Mr David Alexander Member of the Governing Committee Date: 7 November 2012
Healthcare Reform The Food & Health Bureau (FHB) moving ahead with the proposed Health Protection Scheme Working Group, Consultative Group and Project Steering Group set up PricewaterhouseCoopers retained by FHB to conduct a consultancy study Needs support from all service providers including the medical sector HKFI working closely with FHB
Healthcare Reform cont d Areas of Support from HKFI Standard policy terms with basic coverage DRG and packaged pricing for standard pool and high risk pool Clear definition on pre-existing conditions Co-insurance and deductible Scope inpatient Regulation on policy terms Claims Dispute Resolution
Healthcare Reform cont d Challenges Standard terms vs choice Portability how to ensure sustainability Migration should not be mandatory for existing customers Guaranteed acceptance: not required for statutory lines like EC & Motor mechanism needed to control risk e.g. the high risk pool will become very complex potential political issues moving patients from public to private sector at tax-payers expense
Independence of the Insurance Authority (IIA) First Consultation Conclusions released on 4 July 2011 Levy of 0.1% on insurance premiums for all insurance policies Apart from prudential regulation of insurers, IIA also empowered to take interventionary actions for protection of policyholders IIA primary and lead regulator of all insurance intermediaries, including banks, with inspection, investigation and disciplinary powers on intermediaries Specific powers delegated to HK Monetary Authority (HKMA) Draft legislative amendments released on 26 October 2012 for consultation IIA expected to be set up by 2014
Policyholders Protection Fund (PPF) IA conducted consultation in 2011 and issued Consultation Conclusions on 30 Jan 2012 PPF to be legislated 100% coverage for the first HK$100,000 of any claim 80% of balance up to total of HK$1M 0.07% levy on applicable premiums, to be collected from insurers HKFI has serious concerns on general insurance issues, i.e. inclusion of SME, continuity of coverage, cap on levies, etc Proposed PPF to be set up in 2013-2014
Commission Disclosure by Brokers under the Prevention of Bribery Ordinance (PBO) ICAC considers that insurance brokers should seek consent from their clients regarding their receiving commission from insurers High Court Judgment HCCL15/2010 (Hobbins vs Royal Skandia) stated that commission paid to an insurance broker by an insurer does not constitute illegal secret profit unless it is in excess of what is normally paid within the insurance market For HKFI, commission disclosure for brokers is a matter of legal compliance under the PBO
Commission Disclosure for Brokers under the PBO cont d The three self-regulatory organizations (HKFI, CIB & PIBA) agreed that commission disclosure by brokers to their clients would be minimum good practice Disclosure wordings to be incorporated in formal proposals, application forms or debit notes Policyholders informed consent required Disclosure requirement to come into effect on 15 April 2013 for three SROs
Financial Dispute Resolution Centre (FDRC) The FDRC came into operation on 19 June 2012 Covers SFC-licensed corporations and authorized institutions of HKMA Each individual claim cannot exceed HK$500,000 Insurance and MPF sectors carved out. However, complaints on insurance sold in banks would be covered Insurance Claims Complaints Bureau (ICCB) continues to resolve disputes relating to insurance claims Claimants can either go to FDRC or ICCB but not both
Risk-based Capital Framework for Insurance Business in HK Consultancy study being conducted by KPMG, consultant for the IA IA aims to implement Insurance Core Principles and enhance transparency on capital and reserving for risks No increase in capital requirement HKFI has set up Task Forces under its Governing Committee, GIC and LIC Meeting held with KPMG to discuss scope, solvency capital, measurement of assets and liabilities etc IA anticipates full implementation around January 2016
Benefit Illustration Revised Guidance Note on ILAS Illustration Document (GN) will be released in due course Illustration rates will be changed: -? from a maximum of 9% and 5% for two illustrations? to a maximum of 9%, 6% and 3% for three illustrations Objective of the revised GN to ensure:? more consistency of approach in the illustration documents for ILAS policies? customers receive proper information and disclosure? the rates of illustration are appropriate to the current investment environment One year given to HKFI Member Insurers to prepare for implementation
Opening China s s Renminbi Interbank Bond Market for HK Insurers Remarkable growth recently in the RMB life insurance market in HK For 2011, new business premium totalled RMB 8.2 billion, representing a two-fold increase as compared with 2010 However, new business has dropped drastically in the first half year of 2012 comparing with the same in 2011 7 life insurers in Hong Kong have been granted entry, on a pilot scheme basis, to invest in the Mainland s interbank bond market
Contractual Minimum Death Benefits on ILAS It was recognized that there is no standard for the minimum amount of death benefit associated with ILAS products Consensus has been reached whereby the minimum death benefit of an ILAS product should be at least 105% of the investment value of the contract A two-year transitional period will be given The new requirement will not apply to in-force policies A Guidance Note will be issued in due course
Enhancement on Market Statistics for Life Insurance Business Market statistics about onshore/ offshore, currency, premium term, etc will be collected IA is conducting its IT system enhancement for collection of the new data A circular from IA will be issued later this year New data collection is expected to commence in the 2nd quarter of 2013
Implication of the Low US and HK Dollar Interest Rates Low interest rate would affect an insurance company on its (1) capitalization, (2) solvency requirement and (3) future dividend for policyholders, etc. LIC has advised its Member Insurers to (i) conduct prudent reviews (ii) make appropriate adjustment on the aspects above-mentioned and (iii) communicate with their affected policyholders to avoid false expectation LIC would follow up and exchange views with the Actuarial Society of Hong Kong
Foreign Account Tax Compliance Act (FATCA) A Joint Industry Working Group (comprising HKFI, the Hong Kong Trustees Association Limited and the Hong Kong Investment Funds Association) has been set up to work together to address concerns raised by local financial institutions with respect to FATCA A joint industry submission to the US was made in April 2012 Latest discussion focus on the possibility of signing an Inter-government Agreement on the compliance of FATCA
Guideline on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) For compliance with international requirements, no exemption could be granted for group life and telemarketing business even though they are relatively low risk HKFI would re-visit this matter if: -?? IA re-considers the best practice approach the relevant legislation is brought up for review