Bancassurance in Hong Kong: A Practical Framework

"Bancassurance" – a collaboration between banks and insurers for the distribution of insurance products – remains a powerful growth lever in Hong Kong, China. Success depends on translating the Insurance Authority’s (IA) principles‑based, outcomes‑focused philosophy into practice; put customer outcomes first, manage conflicts and mis‑selling risk, ensure resilience and continuity, and evidence governance that stands up to supervisory scrutiny. Licensing clarity, conduct controls and, nowadays, data (and AI) discipline, are all key.

A successful negotiation will lead to – stronger conduct assurance and brand protection; improved value for customers; regulatory‑ready governance and management information; resilient operations and clearer accountability; and, overall, stronger and more sustainable growth from the banking partnerships.

To get to that successful outcome, insurers and their advisers need to lock-down the following areas in the agreement:

• Licensing and Roles: Confirm whether the bank acts as a licensed insurance agent (with technical representatives) or broker; document licences, scope and prompt notification of any licence changes or regulatory actions.
• Conduct and Suitability: Embed IA principles - Act honestly and in customers’ best interests; balanced disclosure; suitability; conflicts management; competence; record‑keeping; proper handling of client money. Highlight cooling‑off arrangements (including, ILAS – investment-linked assurance) and any product‑specific free‑look periods.
• Sales Controls, MI and QA: Secure approval rights over scripts/web journeys; robust Management Information (MI) (sales, persistency, cancellations, complaints); Quality Assurance (QA) sampling and call monitoring; mystery shopping rights; audit access; sales suspension triggers for material conduct failings.
• Remuneration and Incentives: Tie commission to quality and persistency; use balanced scorecards (quality, complaint rates, persistency) and clawbacks to discourage mis‑selling.
• Data, Direct Marketing and Personal Data (Privacy) Ordinance: PDPO‑compliant fair collection notices; clear data user roles; direct marketing notices and consent/no‑objection (and explicit consent when providing personal data to another for direct marketing); Unsolicited Electronic Messages Ordinance‑compliant messaging (sender ID, accurate headers, unsubscribe, respect do‑not‑call registers); detailed data‑sharing terms (purpose, retention, security, transfers, audit).
• ILAS Specifics: ILAS Code disclosures (features, risks, fees/charges), suitability checkpoints and cooling‑off handling; assess whether any SFC licensing is engaged when advising on or dealing in underlying funds.
• Competition and Exclusivity: Review exclusivity and most‑favoured‑nation clauses under the Competition Ordinance or applicable laws; consider competition‑law savings clauses and periodic competition review.
• Complaints and Redress: Fast‑track complaint forwarding; joint investigation protocols; root‑cause analysis; coordinated remediation; clear customer communications.
• Governance, Resilience and Exit: Joint steering and conduct committees; regulatory change control; incident escalation (including, joint data breach drills); Service Level Agreements for processing and service; step‑in rights for systemic service failures; orderly run‑off for in‑force policies; data return/deletion; cyber, digital and "AI" discipline and resilience.

At RPC, our Corporate Insurance team has extensive experience with a range of distribution issues and insurance products in Hong Kong. Please get in touch with us to talk about (for example) structuring agreements, negotiating key protections and embedding best‑practice governance.

Please contact Andrew if you have any queries regarding the issues raised or if you wish to consider commercial law or insurance matters in Hong Kong.