KP Chan commented the following during the discussion on the proposed establishment of an independent Insurance Authority:
“Regulation of one sector by two regulatory bodies”
Mr CHAN Kin-por remarked that the merit of regulating the insurance industry under a single regulator, including the sale of insurance products in banks, was consistency in regulatory standards and enforcement practices, which in turn would provide a level-playing field for insurance companies and banks in the sale of insurance products. Mr CHAN opined that the IIA should be responsible for regulating banks in insurance business, and should seek the assistance of HKMA only when necessary.
Noting that the staff of IIA would be remunerated with bonus, Mr CHAN Kin-por said that the insurance industry was concerned that one of the performance assessment criteria for IIA staff might be the number of enforcement actions taken against insurance companies/brokers/agents which might result in over-regulation of the insurance industry. Mr CHAN was concerned that if the costs for compliance with the IIA requirements were excessively high, many small and medium sized insurance companies might be forced to cease their business, which would in turn adversely affect consumers’ interests given the reduced choices.
Noting that the number of staff to be employed by IIA would double the establishment of the existing OCI, and a variable licence fee would be imposed on insurers based on their liabilities, Mr CHAN Kin-por pointed out that the insurance industry was concerned about the increased cost to be shouldered by insurance companies and consumers. Mr CHAN said that the Government should provide detailed information to addressing the concern of the insurance industry during the further consultation with the industry.
Mr CHAN Kin-por said that while there were divergent views regarding the establishment of the IIA, the deputations generally shared the common concern that the consultation paper had not spelt out the detailed arrangements for the proposed regulatory regime. When the Administration conducted the second round of consultation, it should provide more details to address the industry and the public’s concerns. Mr CHAN opined that the merits of the self-regulatory regime should be retained even after the establishment of the IIA. For instance, adequate representation from the insurance industry should be maintained in the supervisory and disciplinary committees of the IIA.