8. There are two types of insurance intermediary, namely "insurance agent" and "insurance broker". What are the differences in their roles/functions and qualifications? Are they required to be registered before performing their work?
Most people have their insurance matters dealt with through an insurance agent or broker.
Acting on behalf of the general public, insurance agents and brokers advise and arrange the purchasing of insurance. They also prepare reports, keep records and in the event of a loss, help the policy holders to submit and settle a claim.
There are two types of insurance agents: independent agents and employed agents.
Independent agents are self-employed and represent insurance companies and earn a commission on the policies that they help to write. In Hong Kong, independent agents are restricted to representing no more than four insurance companies. No more than two of them can be life insurance companies.
On the other hand, there are employed agents who work exclusively for one insurance company. In addition to being paid a basic salary, they also earn commission on the business that they bring in.
Insurance agents are required to be registered with and supervised by the Insurance Agents Registration Board under the Hong Kong Federation of Insurers ("HKFI") in accordance with the Code of Practice for the Administration of Insurance Agents. To check the identity of a registered insurance agent, you may visit the HKFI's webpage.
To be registered, insurance agents are required to pass the Insurance Intermediaries Qualifying Examination conducted by the Vocational Training Council, unless they are exempt. To ensure professional standards, they are also required to attend continuing professional development programmes as a condition for the renewal of their registration.
An insurance broker exclusively represents the insured person (but not the insurance company). On behalf of the insured person, the broker searches insurance companies for the best available coverage suitable to the needs of the insured person. Usually, this type of insurance relates to commercial activities, the coverage is specialised, and the insurance is for a large amount.
A broker might be a company or a person, working on a commission basis.
An insurance broker must be authorised by the Office of the Commissioner of Insurance or either one of the two industry bodies, The Hong Kong Confederation of Insurance Brokers or the Professional Insurance Brokers Association .
- having a minimum capital and a minimum net asset value;
- meeting certain minimum qualifications and experience (where the broker is a company, it is the chief executive who has to qualify);
- having professional indemnity insurance; and,
- keeping proper books and accounts and separate accounts for each client.
In addition, the broker himself or herself, or the representatives of a broking company, must also be registered with the authorising body and have passed the qualifying examination, unless exempted, and be required to attend professional development programmes.
Lastly, a person or company is not permitted to act as an agent and a broker at the same time.