Concerns on the Establishment of an Independent Insurance Authority

Summary of the Hon Chan Kin-por’s remarks at the Panel on Financial Affairs (July 19th, 2010) regarding the proposal on the establishment of the Independent IA (IIA):

In principle, I support the proposal on the establishment of the independent IA as it will result in better regulated insurance companies and the better protection of the policyholders . However, there remains the following concerns:

1) The self-regulation of insurance intermediaries by the industry has been successfully implemented for years . The current structure of having three self-regulatory organizations is not ideal as there may be difference benchmarks and pace in handling complains. Therefore, I support the integration of the three self-regulatory organizations. However, whether the intermediaries should be regulated by the future IIA or continue to be self-regulated should be open for discussion. It would be worthwhile to consider if the industry can come up with proposals that are more efficient as well as able to address the concern of potential conflicts of interest . Even if the final decision after consultation is for IIA to take over the regulation of intermediaries, there should be adequate participation by the representatives of the industry on the regulation structure.

2) The future IIA should ensure that the industry is not over-regulated in order to maintain the status of Hong Kong as an international financial center and to ensure the development sustainability of the insurance industry . Furthermore, the IIA proposal is not likely to be finalize until 2012 to 2013 but the current IA is already understaffed. I hope the Government will increase the HR resources of the current IA to ensure that the operations during the transitional period are not interrupted.

3) Regarding the proposed new fee structures, I believe there should be a cap on the 0.1% levy on the insurance premiums. In fact, without a cap on the levy amount per policy, a single premium Life policy of HK$10 million would end up paying a levy of HK$10,000 which is obviously too much.

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