Published on: 14 April 2021 by Michael Lamb
CCW Global recently discussed what it is, exactly, that constitutes an insurance broker. However, in the Hong Kong insurance market there are actually two types of intermediary and sitting alongside Brokers in advising customers on their insurance are Agents.
To many people brokers and agents are very similar – you contact the intermediary and obtain insurance rather than go directly through the underwriter. In practice though the role and operations of an agent are extremely different from that of a broker.
So when looking at your insurance intermediary options in Hong Kong (and there are many), an important question to consider is; Does an Insurance Agent represent my interests?
In order to understand exactly how an insurance agent operates it is probably helpful to look at the regulatory definition of a Hong Kong insurance agent as state by the Hong Kong Insurance Authority.
In Hong Kong there are 3 types of Insurance Agent license that may be granted by the Insurance Authority:
In most respects an Agent is not so different from a broker, they are granted a license to advise and arrange insurance for customers. However, the principle, and key difference between an agent and a broker lies in the fact that under the definition of an insurance agent in Hong Kong, the agent is contracted to the authorized insurer they work with.
Remember, under the definition of a broker, the broker is contracted as an agent of the policyholder. In the above definition of an insurance agent, we can clearly see that the agent is (in fact) an agent of the underwriter.
When it comes to how an Agent approaches the market and is able to offer the products and policies in their portfolio, the key portion of the Insurance Authority definition which applies is that which dictates the agent is “an agent of any authorized insurer.”
With just 6 words to pay attention to, there is a great deal of content and meaning contained in this statement.
Under the insurance authority definition, an insurance agent does not work for the customer who is approaching them to place a policy. In fact, the agent has no legal or fiduciary obligation to the policyholder beyond that which is required by the authorized insurance company underwriting the policy being sold.
The agent is an agent of the insurer. They represent the interests of the insurance company for which they hold an agency.
To add to this, the definition of an agent, in itself, contains limitations on the scope of the agency. By stating that the agent is an agent of “any” insurer, the licensing of an agency then assumes that the agent will choose any underwriter from those authorized to operate in the market.
In reality this means that the agent is tied to a single authorized insurance company – because the agent is contracted directly to the insurance company, it is unlikely that the insurer would allow them to contract with a second competing underwriter.
Remember, an agent represents the interests of the insurance provider they are contracted to. If an agent were to represent more than one insurer per line of business there would be a fundamental conflict of interest as to which policy would be sold.
Agents are ubiquitous in Hong Kong – they are everywhere, and you’ve probably seen them waiting in Causeway Bay or outside the MTR. Agents can represent extremely good deals on Insurance as they have direct access to the insurer and can often negotiate discounts that may not be readily available through other sales avenues.
However, there is no choice – you are not able to compare different products from different insurance providers except through speaking to different agents representing different insurers. Additionally, as the agent is contracted directly to the insurer, they have internal sales targets to meet and drive from the insurer to sell a certain number of policies each month.
This means that you are unlikely to receive a completely unbiased and balanced view of the product you are purchasing; if the agent only has access to the single policy, of course that policy is going to be the best thing since sliced bread.
At the end of the day there is nothing wrong in choosing to use an agent to place your insurance coverage. There is a reason that agents sit alongside brokers in Hong Kong’s insurance market. However, before contacting an agent you should be fully informed about how they operate, and understand that the agent you are speaking to is in no way legally obligated to represent you, or your interest over those of the insurance company.
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