The Office of the Insurance Commission (OIC) has published the draft notifications regarding Rules and Procedures for Issuing and Offering for Sale Insurance Products of Life and Non-Life Insurance Companies and the Operations of Insurance Agents and Licensed Brokers.
The recurring theme in the draft notifications is the need to prioritise and protect the benefits of the insured in all aspects of the insurance business. Therefore, the drafts introduce certain concepts, such as good corporate governance and fair treatment of customers, and impose obligations upon insurance companies to include certain processes into their business operation, such as risk management and internal control, highlights the global law firm Baker McKenzie in a note analysing the draft regulation.
In addition, the draft notifications expressly recognise the concept of banks conducting telesales business, which has long been an ambiguous issue in the industry.
The draft notifications are currently going through the OIC’s internal consideration process. If the OIC approves, they will come into force on 1 January 2019.
Major requirements in the proposed rules include:
1) Corporate culture and role board of directors and management
This is an entirely new concept which did not exist in the previous notifications. This draft notification imposes an obligation on the board of directors and the management of any insurance company to be responsible for promoting standards of fair treatment to customers, and requires the company to exert substantial effort into incorporating this corporate culture into its business operations.
2) Issuance of policies
(a) The insurance company will be required to have a development framework for determining the form and wording of policies, developing policies, and setting premium rates, whereby the benefits to policyholders must be central to all considerations. (b) In addition, the company must involve relevant organisations in developing or selecting insurance policies for sale.
3) Offering policies for sale
(a) The draft notifications now recognise electronic platforms as a channel for the sale of insurance policies, subject to the OIC’s notification concerning sales via electronic means. (b) For all sales channels, insurance companies are required to disclose information about all offerors of their insurance products publicly on their websites, and must update this information regularly. In addition, the draft notifications lay down the specific procedures which employees of insurance companies, their agents, and licensed brokers must follow for any sale, including for example: clearly identifying which insurance company issues the policy. (c) For telesales, the person offering to sell an insurance product must seek permission from the prospect to record the telephone conversation. If permission is not obtained, the call must immediately end. Banks are also expressly allowed to conduct telesales.
4) Provision of after-sale services
(a) Insurance companies are required to ensure that there is a working system, procedures, or means for receiving complaints from customers; for cancelling insurance policies; and properly returning premiums. All offerors of insurance products are responsible for providing these services and following up with the customers as appropriate. (b) The procedures and working system implemented by the company must be in accordance with the OIC’s notification regarding compensation pursuant to insurance contracts. A