On 10–11 April 2024, the Insurance Authority and the ICAC ran their first-ever joint operation: search warrants executed at four premises over two days — including the offices of a licensed broker company and a referral company — with the ICAC arresting a broker and a referrer. The target was an open industry secret: unlicensed referrers in Mainland China sourcing clients for Hong Kong long-term policies, while the licensed broker company existed mainly as a paper shell. One month later (22 May), the IA circular formalised the crackdown. A tolerated industry practice had crossed into criminal enforcement.
How the model worked — the circular spells it out
The IA's 22 May circular describes the non-compliant model in operational detail, drawn from intelligence work and mystery shopping:
- Unlicensed referrers sourced clients — typically in the Mainland, pushing long-term policies with savings/investment features
- Inordinate referral fees — pegged directly to closed sales; in some cases over 90% of the broker's commission went to the referrer
- Illegal rebates — referrers passed part of the fee to customers as inducement
- Reps became rubber stamps — no time or resources left (the commission had flowed out), so business reps performed "cosmetic" form-filling, sometimes in the referrer's presence — creating paperwork making the sale look as if it happened in Hong Kong
- False declarations + coaching — clients were asked to sign declarations that all regulated activities took place in Hong Kong, and reps coached them to repeat this in the insurer's post-sale verification calls — defeating the insurer's own controls
s.64G: why criminal, not disciplinary
Section 64G of the Insurance Ordinance (Cap.41) is the licensing regime's foundation: carrying on regulated activities without a licence is a criminal offence, punishable by fines and up to two years' imprisonment. "Regulated activities" covers selling insurance, advising on insurance matters, and arranging policies (Schedule 1A). So a Mainland referrer "explaining and closing" policies is not grey — it is black. The ICAC's involvement reflects suspected Prevention of Bribery Ordinance offences — an agent using documents to deceive his principal — meaning the false declarations deceived not just the regulator but the employer.
The circular's three principles — the referral compliance line
| Principle | Requirement | Practical meaning |
|---|---|---|
| One | Unlicensed referrers must not provide regulated advice or carry on regulated activities/sales | A referrer may only introduce — no product explanation, no pitching, no selection assistance |
| Two | The broker company must perform the regulated activities itself — needs analysis, product explanation, advice, done with the client in person | Reps cannot merely sign — the "rubber stamp" model is itself evidence of breach |
| Three | Referral fees must be commensurate with the referrer's actual work — inordinate fees are a red flag | 90%+ commission outflow indirectly proves who really did the work — fee structure becomes enforcement evidence |
The HKMA recirculated the IA circular to all banks on 12 June 2024 — banks engaged in insurance referrals must likewise avoid regulated activities and maintain adequate policies, procedures, controls and training. The perimeter reaches beyond broker firms.
What followed
The circular says the IA is "following up with other broker companies suspected of using such business models, and with the authorized insurers that sold long-term policies through them" — so the aim reaches past intermediaries to whether insurers had adequate controls against unlicensed selling. Against the annual-report backdrop (66 formal investigations and 24 conduct/fit-and-proper disciplinary actions in 2023–24, up 85%; the first criminal prosecution of a licensed broker company in 2024–25), enforcement density is clearly rising.
Official sources
| Document | Issuer | Date |
|---|---|---|
| First IA-ICAC joint operation | IA | 2024.4.11 |
| Circular on non-compliant referral models | IA | 2024.5.22 |
| HKMA recirculation to banks | HKMA | 2024.6.12 |
| Insurance Ordinance (Cap.41) | eLegislation | Current |