SFC tightens regulation on investment-linked insurance policies to enhance investor protection
- The tightened regulation came after an SFC review found insurance companies were charging high fees and surrender charges
- There are 1.2 million investment-linked insurance policies outstanding in Hong Kong worth US$39.2 billion
Hong Kong’s securities watchdog on Monday introduced tougher regulations on investment-linked assurance schemes (ILAS) in a bid to enhance transparency and protect investors following a review of these products.
The Securities and Futures Commission’s new guidelines require insurance companies to provide greater transparency on the fee structure and design of these products. The companies have also been told to stop charging consumers excessively high fees and surrender charges.
The Hong Kong Federation of Insurers (HKFI), which represents 138 insurers, said it supported the SFC’s new measures.
The SFC tightened the rules after finding problems following a recent review of ILAS products. Many policyholders have complained that insurance companies paid high fees paid to salespeople for selling these products, with some agents getting the entire first-year premium as commission. Some agents, in a bid to get the high commission, allegedly sell these products without clearly explaining the associated risks, consumers said.
“The ILAS is basically like an insurance policy and fund product bundled together,” an SFC spokesman said. “We want to make sure the fees and surrender charges are clear and simple, and most importantly, they should not be much higher than other insurance and fund products.”
The new measures are the first updates to the guidelines issued in 2014, after these schemes were criticised for their high fees and charges.
