The Insurance Authority of Hong Kong (IA) has imposed penalties on a licensed insurance broker firm and a licensed technical representative for mishandling an insurance policy under the previous self-regulatory regime.
The broker firm has been fined HK$37,270, while the technical representative faces a fine of HK$7,000.
The incident stemmed from a vehicle insurance dispute, where a client initially obtained an insurance quote through the broker firm’s website in November 2018. Subsequently, a staff member from a vehicle dealership contacted the technical representative for an alternative quote and requested the processing of a motor policy.
Misinterpreting the dealership staff member as authorized by the client, the technical representative issued a cover note valid until December 7, 2018. However, the note was erroneously sent to the dealer instead of directly to the client, contravening internal protocols. Despite reminders sent via SMS, which were unclear and untimely, regarding outstanding documents after the cover note’s expiration, neither the broker firm nor the technical representative effectively followed up, despite the client’s premium payments.
The situation escalated when, on February 24, 2019, the client was involved in an accident resulting in the total loss of the vehicle. When asked to transfer the insurance policy to a new vehicle, the technical representative instructed the dealer’s staff to initiate a new policy instead of informing the client about the accident reporting requirement.
The insurer eventually issued a policy on March 12, 2019, after receiving the necessary documents, but inaccurately declared the client accident-free over the past three years. The policy was only delivered to the client on July 9, 2019, with no explanation of the urgency of reporting accidents promptly.
Following the client’s conviction for careless driving in October 2019, facing substantial liabilities, the insurer covered only personal injury claims due to the delayed accident report.
Concluding its investigation, the IA found the broker firm and technical representative failed to uphold expected standards, jeopardizing the client’s interests. Critically, the firm lacked robust procedures to verify authorized representatives, ensure policy validity, and promptly report accidents.
In response to the IA’s findings, the broker firm has enhanced its internal controls, compensated the client HK$62,730 for property damages, and implemented a stringent system to validate authorized representatives.
Acknowledging these corrective measures and aiming to deter future misconduct, the IA reduced the initial proposed fine to HK$37,270 for the broker firm. Despite the technical representative’s early acceptance of wrongdoing, her actions warranted a fine of HK$7,000 due to their severity.
The IA, which recently disciplined two former insurance agents for credential fraud, reaffirmed its commitment to vigilance and swift disciplinary action against broker firms and technical representatives failing in their duties.
