In a circular published today entitled ‘Selling of Life Insurance Products’, the regulator highlighted that opt-outs of the so-called ‘financial needs analysis’ (FNA) would be disallowed when the new guidelines are implemented on 1 January next year.
From this date, customers are required to fill in an FNA form which will enable authorised institutions (AIs) to assess the suitability of insurance products for clients before recommending certain types of life insurance plans.
The HKMA advised firms to reject customer applications for insurance products if customers have not filled in the FNA form appropriately.
“It is essential that AIs take all reasonable steps to adopt adequate selling processes to ensure that they treat customers fairly,” the HKMA’s executive director Carman Chu said in the circular.
“Firms should work closely with the insurance companies and ensure that frontline staff adequately disclose and explain such information"
However, the regulator also said certain types of new life insurance policies would be exempt from providing an FNA form, including term insurance policies, some refundable insurance policies and yearly renewable insurance policies.
A signed FNA form is valid for one year unless there are substantial changes to a customer’s circumstances.
All in one go
Also referring to a guidance note (G16) issued by the Office of the Commissioner of Insurance on 30 July, HKMA highlighted that product information must be disclosed to customers when customers are looking to buy non-linked long term insurance policies.
“In this light, AIs should work closely with the insurance companies and ensure that frontline staff adequately disclose and explain such information to the extent applicable to customers during the selling process,” the circular reads.
In earlier guidance issued on 8 December 2014, the HKMA said firms must start providing documentation on the rationale for why they have recommended certain non-linked insurance policies to customers from 8 September.
In its most recent circular, however, the body said the date for implementation had been pushed back to 1 October to “allow AIs to implement these requirements having regard to the guidance in the latest FNA circular and do it in one go”.