XN000022-1986-01-27 — Page 9

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MM), Jaukut <;, 1966

TURNING TO THE SECOND PART OF THE COMMISSION'S REPORT. MR DE SPEVILLE SAID THAT THERE WAS SOME CONFUSION IN THE PUBLIC MIND IN HONG KONG AS TO THE DISTINCTION BETWEEN INSURANCE BROKERS AND INSURANCE AGENTS. HE EXPLAINED THAT THE ESSENTIAL DIFFERENCE WAS THAT BROKERS GENERALLY ACTED AS AGENTS OF THE PERSON SEEKING INSURANCE WHILE INSURANCE AGENTS ACTED AS AGENTS OF THE INSURER, THE COMMISSION HAD CLARIFIED THIS DEFINITION OF EACH OF THESE TYPES OF INSURANCE INTERMEDIARY.

THE COMMISSION POINTS OUT IN ITS REPORT THAT THERE IS AT PRESENT NO STATUTORY REGULATION OF THE ACTIVITIES OF BROKERS OR AGENTS, THOUGH INSURERS THEMSELVES ARE REGULATED BY THE INSURANCE COMPANIES ORDINANCE.

+WHILE THERE HAVE BEEN FEW COMPLAINTS FROM THE PUBLIC, THE COMMISSION NEVERTHELESS BELIEVES THAT THE PUBLIC DOES NOT ALWAYS RECEIVE THE SERVICE WHICH IT IS ENTITLED TO EXPECT FROM THE INSURANCE INDUSTRY AND THAT THERE ARE INADEQUATE SAFEGUARDS AGAINST ABUSE OF THE SYSTEM, MR DE SPEVILLE SAID.

THE COMMISSION RECOMMENDS THAT ANYONE SEEKING TO CARRY ON BUSINESS AS A BROKER SHOULD BE REQUIRED TO REGISTER WITH THE INSURANCE AUTHORITY. BROKING ASSOCIATIONS WOULD ALSO BE ENTITLED TO APPLY FOR REGISTRATION, AND MEMBERSHIP OF A REGISTERED BROKING ASSOCIATION WOULD AUTOMATICALLY SATISFY THE REQUIREMENTS FOR INSURANCE REGISTRATION.

DETAILED PROVISIONS ARE SUGGESTED FOR THE REGISTRATION OF BROKING COMPANIES OR PARTNERSHIPS, MODELLED IN PART ON MEASURES CONTAINED IN THE COMPANIES ORDINANCE.

+ IF THIS PROPOSAL IS IMPLEMENTED, IT WOULD THEN BECOME AN OFFENCE FOR ANY UNREGISTERED PERSON TO CARRY ON BUSINESS AS A BROKER. POWER WOULD BE GIVEN TO THE INSURANCE AUTHORITY TO CANCEL OR SUSPEND REGISTRATION IN APPROPRIATE CASES,+ MR DE SPEVILLE SAID.

THE COMMISSION RECOMMENDS THAT AN INSURER SHOULD BE HELD TO BE RESPONSIBLE FOR THE CONDUCT OF ITS INSURANCE AGENT WHERE THAT CONDUCT IS RELIED ON IN GOOD FAITH BY THE INSURED IN RELATION TO ANY MATTER RELATING TO INSURANCE, WHETHER OR NOT THE AGENT ACTED WITHIN THE SCOPE OF HIS AUTHORITY.

INSURERS WOULD BE REQUIRED TO KEEP A REGISTER OF THEIR AGENTS WHICH WOULD BE OPEN TO PUBLIC INSPECTION. AS WITH BROKERS, IT SHOULD BE AN OFFENCE FOR A PERSON FALSELY TO HOLD HIMSELF OUT AS AN INSURANCE AGENT.

FURTHERMORE, PROTECTION FOR THE INSURED WOULD BE EXTENDED TO MAKE AN INSURER LIABLE FOR THE CONDUCT OF ANY PERSON WHO ARRANGES INSURANCE WITH THE INSURER FOR REWARD FOR A POLICY HOLDER WHERE THE INSURER HAS BY HIS SUBSEQUENT CONDUCT EFFECTIVELY ACCEPTED THE PERSON ARRANGING THE POLICY AS HIS AGENT. THE FACT THAT THE INSURER HAS ISSUED A POLICY WOULD BE TREATED AS PRIMA FACIE EVIDENCE THAT THE INSURER HAS RATIFIED THE CONDUCT OF THE +AGENT+.

THE COMMISSION