IIQE Paper 6 cheat sheet

The Insurance Authority (IA) is a statutory body established under the Insurance Ordinance (Cap. 41); it took over supervision of insurers from the Office of the Commissioner of Insurance and of intermediaries from the three self-regulatory organisations on 23 June 2017.

Statutory functions of the IA include regulating and supervising the insurance industry, protecting policyholders, promoting market stability and competitiveness, and assisting the Financial Secretary in maintaining Hong Kong's financial stability.

The IA is financed mainly by a fee levy on insurance premiums, plus licensing and other fees; it is not funded by general revenue and must not use public funds for its ordinary operations.

Licence types for intermediaries: licensed insurance broker company, licensed insurance agency, and their responsible officers (ROs); individual technical representatives are licensed as 'licensed insurance representative' (agent/broker side) under the agency or broker they join.

A licensed insurance broker company must have at least one RO; a licensed insurance agency must have at least one RO. An RO must be an individual approved by the IA and must be a director of the company (or, for an agency, a director or the sole proprietor/partner as applicable).

Supervisory approach is three-pillar: prudential supervision of insurers, conduct supervision of intermediaries, and market development; the IA uses a risk-based, proportionate approach with off-site review, on-site inspection and thematic reviews.

The IA may exercise powers including investigation, imposing disciplinary sanctions (public/private reprimand, revocation or suspension of licence, pecuniary penalty up to HK$10 million or three times the profit gained or loss avoided, whichever is higher), and prosecution of offences.

Appeals against IA disciplinary or licensing decisions lie to the Insurance Appeals Tribunal; the Tribunal may confirm, vary or reverse the decision.

Only a licensed insurance broker company may act as agent of the insured, and only a licensed insurance agency may act as agent of an insurer; an individual cannot be licensed as a broker or agency in their own name.

Fit and proper criteria for licensees and ROs cover: financial soundness, qualifications and experience, competence, integrity, reputation and reliability, and compliance with regulatory requirements.

Minimum qualification for an individual licensee: passes the Insurance Intermediaries Qualifying Examination (IIQE) papers required for the licence type, or holds an approved equivalent; Paper 1 plus Paper 3 for agency-side general/long term business, Paper 1 plus Paper 2 for broker-side.

CPD requirement: licensed insurance representatives and ROs must complete 15 CPD hours per year (of which at least 3 hours on ethics/regulatory compliance and at least 3 hours on the relevant business type), subject to IA-prescribed exemptions.

Application for a licence or renewal is made to the IA; a licence is valid for 3 years and renewal must be applied for before expiry; a licence lapses if not renewed and the individual must cease regulated activity.

An RO must have at least 3 years' relevant experience in the insurance industry (or other approved experience) and must be a fit and proper person; the IA assesses the RO's management and supervisory capability.

A licensee must notify the IA of changes in prescribed particulars (e.g., change of RO, address, cessation of business) within the time specified; failure is a disciplinary matter.

Grounds for refusal or revocation include: not fit and proper, providing false information, failure to comply with the Ordinance or IA guidelines, and conviction of an offence involving fraud or dishonesty.

The IA's Guideline on Conduct Requirements for Licensed Insurance Intermediaries (GL16) sets standards on: honesty and fairness, due care and diligence, disclosure of information, suitability, conflicts of interest, and remuneration.

Suitability rule: before recommending a product, the intermediary must conduct a financial needs analysis (FNA) and risk profiling, and must ensure the recommendation is suitable for the client's circumstances; if the client declines to provide information, the intermediary must explain the consequences and record it.

Disclosure duties include: the intermediary's name, licence number, capacity (agent of insurer vs broker of client), the insurer represented, and whether remuneration is commission, fee or both.

Conflicts of interest must be avoided, and where unavoidable, disclosed and managed; the intermediary must not put its own interest above the client's and must not accept undisclosed inducements.

Remuneration must not be structured so as to incentivise mis-selling; commission and incentive schemes must not compromise suitability and must be disclosed to the client on request.

Client money: premiums received by a broker must be held in a designated client account and kept separate from the broker's own money; agency premiums are handled under the agency agreement with the insurer.

Record keeping: the intermediary must keep records of the FNA, advice given, product disclosure, and client instructions for at least 7 years (or as specified by the IA), and make them available to the IA on request.

The IA may issue codes and guidelines; breach of a guideline is not itself an offence but may be relied on in disciplinary proceedings as evidence of failure to comply with the Ordinance.

Financial needs analysis (FNA) covers: the client's financial objectives, time horizon, financial situation (income, assets, liabilities), risk tolerance, and existing insurance coverage.

Risk profiling must be documented; the recommended product's risk level must be consistent with the client's risk profile, and any mismatch must be justified and recorded.

Presentation and comparison: the intermediary must present the product's key features, benefits, exclusions, limitations, surrender value, and charges, and compare alternatives where relevant.

Product disclosure: for investment-linked or non-guaranteed products, the intermediary must explain the nature and extent of risks, including market risk and non-guarantee of returns.

The 'know your client' principle applies throughout the sales process; recommendations must be based on the client's disclosed information, not on the intermediary's sales targets.

For long-term insurance products, the intermediary must provide a product summary and, where applicable, a benefit illustration; the client must be given time to consider the product.

Record keeping of the sales process: FNA form, risk profile, product comparison, disclosure of remuneration, and signed client declarations must be retained and be sufficient to reconstruct the advice.

The IA's guidance requires a 'cooling-off' period for specified life insurance products; the client may cancel within the period and receive a refund of premiums (subject to market value adjustment).

Hong Kong's AML/CFT regime for insurance intermediaries is based on the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) and the IA's Guideline on AML/CFT (GL3).

Risk-based approach: the intermediary must identify, assess and understand its ML/TF risks, and apply CDD and monitoring measures proportionate to those risks.

Customer due diligence (CDD) measures: identify the customer and verify identity using reliable, independent sources; identify the beneficial owner; understand the purpose and intended nature of the business relationship.

Enhanced due diligence (EDD) is required for higher-risk situations, including politically exposed persons (PEPs), correspondent relationships, and customers from higher-risk jurisdictions.

Ongoing monitoring: the intermediary must conduct ongoing CDD, keep documents up to date, and monitor transactions for unusual patterns; simple one-off transactions below the threshold may be exempt from full CDD.

Suspicious transaction reporting: if the intermediary knows or suspects that property is connected to a predicate offence, it must make a suspicious transaction report (STR) to the Joint Financial Intelligence Unit (JFIU) as soon as practicable.

Tipping-off is an offence: the intermediary must not disclose to the customer or any third party that an STR has been made or is being considered.

Record keeping for AML/CFT: CDD records and transaction records must be kept for at least 5 years after the end of the business relationship or the completion of the transaction.

The Insurance Complaints Bureau (ICB) handles complaints from individual policyholders against licensed insurers and intermediaries; it is an independent, industry-funded body, separate from the IA.

The ICB's remit covers monetary disputes within its jurisdiction limits; it does not handle complaints about the IA's own decisions or about matters outside its terms of reference.

The IA's enforcement process: investigation (which may be initiated by the IA on its own initiative or on complaint), then a disciplinary hearing, then a decision with reasons, then a right of appeal.

Disciplinary sanctions available to the IA: private reprimand, public reprimand, suspension or revocation of licence, and a pecuniary penalty of up to HK$10 million or three times the amount of profit gained or loss avoided, whichever is greater.

The IA may also impose conditions on a licence, or require the licensee to take remedial action, as an alternative or in addition to a sanction.

Appeals against IA decisions go to the Insurance Appeals Tribunal, which is independent of the IA; the Tribunal's decision may be appealed to the Court of Appeal on a point of law.

The IA publishes enforcement decisions and guidelines on its website; the disciplinary process must observe natural justice, including the right to be heard and to be represented.

Complaints to the IA about an intermediary's conduct may lead to investigation and disciplinary action; the IA does not adjudicate on the amount of a claim, which is a matter for the insurer or the ICB.

Honesty: the intermediary must not misrepresent the product, the insurer, or the intermediary's own qualifications, and must not conceal material facts from the client.

Fair dealing: the intermediary must treat clients fairly, act in the client's best interest, and not take advantage of the client's lack of knowledge or sophistication.

Confidentiality: client information must be kept confidential and used only for the purpose for which it was obtained, subject to legal disclosure requirements (e.g., AML reporting, court order).

Competence: the intermediary must only advise on products and matters within their knowledge and competence, and must refer the client to a specialist where appropriate.

Continuing professional development (CPD): licensees must complete the IA-prescribed CPD hours annually, covering technical, regulatory and ethics topics, and keep records of CPD completion.

Integrity: the intermediary must not offer or accept undisclosed benefits, must avoid conflicts of interest, and must not use client assets or information for personal gain.

Professional conduct also covers: not engaging in unlicensed activity, not holding out as licensed when not, and cooperating with the IA's supervision and investigations.

Breach of ethical standards may constitute a failure to be fit and proper, and may lead to disciplinary action by the IA, including suspension or revocation of licence.

The Insurance Ordinance (Cap. 41) was substantially amended in 2015 to establish the IA as an independent regulator; the IA commenced full operation on 26 June 2017.

The IA has a governing body (the Board) whose members are appointed by the Chief Executive; the Board oversees the IA's strategy and appoints the Chief Executive Officer.

The IA's statutory objectives include: promoting the general stability of the insurance industry, protecting existing and potential policyholders, and promoting public understanding of insurance.

The IA may make rules (subsidiary legislation) on matters such as capital requirements, valuation, and intermediary conduct, subject to negative vetting by the Legislative Council.

The IA cooperates with other regulators (e.g., the Hong Kong Monetary Authority, the Securities and Futures Commission) and with overseas supervisors through memoranda of understanding.

Licensing of intermediaries is a function of the IA; the IA maintains a register of licensed intermediaries that is available to the public for verification.

The IA's supervisory approach includes a 'risk-based' framework under which it assigns risk ratings to insurers and intermediaries and allocates supervisory resources accordingly.

A licensed insurance agency is a company that acts as agent for one or more insurers; a licensed insurance broker company acts as agent of the client and may place business with multiple insurers.

An RO of a broker company must be a director of the company; an RO of an agency must be a director or, where the agency is a sole proprietorship or partnership, the sole proprietor or a partner.

The IA may grant a licence subject to conditions; breach of a condition is a ground for disciplinary action.

The IA's 'fit and proper' assessment considers: financial status, education and qualifications, experience, criminal record, regulatory record, and management capability.

A licensee must not carry on regulated activity unless the licence is in force; carrying on unlicensed regulated activity is a criminal offence.

The IA may refuse an application if the applicant has been convicted of an offence involving fraud, dishonesty, or money laundering, or has been subject to disciplinary action by another regulator.

Renewal applications should be submitted before the licence expires; a late renewal may result in a gap in licensing and the individual must not carry on regulated activity during that gap.

The IA's conduct requirements apply to all licensed insurance intermediaries, including those who are also registered with other regulators.

The intermediary must act with due care, skill and diligence, and must not recommend a product that is not suitable for the client's circumstances.

Disclosure of capacity: the client must be told whether the intermediary is acting as agent of the insurer or as broker of the client, because this affects the nature of the advice and the duty owed.

The intermediary must disclose any commission, fee or other benefit received in connection with the sale, and must not accept undisclosed benefits from third parties.

Conflicts of interest policies must be in place at the company level, and the RO is responsible for ensuring compliance.

Client money rules: a broker must maintain a separate client account, keep proper records, and reconcile the account regularly.

The IA may require an intermediary to produce records and documents for inspection; failure to comply is a disciplinary matter.

The FNA must be conducted before the recommendation, not after; the recommendation must be based on the documented FNA.

The risk profile must be reviewed and updated at each new recommendation, not just at the initial sale.

The intermediary must explain the product's key exclusions and limitations, and must not rely on the client reading the policy documents alone.

For investment-linked products, the intermediary must explain the investment risk, the fees and charges, and the fact that the value may go down as well as up.

The intermediary must provide a copy of the FNA and the recommendation to the client, and keep a copy on file.

The 'cooling-off' period applies to specified life insurance products; the client must be informed of the right to cancel and the period within which to do so.

The sales process must be documented sufficiently to allow a reviewer to reconstruct what was recommended, why, and on what information.

The AML/CFT Ordinance (Cap. 615) imposes CDD and record-keeping obligations on financial institutions, including licensed insurance intermediaries.

CDD must be completed before establishing a business relationship or carrying out a transaction, except in limited circumstances where it may be completed after, with safeguards.

Simplified due diligence (SDD) may be applied in lower-risk situations, but the intermediary must still identify the customer and verify identity where appropriate.

PEPs include individuals who hold or have held prominent public positions, and their family members and close associates; EDD is required for PEPs.

The JFIU receives STRs and disseminates intelligence to law enforcement; the intermediary must not investigate the offence itself.

The IA's GL3 requires the intermediary to have a written AML/CFT policy, a designated compliance officer, and staff training.

Failure to comply with AML/CFT requirements may result in disciplinary action by the IA and criminal liability under Cap. 615.

The Insurance Complaints Bureau (ICB) is a company limited by guarantee, funded by insurers, and is independent of the IA.

The ICB's jurisdiction covers complaints by individual policyholders against insurers and intermediaries, subject to a monetary limit and a time limit.

The ICB's decisions are binding on the insurer if the complainant accepts the award; the complainant may still pursue legal action.

The IA's disciplinary process must be fair and transparent; the licensee has the right to be informed of the allegations and to respond.

The IA may publish a reprimand or a revocation decision; the publication must be fair and accurate.

The Insurance Appeals Tribunal hears appeals against IA decisions; the Tribunal's decision is final on the facts, with appeal to the Court of Appeal only on a point of law.

The IA's enforcement powers are set out in the Insurance Ordinance; the IA may also refer cases to the police or the JFIU where criminal conduct is suspected.

The intermediary must not use confidential client information for personal gain or for the benefit of a third party.

The intermediary must not mislead the client about the nature of the product, the insurer's financial strength, or the intermediary's role.

The intermediary must not engage in 'churning' (replacing a policy to generate commission) or other practices that are not in the client's best interest.

The intermediary must not discriminate unfairly against clients on grounds such as age, gender, disability, or race.

The intermediary must cooperate with the IA's investigations and must not obstruct or mislead the IA.

CPD records must be kept and produced to the IA on request; failure to meet CPD requirements may affect licence renewal.

Ethical conduct is a continuing obligation, not a one-off requirement at licensing; the IA may take disciplinary action for conduct that occurs at any time during the licence period.

The IA's powers include the power to make rules on: capital adequacy, valuation of assets and liabilities, and the conduct of insurers and intermediaries.

The IA must consult the industry before making rules, and the rules are subject to the Legislative Council's negative vetting procedure.

The IA's Board includes members with experience in insurance, finance, law, and consumer affairs.

The IA publishes an annual report and a corporate plan, and reports to the Financial Secretary.

The IA's supervisory activities are guided by the Insurance Core Principles issued by the International Association of Insurance Supervisors (IAIS).

The IA's licensing process includes a review of the application, verification of qualifications and experience, and a fit and proper assessment.

The IA may request additional information or an interview as part of the application process.

The IA maintains a public register of licensed intermediaries; clients can verify a licence on the IA's website.

A licensee must display their licence number on business documents and correspondence.

The IA may impose conditions on a licence, such as restricting the types of products the licensee may sell.

The intermediary must ensure that all communications with the client are clear, fair and not misleading.

The intermediary must not use high-pressure sales tactics or exploit the client's vulnerability.

The intermediary must keep the client informed of material changes to the product or the insurer's financial position.

The intermediary must not accept a client's instruction if it is unclear or if the client lacks capacity, without taking appropriate steps.

The intermediary must have a complaints handling procedure and must inform the client of the procedure.

The FNA must consider the client's existing insurance coverage to avoid over-insurance or gaps.

The risk profile must be based on the client's own assessment, not on the intermediary's assumption.

The intermediary must explain the difference between guaranteed and non-guaranteed benefits.

The intermediary must provide a written recommendation that sets out the reasons for the recommendation.

The intermediary must give the client the opportunity to ask questions and must answer them accurately.

The intermediary must verify the identity of the customer and the beneficial owner using reliable, independent sources.

The intermediary must understand the ownership and control structure of a corporate customer.

The intermediary must conduct ongoing monitoring of the business relationship, including reviewing transactions against the client's profile.

The intermediary must keep records of CDD and transactions for at least 5 years.

The intermediary must train staff on AML/CFT requirements and maintain a written policy.

The ICB's process includes mediation and, if necessary, adjudication by an independent adjudicator.

The ICB's award may include compensation for financial loss and distress.

The IA's disciplinary process includes a hearing at which the licensee may be represented.

The IA may impose a pecuniary penalty in addition to a reprimand or suspension.

The IA's decisions are subject to appeal to the Insurance Appeals Tribunal.

The intermediary must act in the client's best interest, even if this means recommending a product with lower commission.

The intermediary must not disclose client information without the client's consent, except where required by law.

The intermediary must maintain and update their professional knowledge through CPD.

The intermediary must not engage in conduct that brings the insurance industry into disrepute.

The intermediary must cooperate with the IA and other regulators in the conduct of their duties.

The IA was established on 23 June 2017 and is the sole regulator of insurers and insurance intermediaries in Hong Kong.

The IA's statutory functions are set out in the Insurance Ordinance (Cap. 41).

The IA is funded by a premium levy and fees, not by general revenue.

The IA's supervisory approach is risk-based and proportionate.

The IA has powers to investigate, discipline, and prosecute.

A licensed insurance broker company acts for the client; a licensed insurance agency acts for the insurer.

An RO must be a director of the company (or the sole proprietor/partner for an agency).

CPD requirement: 15 hours per year, including at least 3 hours on ethics and 3 hours on the relevant business type.

A licence is valid for 3 years and must be renewed before expiry.

The IA may refuse or revoke a licence on fit and proper grounds.

The IA's GL16 sets out conduct requirements for licensed insurance intermediaries.

Suitability requires an FNA and risk profiling before a recommendation.

The intermediary must disclose their capacity, licence number, and remuneration.

Client money must be held in a separate client account.

Records must be kept for at least 7 years.

The FNA must cover the client's objectives, financial situation, risk tolerance, and existing coverage.

The recommendation must be consistent with the client's risk profile.

The intermediary must explain the product's key features, exclusions, and risks.

The client must be given a cooling-off period for specified life products.

The sales process must be documented sufficiently to reconstruct the advice.

The AML/CFT Ordinance (Cap. 615) and the IA's GL3 govern insurance intermediaries.

CDD includes identifying the customer, the beneficial owner, and the purpose of the relationship.

EDD is required for PEPs and higher-risk situations.

STRs must be made to the JFIU as soon as practicable.

Tipping-off is a criminal offence.

The ICB handles complaints by individual policyholders against insurers and intermediaries.

The IA may impose a pecuniary penalty of up to HK$10 million or three times the profit gained.

The Insurance Appeals Tribunal hears appeals against IA decisions.

The IA may suspend or revoke a licence.

The IA may publish enforcement decisions.

Honesty, fair dealing, confidentiality, competence, and integrity are core ethical duties.

CPD is a continuing obligation and records must be kept.

Conflicts of interest must be avoided or disclosed and managed.

The intermediary must not use client information for personal gain.

Breach of ethical standards may lead to disciplinary action.

The IA's statutory objectives include protecting policyholders and promoting market stability.

The IA's Board is appointed by the Chief Executive.

The IA cooperates with other regulators and overseas supervisors.

The IA maintains a public register of licensed intermediaries.

The IA's rules are subject to negative vetting by the Legislative Council.

The IA assesses fit and proper criteria including financial soundness, qualifications, and integrity.

The IIQE papers required depend on the licence type.

A licensee must notify the IA of changes in prescribed particulars.

The IA may impose conditions on a licence.

Unlicensed regulated activity is a criminal offence.

The intermediary must act with due care, skill, and diligence.

Disclosure of capacity is essential for the client to understand the advice.

Commission and incentives must not compromise suitability.

Client money must be kept separate from the intermediary's own money.

Breach of a guideline may be evidence of failure to comply with the Ordinance.

The FNA must be conducted before the recommendation.

The risk profile must be updated at each new recommendation.

The intermediary must explain the difference between guaranteed and non-guaranteed benefits.

The client must be informed of the cooling-off period.

The sales process must be documented.

The risk-based approach requires proportionate CDD and monitoring.

SDD may be applied in lower-risk situations.

PEPs require EDD.

The JFIU receives STRs.

Records must be kept for at least 5 years.

The ICB is independent of the IA.

The ICB's jurisdiction is subject to monetary and time limits.

The IA's disciplinary process must be fair and transparent.

The Insurance Appeals Tribunal is independent.

The IA may refer criminal cases to the police.

The intermediary must not mislead the client.

Confidentiality is subject to legal disclosure requirements.

Competence requires advising only within one's knowledge.

CPD records must be produced to the IA on request.

Ethical conduct is a continuing obligation.