Consumer Council's Views on the Draft Insurance (Maximum Number of Authorised Insurers) Rules
1. The Consumer Council (the Council) is pleased to submit its views on the Consultation Paper regarding the Draft Insurance (Maximum Number of Authorised Insurers) Rules (Draft Rules), for consideration of the Insurance Authority (IA). From the protection of the interests of policy holders and the choice of potential policy holders, the Council takes this opportunity to put forward its views and suggest the following consumer protection principles and safeguards to be observed:
2. With regard to the existing framework in relation to the maximum number of authorised issuers by which an individual insurance agent or an insurance agency can be appointed, the Council considers it not in the position to comment on whether a business to business arrangement regarding the choice of the agent or the agency, should be retained and the overall cap should be increased to a certain number (from four to the proposed ‘five’), for which might render competition concerns.
3. However, the Council is more concerned with whether the arrangement would have any likely exclusory effect whereby insurance agents (subagents) or agencies are tied to act solely for particular principal(s) which would narrow the choices for consumers and lessen competition. The Council is of the view that the IA should examine the extent of exclusive dealing between insurance agents/agencies and principals in the market, so as to see if any measures are necessary to enable healthy competition in the marketplace.
4. The Council also considers that information transparency is crucial for consumers to make informed choice. Under the case where an agent only represents one principal (insurer), a consumer knows he/she is working through an agent and the agent acts for only one principal, no issue may arise. But if more than one principal (albeit currently the number of principals that an agent may represent is four and maximum two long term (life) insurers), it would be necessary for the agent to declare his/her representation right at the beginning as to all principals he/she involved with, and the possible conflict of interest when making recommendation to the prospecting or existing policy holders.
5. To facilitate consumers to make comparisons and enquiries, the Council suggests to add in the Draft Rules that the licensed individual insurance agent or licensed insurance agency who act for principals should be required to provide adequate and clear information on their identities before making any recommendations to potential policy holders. Besides, supervision from the IA is deemed necessary to improve quality of information disclosure in the interest of consumers.
6. To conclude, the Council recommends the IA to take necessary steps to foster a fair marketplace for both consumers and industry players to optimise the consumer’s right in making a free choice and to facilitate the development of the industry.