smooth Transition to IIA, convened by Deputy Secretary for Financial Services and the Treasury with representatives from the Insurance Authority (IA) and the three self regulatory organisations (SROs), was held last week. The Working Group is tasked to oversee the smooth migration from the present self-regulatory regime to the new IIA. We believe this should not be just about the transfer of data and documents. Of equal importance is the transfer of SROs' expertise to the new regulatory authority including the valuable experience and knowledge accumulated by the Insurance Agents Registration Board and Appeals Tribunal over the years.
Policyholders Protection Fund (PPF)
46 General Insurance Members (GIMs) and 32 Life Insurance Members (LIMs) responded to our survey on the impact the proposed PPF will have on their business operations. The results confirmed our serious concern over the length of the continuity of cover, the implication of 1% levy cap on life insurance business and the remaining off-shore to be covered by the PPF. The Task Force on PPF has already relayed the gist of the survey results to the Financial Services and Treasury Bureau and IA. A meeting will be held with the Government early next month to further review the concerns raised by Members. At HKFI our position is clear - we support the proposed PPF in principle but it should be rolled out on a sound basis to avoid creating inadvertently any potential systematic risks for the industry.
Health Care Reform
Earlier this month, the Food and Health Bureau (FHB) and their consultant presented a revised version of the Health Protection Scheme (HPS). The revised proposal has taken into account some of the views of the industry. But we remain gravely concerned about the lack of choice for consumers, operation of the high risk pool, etc. Our concerns have been echoed by the patient groups, academia and medical profession as reported in the media lately. To further articulate our industry's concerns, we will provide another written submission to the FHB. A briefing will be held in late November to update Members on the latest development.
New LIC Councillor
Following Mr Roger Steel's resignation, the LIC had conducted a by-election to fill the vacancy. Mr Wim Hekstra of Sun Life Hong Kong Limited was elected. Congratulations to Mr Hekstra and a sincere vote of thanks to Mr Steel for his valuable contribution to the Federation in the past years.
Review of Benefit Illustrations for Investment-linked Life Assurance Schemes (ILAS)
The above consumer protection mechanism was introduced to provide useful information to customers at the point of sale and illustrate the effect of early surrender. In the light of the recent economic circumstances, the LIC has, in collaboration with the IA and Securities and Futures Commission, reviewed the current rates used in the Illustrations and suggested some changes. Effective from 1 January 2014, the illustration rates will change from a maximum of 9% and 5% for two illustrations to a maximum of 9%, 6% and 3% for three illustrations to give the customer a clearer idea of the variability of the potential outcome.
Improved Sales Flow for ILAS
The LIC has updated, with input from the IA, the existing FAQ on ILAS to clarify the best practice of proposing an ILAS product by an intermediary. Member Companies are advised to amend, where appropriate, their respective post-sale call script and point-of-sale audio recording script accordingly and check regularly the HKFI website for updates. (http://www.hkfi.org.hk/pdf/en/download/e_FAQ.pdf)