Insurance Authority cracks down on broker firm, representative for policy missteps

Insurance Authority cracks down on broker firm, representative for policy missteps | Insurance Business Asia

Insurance News

Insurance Authority cracks down on broker firm, representative for policy missteps

Firm takes corrective measures

Insurance News

By
Roxanne Libatique

The Insurance Authority of Hong Kong (IA) has issued fines against a licensed insurance broker firm and a licensed technical representative for mishandling an insurance policy under the previous self-regulatory system.

The broker firm received a fine of HK$37,270, and the technical representative was fined HK$7,000.

Vehicle insurance dispute in Hong Kong

According to the IA, a client obtained a vehicle insurance quote through the broker firm’s website in November 2018. Later, a staff member from the vehicle dealer contacted the technical representative for another quote and requested the application of a motor policy.

The technical representative mistakenly assumed the staff member was authorised to act on behalf of the client and issued a cover note valid until December 7, 2018, pending submission of required documents.

The technical representative sent the cover note to the dealer instead of directly to the client, violating the firm’s internal procedures. The broker firm sent four SMS reminders to the client about the outstanding documents, three of which were sent after the cover note had expired. The reminders were unclear about what documents were needed and how to submit them. Despite the client paying the premiums, neither the broker firm nor the technical representative followed up effectively.

On February 24, 2019, the client was involved in an accident, leading to the total loss of the vehicle. When the technical representative was asked to transfer the insurance policy to a new vehicle, she informed the dealer’s staff that a new policy had to be taken out first. The client was not adequately informed about the need to report the accident.

The insurer issued a policy on March 12, 2019, after receiving the necessary documents. The broker firm incorrectly declared that the client had not been involved in any accidents in the past three years, and the policy was delivered to the client on July 9, 2019, without explaining the importance of immediate accident reporting.

In October 2019, the client was convicted of careless driving and faced liabilities of HK$480,000 for personal injuries and HK$72,730 for property damages. The insurer only covered the personal injury claims due to the delayed accident report.

Hong Kong broker firm and technical representative failed to meet expected standards

The IA concluded that the broker firm and technical representative did not meet the expected standards, putting the client’s interests at risk. The firm lacked effective procedures to verify authorised representatives, failed to ensure valid policy coverage, and did not report the accident.

In response, the broker firm has improved its internal controls, compensated the client HK$62,730 for property damages, and implemented a system to screen authorised representatives.

Due to these corrective measures and the need for deterrence, the IA reduced the original proposed fine to HK$37,270. Despite the technical representative’s early acceptance of the penalty, the seriousness of her actions resulted in a fine of HK$7,000.