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Mandatory Compliance Training for Insurance / MPF Intermediaries 2008

To advise the relevant laws and regulations relating to the insurance agency businesses/MPF To go through the Insurance Agency Services Compliance Manual To let associates and supervisors understand their obligations on compliance and how to discharge the obligations

Regulatory Authorities
Office of the Commissioner of Insurance (OCI) Hong Kong Federation of Insurers (HKFI) Insurance Agents Registration Board (IARB) Mandatory Provident Fund Schemes Authority (MPFA)

Insurance Agents Registration Board (IARB) assess whether the insurance intermediaries meet the fit and proper requirements registration of insurance intermediaries receive and handle complaints related to insurance affairs

Code of Practice for the

Rules, Codes and Guidelines

Administration of Insurance Agents (May06) Illustration Standards for Universal Life (Non-Linked) Policies (2002) Code of Practice for Life Insurance Replacement (May06) Customer Protection Declaration Form (Jan05/May06) Initiative on Need Analysis (May06)

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 Technical Representatives (Jun04) Guidelines on Compliance with CPD (Jun05) Cooling-off Initiative (Jan03) Revised Guidance Note on Prevention of Money Laundering and Terrorist Financing (Jul06)

Insurance Company
Insurance Agency

Technical Representatives

Responsible Officer

Fit & Proper Criminal Offence Bankruptcy or Winding Up Misconduct (Professional Body) Non-compliance with the Code

If any of the above occurs, please notify our Responsible Officer or Compliance Department within ONE business day!

Registration not exceeding 3 years and re-register no earlier than 3 months before expiration Insurance agent is prohibited from representing more than 4 insurers, of which no more than 2 shall be long term insurers RO/TR of an insurance agent is prohibited from being a RO/TR of another insurance agent Illegal cross-border selling activities

General Insurance Long Term Insurance Investment Linked Long Term Insurance
- not entering into discussion with customers on underlying securities unless also registered as SDS for Type 1/Type 4 regulated activities under HKMA Register

Information Card

Rules of Conduct
Identify as insurance intermediary acting on behalf of the Bank and the relevant insurance companies disclose the registration number if so requested 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

Rules of Conduct
Explain the cover afforded by each policy recommended Ensure the prospective policy holder understands what he is buying explain the differences when making comparisons with other type of policies

Rules of Conduct
Treat all information supplied by the prospective policy holder as confidential (need to know basis) Not making inaccurate or misleading statements, either fraudulent, reckless or negligence


Rules of Conduct
Not impose any charges in addition to the policy premium without disclosing the amount 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 the business

Rules of Conduct
Not influence the prospective policy holder when assisting client to complete the proposal or application form explain the consequences of fraud, non-disclosure and inaccuracies to the prospective policyholder and draw his attention to the relevant statements in the proposal form


Rules of Conduct
Long 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 in the policy as an inducement to any prospective policy holder explain the long term nature of the policy and the consequences of early discontinuance or surrender

Rules of Conduct
Investment Linked Insurance: brochure and illustration document Difference between guaranteed and projected benefits Past performance may not be a guide to future performance


Business Cards
On the business cards, there MUST be:
Their IARB registration numbers (COP) Names shown on their Identity Cards (either in full Chinese or English) (HKFI memo Feb 26, 2003)


Illustration Standards
Ensure adequate disclosure of relevant information on policy features and benefits, investment returns and surrender values to enable informed decision Only such sales proposals and illustrative figures supplied by the Principal and use the whole illustration Clearly state the level/basis of calculation of all costs and charges payable Sign on the illustration document by proposed policy owner

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 or substantial part has lapsed, surrendered or converted to paid-up or extended-term insurance (internal replacement covered) Complete Customer Protection Declaration (CPD) form

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 to the 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


Customer Protection Declaration Form

Must stated the implication of replacement:
Financial Implication: Real or Potential Disadvantages e.g. set up cost 2 years premium of existing policy(ies) Insurability Implication: Real or Potential Disadvantages (e.g. review of the health status) Claims Eligibility Implication: Real or Potential Disadvantages (e.g. suicide clause/contestability period)


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. financial
Evaluation and Recommendation total
income/outgo, usable assets, liabilities, family commitments,.)

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

protection needs/reasons for recommendations


Needs Analysis
Signed by policy owner and file copy of the Form for insurance basic plan with:sum insured of HK$2,000,000 or above Or annualized premium of HK$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 from same 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


Guidelines on Misconduct
On no account will associate ask customers to sign blank or incomplete forms/forged signature Any alternation to the forms must be initialed by the customer Prescribed Customer Protection Declaration completed for life assurance policy

Guidelines on Handling of Premiums

Cheque written in favour of the insurer Credit card/direct deposit/bank transfer from customers account to the insurer Must not mixed customers money with agents personal funds

Guidelines on Effective Date of Registration of Ins Agents, RO/TR

Notice of Confirmation of Registration Information Card/business card with registration number No holding out before that


Cooling-off Initiative
Give new life insurance policy holder a change to re-think within a reasonable period 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 existing policy insurer - 5 days after deliver of the policy or Notice of availability of policy and the expiry date of Cooling-off


Cooling-off Initiative
Inform prospective policy holders of the Cooling-off rights and expiry date Deliver policy to policyholders within a reasonable period of time after policy is issued (internal arrangement within 9 days and complete the log) Obtain a refund of the premium paid (linked policies and non-linked single premium life policies may apply market value adjustment)


Guidance Note on Prevention of Money Laundering & Terrorist Financing

Long term business Authorized FI subject to HKMA Guideline on Prevention of Money Laundering Specific examples of suspicious transactions or money laundering case in Annexes F & G e.g. early termination, using single premium insurance contract which is inconsistent with customers apparent standing, Revised Guidance Note effective on July 1, 2006 30

Disciplinary Actions
Issue a reprimand Suspend or terminate the appointment Such other actions as the IARB thinks fit


Disciplinary Actions
1. 2. 3. 4. 5. 6. Offence Inaccurate information Mishandling of Premiums/monies Breach of Code of Practice for Life Insurance Replacement Twisting of Policies Understating disadvantages on CPD Form Obtaining benefit by improper/unauthorized means Making inaccurate or misleading representation on policy sold outside HK Making inaccurate or misleading declaration/representation Aiding others to make inaccurate or misleading declaration/representation Reference 1 to 3 years 1 to 3 years 1 to 3 years 3 years 1 to 2 years 1 to 3 years


3 years


1 to 3 years


2 years

Disciplinary Actions
Offence 10. Effecting Policy without Authority Reference 1 to 3 years

11. Failure to make reasonable effort to ensure 1 year the policy meets the Needs of the policyholders Requesting clients to sign blank or incomplete 12. forms 1 to 3 years Failure to take reasonable effort to deliver 13. policy within the cooling-off period Failure to disclose previous records of bankruptcy, criminal offence or disciplinary 14. action taken by other professional bodies Depending on circumstances Depending on circumstances


Disciplinary Actions
Offence Reference Until bankruptcy order is discharged/ debts are repaid unless there are exceptional circumstances

15. Having been declared bankrupt

16. Having been convicted of a criminal offence or disciplined by a professional body (refer to Notice issued on July 31, 2007)

Depending on seriousness of offence/\ Severity of penalty


Continuous Obligations
Comply with all relevant regulations and codes/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 hours accredited course

CPD Programme
Retain the supporting evidence of all CPD activities undertaken Maintain appropriate records for at least 3 years Failure to comply: refusal of renewal of registration or de-registration


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, investment objectives, risk profile of the fund and time horizon of policy

Should older people purchase

Costs and benefits of purchasing

- in general, less needs for life protection. Assess ability to sustain payment of premiums, take into account high initial costs and possible early surrender charges
- flexibility by top up, withdrawal, switch funds, vary level of protection, enjoy premium holidays, invest in wide range of funds. Fees and charges include insurance coverage charges, policy/admin charges, fund management fees, surrender charges, bid-offer spread of units and fund switching charges. If fund does not perform well, value of units may be inadequate to meet insurance coverage 37 charges.

Investment-linked Assurance Schemes (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 into account any charges that customer may incur if he/she decides to withdraw the money or surrender the Scheme early. How much risk customer can take as the return of the Scheme will depend on the performance of the underlying investments that customer chooses.


Attend the training course organized by MassMutual and passed the test and received licence from MassMutual
Well versed with the Application Guide for Chinese Residents, Underwriting Rules and Policy Administration Rules and Workflow on Verification of Identification and Travel Documents re application from PRC residents No selling to customers from Iran, North Korea, Cuba, Congo, Cote dIvoire and Sudan

Insurance Selling & Servicing to PRC/other Residents


Complaint Handling
Verbally or in writing Customer Complaint Control Sheet Unsettled over 14 days


Code of Conduct for MPF Intermediaries (5th edition Oct 1, 2005) Information about clients financial situation - risk preference - investment knowledge, experience and objectives

Code of Conduct for MPF Intermediaries (5th edition Oct 1, 2005) Information for clients Principal brochure, - Key features of MPF schemes and constituent funds, guarantee nature - identify with MPF Card/MPF Certificate (Oct 1, 2005) Discussion of underlying securities (RA1/RA4)

Client assets not receive cash payment and client payments are made payable to the trustee of MPF scheme

Guide to Registration as MPF Intermediaries

Align the expiry date of individual intermediaries with those of sponsoring corporate intermediaries

Guide to CPD for MPF Intermediaries

10 hours (20% of which on core subjects)

Question 1
Please select periods below which are relevant to the cooling-off period:a) 21 days after application signed b) 7 days after policy holder pays the 1st premium c) 14 days after policy issue date d) 14 after CPD form copied to existing policy insurer e) 5 days after deliver of the policy or Notice of availability of policy and the expiry date of Cooling-off


Question 2
a) Cooling-off Initiative b) Standard Illustration for Non-linked Life Policy c) Initiative on Needs Analysis d) Code of Practice for Life Insurance Replacement
i) Need Analysis Form (G43)/Agents Report (G01) ii) Customer Protection Declaration Form iii) Illustration Document iv) Notice of availability of policy and the expiry date of Cooling-off

Question 3
For applying Investment Linked Insurance Products, is it required to complete the Investment Profile Questionnaire of the Bank?


Regulations Case Study

Case 1 False representation on insurance policies sold outside 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 ran concurrently May involve criminal offence, report to Police


Regulations Case Study

Case 2 Agent A Requesting complainant to sign on incomplete forms (1 yr suspension) Twisting (3 yrs suspension) Aiding and abetting another agent to make false representations to obtain commission from another agent (2 yrs suspension)
Agent B False representation (1 yr suspension) Obtain commission by deception (3 yrs suspension) 48

Regulations Case Study (contd)

Case 3 misappropriation of premium (3 yrs suspension) May involve criminal offence, report to Police
Case 4 Declared bankrupt and found fit/not fit and proper to continue acting as an insurance 49 agent

Thank You