The Hong Kong Insurance Authority (HKIA) has started looking into orphan policies – with a particular emphasis on the life sector.
It follows a surge in complaints about the “failure to continue providing service on insurance policies after the licensed individual insurance agent who originally sold the policies leaves the insurer”, the watchdog explained.
The issue is that licensed insurance agents have two main roles: the first is the sale of the policy; and the second is related to post-sale activities; such as supporting and advising clients, including handling personal data, medical records, names of beneficiaries, and so on.
But when the agent leaves the firm, “problems can arise if an insurer does not have in place requisite processes to ensure that these insurance policies – known as ‘orphan policies’ – continue to be served to the same standard as before the agent’s departure”, the HKIA said.
Some of the complaints received by the regulator range from a lack of communication from the newly appointed agent leading to losing on cheaper alternatives; unnecessary sharing of personal data between agents; failure to notify a client that their agent left; and original agents still posing as if they worked for the insurance provider after they left the business.
The HKIA said: “These examples demonstrate the importance that insurers – particularly life insurers who enter into insurance policies with long-term commitments – must give to ensuring that orphan insurance policies continue to be properly serviced when the insurance agent responsible for arranging the policy leaves their company.
“Insurers and key persons in control functions for intermediary management must therefore have in place proper controls and processes to address this issue, for example by assigning a new insurance agent to service the policies in an expeditious manner.”