24 June 2024
The Insurance Authority (IA) has imposed a pecuniary fine of HK$37,270 against a licensed insurance broker company and a pecuniary fine of HK$7,000 against a licensed technical representative for failing to handle the insurance policy of a client with due care and diligence under the former self-regulatory regime1.
In November 2018, the client obtained a quotation via the broker company’s website on insurance coverage for his vehicle purchased from a dealer. A staff from the dealer contacted the technical representative of the broker company to obtain a quotation again and asked her to apply for a motor policy. The technical representative wrongly assumed the staff to be an authorized representative of the client and went ahead. A cover note was subsequently issued by the insurer with validity until 7 December 2018 pending the production of outstanding documents.
The technical representative then sent the cover note to the dealer, in contravention of internal guidelines set by the broker company that require it to be passed directly to the client. Four SMS reminders were sent by the broker company to the client chasing for outstanding documents, three only after the cover note expired. The reminders were vague and ambiguous, unable to express clearly what documents were outstanding and how they should be submitted. Furthermore, neither the broker company nor the technical representative saw fit to follow up with the client even though premiums were duly paid by him.
On 24 February 2019, the client was involved in an accident that caused his vehicle to be written off and led him to purchase a new vehicle from the dealer. When the technical representative was requested to transfer the insurance policy of the client’s former vehicle to his new vehicle, she informed the staff of the car dealer that an insurance policy must first be taken out before it could be transferred to another vehicle. The staff was also requested to file a report on the accident but indicated that the client would not want to do so. The technical representative did not explain the consequences to the client.
After receiving all outstanding documents, the insurer issued a policy to the client on 12 March 2019 and the broker company applied to transfer it to the new vehicle by declaring that the client had not been involved in any accidents over the past three years. The policy was passed to the client on 9 July 2019 (i.e. more than four months after the accident) by the broker company without explaining that accidents should be immediately reported.
In October 2019, the client was convicted of careless driving and demanded to pay HK$480,000 and HK$72,730 for causing personal injuries and property damages respectively. The insurer only settled the former since no timely report was made on the accident.
The broker company and the technical representative have fallen short of the standards expected of them and jeopardized the interests of their client. Specifically, the broker company did not install an effective mechanism to screen authorized representatives, resulting in the client not covered by a valid policy when the accident occurred and overlooked the requirement to file a report on the accident.
Members of the public rely on broker companies and technical representatives to ensure that their protection needs are accurately assessed and suitably mitigated. It is imperative for them to act in the best interest of policy holders and potential policy holders, handle application for insurance policies with due care and diligence and follow up with the client on outstanding documents to ensure that insurance policies are issued without delay.
In response to a proposal made by the IA to impose a pecuniary fine of HK$100,000, the broker company admitted its wrongdoing and made a compensation of HK$62,730 (after deducting an excess of HK$10,000) to the client for property damages. We therefore decided to impose a fine of HK$37,270 against the broker company. For the technical representative, a pecuniary fine of HK$7,000 was imposed due to seriousness of the wrongdoing despite her early agreement to the penalty. The following factors are relevant:
The IA will stay vigilant and take disciplinary actions against broker companies or technical representatives who fail to properly discharge their duties. Please see the section titled “Enforcement News” in our website for further details about this case and browse the “Register of Licensed Insurance Intermediaries” for all public disciplinary actions taken against insurance intermediaries.
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Notes:
1 Pursuant to section 113(4)(d) of Schedule 11 to the Insurance Ordinance (Cap. 41), in handling non-compliance cases unresolved by the Self-Regulatory Organisations (SROs), the IA may impose a disciplinary sanction on a specified person that could have been imposed by the SRO concerned.