The government plans to conduct a second round of consultations with the insurance industry to set up an independent regulatory body, Commissioner of Insurance Annie Choi told the Legislative Council (LegCo) Panel on Financial Affairs Tuesday.

The Financial Services and the Treasury Services Bureau had published a consultation paper in July proposing the establishment of an independent insurance authority (IIA) by 2013 to regulate the industry. Under the proposal, the existing Office of the Commissioner of Insurance would be scrapped after the new body is set up.

About 13 insurance industry trade organizations had been invited to take part in the initial consultation exercise to express their opinions. This included the three insurance-related organizations that are currently self-regulating - the Hong Kong Federation of Insurers (HKFI), the Hong Kong Confederation of Insurance Brokers (HKCIB), and the Hong Kong Professional Insurance Brokers Association (HKPIBA).

Among the three, the HKFI and the HKCIB have expressed support for the idea of an IIA being set up, saying it would enhance the local industry's competitiveness. However, the HKPIBA disagreed, arguing that it will lead to the industry being over-regulated.

However, all three agreed on a few major issues. They are opposed to the proposal to let the Hong Kong Monetary Authority (HKMA) regulate the conduct of banks that sell insurance products, as it will lead to resource duplication.

They were also opposed to the idea of a 0.1 percent levy on insurance premiums on all policies as a way of providing funding to operate the IIA. They said that it would make them less competitive and increase costs for policyholders. Some companies might even move to other global offshore insurance centers.

Their final concern was about how unwieldy the new regulator body might be, as well as the burden that would fall on tax payers. Under the current proposal, the amount of staff at IIA would increase to 237, up 93 percent compared with current staff levels at the Office of the Commissioner of Insurance.

Choi stressed that the government will conduct another round of consultations that would allow for further discussion of the issues. "We will consider arguments about the HKMA's regulation of insurance products sold in banks, and we will also study whether it is appropriate or not to collect a 0.1 percent levy from policyholders," Choi said.

However, she also emphasized that the creation of an independent regulator is inevitable.

"The regulation of the insurance industry via an independent regulator is the basic global standard. And as an international financial center, Hong Kong should adhere to these rules," Choi said.

She added that last year alone, there were more than 1,600 cases dealing with complaints about insurance intermediaries.

China Daily

(HK Edition 10/13/2010 page2)