Insurance Authority bans former insurance agent for five years for mishandling and misappropriating

The Insurance Authority (IA) has banned a former insurance agent from applying for a licence for five years for mishandling and misappropriating the premium payments from two policy holders.

In February 2019, a policy holder approached the insurance agent regarding how to pay premium for an insurance policy to the agent’s appointing insurer. The agent then purported to facilitate the payment by receiving RMB12,000 from the policy holder. Instead of immediately paying it onto his appointing insurer, however, the agent used the funds to settle his own family affairs. When the agent did eventually issue a cheque to the appointing insurer, the cheque bounced (because the agent had already used the money). The agent did not, however, tell the policy holder this. Only when the policy holder later checked with the insurer was the truth discovered. The policy holder complained to the insurer about the agent’s conduct. In response, the agent returned RMB6,000 to the policy holder, but astonishingly refused to return the remaining amount unless the complaint was withdrawn and a public apology was issued. Later the insurance agent returned a further RMB3,000.

The complaint prompted the insurer to conduct an audit call on all of the agent’s clients whose policies had lapsed within the previous two years. Through the audit call, it was discovered that the agent had received RMB15,000 from a client in April 2018, for the purpose of settling the client’s premium payment of an insurance policy. However, the agent failed to pay the monies onto the insurer, resulting in the policy lapsing in December 2018. When the client enquired about the policy in May 2019, the agent concealed the status of the policy. He even led the client to think the policy was still in force, informing the purported latest instalment of premium that needed to be paid. This time, however, the client tried to make the payment direct to the insurer and it was at this point the true status of the policy was revealed, along with the failures of the agent.

The appointing insurer terminated its agency contract with the agent and reported the case to the IA, which has taken the stated disciplinary action against the former agent.

The agent’s actions in this case amount to a litany of serious misconduct. His behavior was so disgraceful as to be worthy of the lengthy ban imposed to signal that there is no place for this type of despicable conduct in the insurance market. To say that the agent’s actions showed an absence of integrity and demonstrated a complete lack of understanding of his duties and ethical responsibility as an insurance agent, is an understatement. His conduct fell so far below the standards expected of an insurance agent as to be entirely unacceptable.

Since the facts of the two incidents took place before the current regulatory regime for insurance intermediaries came into force (on 23 September 2019), the IA has been constrained to decide the case by applying the applicable rules that were in place at the relevant time1. In deciding the disciplinary action, the IA has weighed all relevant circumstances in the balance, including:

1. The deliberation in the agent’s actions to mislead and deceive;

2. The agent misappropriated premium payments on two separate occasions;

3. The agent obtained financial benefit from his conduct;

4. The agent’s admission of his actions; and

5. The need to send a strong deterrent message against mishandling and misappropriation of premiums.

Members of the public must be able to trust the integrity of the licensed insurance intermediaries with whom they have financial dealings. Professional licensed insurance intermediaries of integrity understand the importance of trust in the insurance market to the clients they serve. Nothing risks undermining that trust more than when a single agent mishandles and misappropriates policy holder funds. The IA has zero tolerance for such conduct and will not hesitate to take disciplinary action proportionate to the severity and seriousness of the actions concerned so as to ensure the insurance market remains founded on trust and integrity.

Policy holders who buy insurance through licensed individual insurance agents should always use the official payment channels provided for payment of premium direct to insurers, rather than paying any monies to individual agents.

For further information on the IA’s enforcement work, please see the “Enforcement News” section of the IA’s website. Public disciplinary actions against licensed insurance intermediaries may also be searched on the Register of Licensed Insurance Intermediaries on our website.

Ends

Note:

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 had the case been handled by the body.