[Paying Premiums Directly to Agents?] Are there risks in having insurance intermediaries handle premiums?

Many insurance agents are well-acquainted with their clients and often pay premiums on their behalf. However, issues can arise from time to time. According to the Code of Conduct for Licensed Insurance Agents, insurance agents are only permitted to collect premiums if authorised by the insurance company. They must strictly adhere to the insurance company’s policies, controls, and deadlines for processing, and ensure the premiums are paid to the insurance company. Nevertheless, the Insurance Authority frequently receives related complaints and has raised concerns in its Regulatory Newsletter, highlighting potential issues that may arise.

When paying premiums to an insurance company through an agent, the agent may mix the client’s premium with their personal funds, for instance, by depositing the premium into their personal bank account. This could result in the inability to trace the paid premium or failure to properly account for it. Such fund-mixing behaviour by the agent may even prompt inquiries from the Joint Financial Intelligence Unit regarding anti-money laundering efforts.

Furthermore, the agent may delay paying the premium to the insurance company, or in extreme cases, the agent might misappropriate the premium and abscond with the funds.

The Insurance Authority reiterates that, even if authorised by an insurance company, agents may only collect premiums within the scope of that authority and must strictly adhere to the insurance company's controls and procedures. Additionally, agents must not mix the premiums they have collected with their personal funds and are required to maintain records of the premiums received in accordance with the insurance company's controls and regulations. Failure to comply may result in disciplinary action.

If agents have any doubts regarding the collection of premiums, they should act with caution and advise clients to make payments directly to the insurance company through the designated payment methods specified by the company.

Regarding the responsibilities of insurance companies, the Insurance Authority reminds insurers that they must carefully consider whether to authorise their agents to collect premiums. If authorisation is granted, insurance companies must implement appropriate controls and procedures to ensure that premiums paid by policyholders to agents are properly safeguarded, especially considering that insurance companies, as the principals of their agents, may bear ultimate responsibility for the premiums collected by their agents.

Furthermore, insurance companies should clearly inform policyholders of the authority and limitations of agents in collecting premiums. If an insurance company does not authorise agents to collect premiums, it should state in the premium or renewal notice that premiums must be paid directly to the insurance company through the provided methods and not to the agent. Insurance companies should ensure that such notices are sent directly to policyholders in a manner that is most likely to be seen by them.

Lastly, the Insurance Authority recommends that policyholders should use the payment methods specified in the quotation, premium notice, and renewal notice to pay premiums directly to the insurance company.

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.