The Office of the Commissioner of Insurance, Hong Kong's insurance authority, has reportedly imposed a ban on charging upfront commission payments on long-term policies, as part of its strategy to control fraudulent sales practices.


It is believed that the ban will adversely affect insurance savings plan industry sold to both expatriate and local investors, which combines life insurance, investment and estate planning structures, as reported by The South China Morning Post.

The new rule, which will be effective from 1 January 2015, was cited by the publication as saying: "Indemnity commission, or any standing arrangement that offers advance payment of commission, is strictly prohibited.

"Insurers should only pay commission on an earned basis."

"Commission payable should also spread over an appropriate duration to encourage good after-sale service and duly reward long-term relationship between intermediaries and policyholders."

According to an estimate, approximately 70,000 insurance brokers registered with the Hong Kong Federation of Insurers will be affected as many depend on the sale of upfront commission paying products to support their business costs and personal income.

The Hong Kong Confederation of Insurance Brokers, the Professional Insurance Brokers Association and the Insurance Agents Registration Board directly supervise intermediaries; however, none of them have statutory powers and have limited means to deal with complaints.

Image: Hong Kong’s insurance authority prohibits indemnity commissions. Photo: courtesy of Stuart Miles/ free