【Paying premiums directly to an Agent?】Are there any pitfalls when an insurance intermediary handles your premiums?

Many insurance Agents have a close relationship with their clients and will often pay premiums on their behalf. However, this can sometimes lead to problems. According to the Code of Conduct for Licensed Insurance Agents, insurance Agents may only collect premiums when authorised by the insurance company. They must strictly follow the procedures, controls and deadlines set by their insurance company, and pay the premiums to the insurance company. However, the Insurance Authority receives related complaints from time to time and has expressed its concerns in its regulatory newsletter, listing the potential problems that may arise.

When paying premiums to the insurance company through an Agent, the Agent may mix the customer’s premiums with their own personal funds, for example by paying the premiums into their personal bank account. This may make it impossible to trace the premiums paid or result in them not being properly recorded. The Agent’s commingling of funds may even prompt anti-money laundering enquiries from the Joint Financial Intelligence Unit.

In addition, the Agent may delay paying the premiums to the insurance company or, in extreme cases, misappropriate the premiums and abscond.

The Insurance Authority reiterates that, even if authorised by an insurance company, an Agent may only collect premiums within the scope of that authority and must handle them strictly in accordance with the insurance company’s controls and procedures. In addition, an Agent must not mix premiums collected with their personal funds and must keep records of the premiums received in accordance with the insurance company’s controls and requirements. Failure to do so may result in disciplinary action.

If an Agent has any questions about the collection of premiums, they should exercise caution and advise the customer to pay the insurance company directly using the payment methods designated by the insurance company.

Regarding insurers’ responsibilities, the Insurance Authority reminds insurers that they must carefully consider whether to authorise their Agents to collect premiums. If they decide to grant such authority, insurers must implement appropriate controls and procedures to ensure that premiums paid by policyholders to Agents are properly safeguarded, particularly given that insurers, as the principals of their Agents, may ultimately be responsible for premiums collected by their Agents.

Furthermore, insurers should clearly inform policyholders of the authority granted to Agents to collect premiums, as well as any relevant limitations. If an insurer has not authorised an Agent to collect premiums, this should be stated in the premium or renewal notice, specifying that premiums should be paid directly to the insurer using the methods provided and must not be paid to the Agent. Insurers should ensure that such notices are sent directly to policyholders in a manner in which they are most likely to see them.

Finally, the Insurance Authority recommends that policyholders pay premiums directly to the insurance company using the payment methods specified in the quotation, premium and renewal notices.

Note: This article was last updated on 21 April 2022.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.