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Major Reform in Hong Kong Insurance Industry! Does this affect you?

The Hong Kong Officer of the Commissioner of Insurance (OCI) has recently released a document which describes proposed changes to how insurance commissions can be paid. The circular, titled "Guidance Notes on Underwriting Class C Business", concerns the ILAS product which is so prevalent in Hong Kong, and in particular outlines the standards expected of licensed insurers with aim of protecting and benefiting the consumer - by focusing on the remuneration aspect.
"...indemnity commission, or any standing arrangement which offers the advance payment of commission, is strictly prohibited. Insurers should only pay commissions on an earned basis. Commission payable should also spread over an appropriate duration to encourage good after-sales service and duly reward long-term relationship between intermediaries and policyholders"
With this, the guidance notes align Hong Kong with the regulatory changes which have been sweeping the rest of the world. The impact will be most harshly felt by those firms of Independent Financial Advisors, or IFAs, who are still reliant on up-front commissions on long-term regular savings products for their revenue. The aim of the guidance notes is to encourage the market to adopt a more service-oriented approach, and therefore to adopt a commission structure which is more based on recurring revenues.
Such recurring revenues can take several forms - but the key concept is that they are not guaranteed. If the client is not happy with the service provided, he can take his business elsewhere - and the recurring revenue stream would presumably follow him or her to wherever they move their business.
In order to retain clients, IFA firms may need to closely examine how they can achieve the following:
Differentiate their service from the competitors
Enhance the brand loyalty
Make it easy for their advisors to add value to their client
Offer ongoing asset-management advice - either from in-house, or purchased from a 3rd party
For all of these aspects, Privé Managers, the advanced wealth management platform, is able to help. Whether it is through bespoke Reporting and enhanced Branding, sophisticated Alerts to help the Advisor stay ahead of the client, or through the efficient implementation of Model Portfolios or trading ideas to provide additional revenues - we have a solution for you.
For more information on how Privé Managers can help your business stay ahead of the game, please contact [email protected]
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