CP Advice

• The regional director is an agent of Company A.  He solicits advantages (i.e. sharing of the commissions earned by the “down-line” individual insurance agent) from the “down-line” individual insurance agent for submitting policy application documents containing false information to Company A (i.e. his principal) which is related to the affairs of Company A.  Without the permission of Company A to solicit such advantages, he contravenes Section 9(1) of the Prevention of Bribery Ordinance (Cap. 201) (POBO).  The “down-line” individual insurance agent also contravenes Section 9(2) of the POBO by offering the advantages under such circumstances. 

• The “down-line” individual insurance agent is also an agent of Company A.  He conspires with the regional director (an agent of Company A) to use policy application documents with false information to deceive Company A (i.e. their principal) for more commissions.  Both the “down-line” individual insurance agent and the regional director contravene Section 9(3) of the POBO as they use policy application documents with false information in respect of which their principal is interested and with an intent to deceive their principal.

Some dishonest insurance intermediaries might falsely represent on the policy application documents that other insurance intermediaries who are not involved in any part of the sales process as the handling agents of the applications with a view to soliciting the commissions earned by the latter.  Apart from contravention of the POBO by the insurance intermediaries concerned and causing financial loss to insurance companies, such improper practice among insurance intermediaries will also put the companies’ reputation at stake, thereby affecting the customers’ confidence in the companies.  If there are inadequate controls in the insurance company, this would create opportunities and temptation for exploitation by the corrupt parties concerned.  In order to deter/detect the related malpractice in the above case, insurance companies are advised to pay attention to red flags (i.e. indicators of areas where management oversight is required to safeguard against possible corruption) and put in place adequate corruption prevention safeguards.  Examples of red flags and safeguards include –

Red Flags

• Unexpected increases in sales transactions by insurance intermediaries that are exceptional or without apparent reasons in a short period of time.

Safeguards

• Include a warning in relevant documents (e.g. insurance intermediary declaration form which is attached to the policy application form) to warn insurance intermediaries against submission of false information (e.g. falsely representing on the policy application documents that another insurance intermediary who is not involved in the sales process is the handling agent of the applications) and the possible consequences (e.g. incurring criminal liabilities), and require them to declare on relevant documents that all the information and supporting documents provided to the insurance company are true and accurate.

• Draw customers’ attention to important notes such as the need for them to check policy terms and other essential information (including, amongst others, the name of the handling agent) carefully and avoid signing blank or unclear documents.

• Prohibit individual insurance agents from requesting or advising customers to sign on blank/incomplete policy application documents.

• Provide electronic means of application (e.g. via e-application App) for the insurance intermediaries’ submission of policy applications during the sales meeting with the customers / potential policy holders to lessen the risk of false representation of handling agents as the names of the handling agents are electronically logged on the electronic policy application documents.

• Stipulate the names of the policy handling agents in the insurance policies and send direct messages (e.g. SMS alerts) to the policy holders concerned to inform them of the names of the policy handling agents, status of their policy applications and the company enquiry telephone number.

• Make post-sales confirmation calls to customers on a risk basis to verify some essential information of the sales process (e.g. the names of the handling agents), and take appropriate follow-up action(s) for suspicious case(s).

• Conduct random supervisory checks (e.g. by respective Distribution Channel Departments) and independent checks (e.g. by the Compliance Department, Internal Audit Department) on new business and/or high risk applications (e.g. policy applications submitted via individual insurance agents with previous disciplinary record / abnormal portfolio) to deter and detect malpractice; and make the parties concerned (e.g. individual insurance agents) aware of the random/independent check policy for deterrence purpose.