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IIQE Paper 3 study materials
IIQE Paper 3 study resources

IIQE Paper 3: Regulatory Framework and Conduct Requirements for Long Term Insurance Intermediaries

IIQE Paper 3 · Work through your exam, one topic at a time.

All guide sections

Regulatory Framework and Conduct Requirements for Long Term Insurance Intermediaries

What this domain tests

This domain covers who may sell long-term insurance, what the Insurance Authority (IA) requires and how conduct rules apply at the point of sale. It is the compliance backbone of Paper 3.

Regulators and licensing

The IA regulates insurers and insurance intermediaries under the Insurance Ordinance (Cap 41). Insurance agents represent insurers; brokers act for policyholders and must be independent of insurers. Individuals must be fit and proper, pass the required IIQE papers, and meet CPD. ILAS distribution also engages the SFC regime because ILAS are securities; the relevant licence or exemption is required. The IA supervises market conduct, handles complaints and can impose sanctions.

Conduct requirements

  • Know your customer and complete a financial needs analysis before recommending a product.
  • Assess suitability, affordability, risk tolerance and replacement (switching) implications.
  • Disclose the insurer, product, premium, charges, cooling-off rights and material exclusions.
  • Do not rebate commission or offer inducements not stated in the policy.
  • Do not twist: replacing a policy must be justified and disclosed.
  • Keep records of advice and client instructions.
  • Handle client money through proper channels; comply with PDPO and AML/CFT obligations.

Worked example

A 70-year-old retiree with HKD 500,000 in savings is sold a 10-year ILAS with a 5% early surrender charge. The agent records only 'balanced risk'. On complaint, the IA would ask whether an FNA was done, whether the client could afford locking up capital for 10 years, whether the risk profile was documented and whether cooling-off was explained. The missing FNA and unsuitable recommendation breach conduct requirements even if the client signed the form.

Traps

  • Confusing agents and brokers: an agent's duty is to the insurer, a broker's to the client.
  • Assuming IA authorization guarantees the insurer's solvency.
  • Treating SFC authorization of an ILAS as a suitability judgement.
  • Skipping FNA because the client is experienced.
  • Failing to document why a replacement is beneficial.
  • Forgetting that commission is not itself prohibited, but undisclosed or unsuitable inducement is.