Under the current framework, a broker or firm is only able to represent up to four insurers.
But respondents criticised the limit as “outdated”.
Most insurance agents suggested increasing the overall cap to five; with some calling for an even bigger increase as it would allow them to “better serve their clients by offering a wider range of products”.
However, the HKIA did not agree with the argument and said that industry statistics showed a different picture.
Industry already strong
The regulator said that the main reason for turning down the increase was that the change could “weaken” control and compliance practices that insurers must have in place when appointing agents.
Its’ view was shared by most insurers, which stated that “increasing the cap, even by only one, would weaken the practical effectiveness of insurer’s compliance and corporate governance for the oversight of its agents, increase insurers’ exposure to liability and ultimately be detrimental to policyholder protection”.
Additionally, data from the Hong Kong Federation for Insurers shows that 85% of individual agents and 70% of agencies currently sell or promote products on behalf of fewer than four insurers.
Meaning that increasing the cap would only have a real impact for a minority of providers and policyholders.
A measure for the few
“This suggests that the majority of insurance agents are able to perform their functions without the need for having to represent four insurers (letting alone five) and hence there is no broad impetus across the agency market as a whole to have to increase the cap to five,” the HKIA said.
Considering the overall Hong Kong insurance market – 70,000 individual agents, 2,300 agencies and 23,000 technical representatives – the cap increase would only benefit approximately 700 agencies, of which “the vast majority are relatively small outfits in terms of the number of appointed technical representatives”, the regulator said.