By Enoch Yiu

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Hong Kong insurance companies and brokers from Wednesday are barred from paying excessive referral fees to unlicensed individuals, as the city’s insurance regulator bolsters efforts to curb misconduct and enhance customer protection.
The city’s Insurance Authority has put a 50 per cent cap on commissions for referral fees in life insurance policies, a move that provides long-term life protection and dividends to policyholders, according to the regulator’s circular.
The cap will not cover referral fees paid to a licensed person by the authority, the Securities and Futures Commission, or the Hong Kong Monetary Authority, the circular said.
The regulation takes effect at the start of the National Day holiday – also known as the “golden week” – when millions of mainland Chinese visitors visit Hong Kong, which also serves as an opportune time for many of them to buy new insurance policies in the city.
“The Insurance Authority expressed concern about business models that could incentivise unlicensed selling of long-term insurance policies, particularly those adopted by licensed insurance broker companies relying solely or heavily on referrers,” the regulator said in the circular.
“Market feedback indicates that the current situation, if left unchecked, could breed misconduct, erode public confidence and impair market sustainability.”
The authority considered the need to tighten the regulation on such practices, as some insurance brokers consistently paid up to 90 per cent of the commission they received from the insurance companies to these third parties.

Hong Kong allows insurance companies to pay commission to insurance brokers to sell policies for them. Both parties are licensed by the Insurance Authority.
The current model, however, also allows licensed insurance brokers to pay referral fees to unlicensed third parties.
The Hong Kong Federation of Insurers said the industry, in general, supports the direction of the new regulation, part of a broader move to enhance professionalism, transparency and consumer protection.
“The practice of licensed Hong Kong insurance intermediaries paying referral fees to unlicensed third parties has been a grey area for too long,” said Damien Green, chairman of Manulife Financial Asia. “It is very positive that the Hong Kong Insurance Authority has begun to address the problem.”
Green said the “under-the-table” referral payments to unlicensed third parties brought compliance risks associated with covert kickbacks, which also paved the way for unqualified intermediaries to provide unauthorised advice to customers.
He added that the new regulation was important, as the city’s insurance industry recorded strong sales growth.
Hong Kong sold a record HK$93.4 billion (US$12 billion) worth of new life policies in the first quarter, up 43 per cent from HK$65.3 billion a year earlier, according to data from the Insurance Authority.
That followed a record year in 2024, when insurers posted a 21.4 per cent jump in sales to HK$219.8 billion, while mainland Chinese visitors accounted for 28.6 per cent of that total.
“As the most important global insurance hub in the world today, Hong Kong has a strict set of regulations that require insurance intermediaries to be qualified, licensed and authorised,” said Green, who is also a director of Financial Services Development Council, which is a government-backed body that promotes the city as an international financial centre.
“The Insurance Authority’s new cap on referral fees for certain life insurance policies is a big step in the right direction and will further enhance the sustainability and underlying integrity of Hong Kong’s insurance market,” Green said. He added that he would like to see the authority expand the cap to cover more insurance products in the future.
AIA Hong Kong said it welcomed the Insurance Authority’s move to “uphold high industry standards and foster the sustainable development of Hong Kong’s insurance market”.
“AIA Hong Kong will continue to maintain strong governance and oversight of our intermediaries to ensure that the Insurance Authority’s new regulatory requirements are considered and complied with during the due diligence process,” the insurer said in a statement.