The following press release is issued collectively by the Insurance Authority, the Mandatory Provident Fund Schemes Authority and the Hong Kong Monetary Authority:
The Insurance Authority (IA), the Mandatory Provident Fund Schemes Authority (MPFA) and the Hong Kong Monetary Authority (HKMA) today (23 December) jointly issued a circular outlining the key findings of a joint mystery shopping programme (MSP)1 conducted earlier this year on the selling practices of intermediaries2 in respect of two tax-deductible products, namely Qualifying Deferred Annuity Policies (QDAP) and Mandatory Provident Fund Tax-Deductible Voluntary Contributions (TVC) in Hong Kong, and the good practices observed in the MSP.
A number of aspects in relation to selling practices were covered in the MSP, including the know-your-customer procedures, financial needs analysis (as applicable to QDAP), suitability of recommendations, and explanation of product features and risk disclosure. The MSP revealed that the intermediaries were generally in compliance with the relevant regulatory requirements, except for certain aspects and individual samples which showed room for improvement, such as insufficient efforts made to collect information or consider circumstances of the customer for the relevant product, and inadequate explanation and disclosure on certain product features and risks. The industry is reminded to consider the findings of the MSP, and review and enhance their policies and internal controls accordingly to adhere to the principles of treating customers fairly and acting in customers’ best interests.
“With more than 230,000 in-force policies in the market, QDAP has become an important component of retirement planning for members of the public. The MSP findings provide a valuable reference about the current selling practices of QDAP and an opportunity for insurers and intermediaries to revisit their procedures for better protection of policy holders,” said Ms Carol Hui, Executive Director, Long Term Business of the IA.
“Since its introduction in 2019-20, TVC which could enhance retirement savings while enjoying tax deduction was well received by Mandatory Provident Fund scheme members. The MSP findings provide useful references for stepping up supervision of the intermediaries, in particular in improving their marketing and selling practices of TVC for the benefits of scheme members,” said Ms Cynthia Hui, Acting Chief Operating Officer of the MPFA.
“The HKMA believes that the results of this MSP are useful for the industry to further improve the selling practices of the two tax-deductible products, and to raise the conduct standards and promote better customer outcome. The HKMA will continue to collaborate with fellow regulators on matters of mutual interests in according customer protection and promoting sound culture of the financial industry,” said Mr Alan Au, Executive Director (Banking Conduct) of the HKMA.
The regulators will take into account the findings in formulating supervisory plans and related measures, follow up the findings with the insurers and/or intermediaries concerned as appropriate and require them to take actions to address the issues noted as applicable. The regulators will also continue to monitor the industry’s compliance with relevant regulatory requirements in their on-going supervision.
Insurance Authority
Mandatory Provident Fund Schemes Authority
Hong Kong Monetary Authority
23 December 2022
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Media enquiries
IA
Iris Leung, External Relations Manager, IA
Tel: 3899-9689 Email: irisleung@ia.org.hk
MPFA
Maggie Tsoi, Manager (External Affairs), MPFA
Tel: 2292-1278 Email: maggietsoi@mpfa.org.hk
HKMA
Frances Li, Manager (Communications), HKMA
Tel: 2597-0615 Email: press_office@hkma.gov.hk
1 The MSP commenced in early 2022 and is the first of its kind jointly conducted by three financial regulators. A service provider was engaged to undertake the MSP. Please refer to the press release published on 29 December 2021 for more details.
2 “Intermediaries” refers to-
| (a) |
licensed insurance intermediaries as defined in section 2(1) of the Insurance Ordinance; |
| (b) |
registered intermediaries as defined in section 2(1) of the Mandatory Provident Fund Schemes Ordinance; and |
| (c) |
authorized institutions as defined in section 2(1) of the Banking Ordinance. |
