Hong Kong Monetary Authority Complaints for 2023 1st Half: 75 Cases of Mis-selling & Total of 1,552 Complaints, Increase in Complaints for Buying Insurance Plans with Premium Financing, Incorrect Investment & Banking Information Provided to Clients via Whatsapp & WeChat
27th July 2023 | Hong Kong
Hong Kong Monetary Authority (HKMA) has released the Complaints Watch for 2023 1st half in the financial industry, with 75 cases of mis-selling, total of 1,552 complaints, increase in complaints for buying insurance plans with premium financing (loans), and incorrect investment & banking information provided to clients via instant messaging tools such as Whatsapp & WeChat. On Premium Financing: “Premium financing is an insurance funding arrangement where a policy holder borrows funds from an AI to pay for the premium of a new insurance policy by assigning part or all of the rights under the policy to the AI as collateral, thereby scaling up the insurance policy value with the same amount of principal. The HKMA noted a number of complaints against AIs concerning the purchase of insurance plans with premium financing. 1) misrepresentation, inadequate or unclear disclosure of the features and risks of the insurance plans and associated premium financing 2) application for premium financing without the customer’s knowledge, e.g. the customer thought that the monthly payouts were insurance policy premiums, but in fact they were loan interest payments 3) unclear communication of the floating rate on premium financing loan; and 4) miscalculation of affordability.” View HKMA Complaints Watch | More info below.
“ Hong Kong Monetary Authority Complaints for 2023 1st Half: 75 Cases of Mis-selling & Total of 1,552 Complaints, Increase in Complaints for Buying Insurance Plans with Premium Financing, Incorrect Investment & Banking Information Provided to Clients via Whatsapp & WeChat “
Comments and feedback on Complaints Watch are welcome. Please email them to [email protected].
Hong Kong Monetary Authority Complaints for 2023 1st Half
Complaints Watch is published half-yearly by the Enforcement Divisions of the Hong Kong Monetary Authority (“HKMA”). It highlights the latest complaint trends, emerging topical issues, and areas that Authorized Institutions (“AIs”) and members of the public should be alert to. By publishing Complaints Watch, the HKMA aims to promote proper standards of conduct and prudent business practices among AIs and to increase public awareness of information about products and services offered by AIs.
Complaints Jan to June 2023
- Banking – 1,400
- Conduct – 152
- Total – 1,552
Complaints Type (Cases)
- Lending business decisions – 56
- Fees & charges – 59
- Client agreement issues – 62
- Mis-selling – 75
- Remittance services & transfer disputes – 203
- Service quality – 207
- Banking services – 219
- Credit cards – 546
- Others – 125
HKMA received 637 fraud-related banking complaints in the first six months of 2023, as compared to 555 cases for the full year of 2022.
1) Premium financing for purchase of insurance plans
Premium financing is an insurance funding arrangement where a policy holder borrows funds from an AI to pay for the premium of a new insurance policy by assigning part or all of the rights under the policy to the AI as collateral, thereby scaling up the insurance policy value with the same amount of principal. The HKMA noted a number of complaints against AIs concerning the purchase of insurance plans with premium financing.
Some common allegations include:
- misrepresentation, inadequate or unclear disclosure of the features and risks of the insurance plans and associated premium financing;
- application for premium financing without the customer’s knowledge, e.g. the customer thought that the monthly payouts were insurance policy premiums, but in fact they were loan interest payments;
- unclear communication of the floating rate on premium financing loan; an
- miscalculation of affordability.
AIs should place adequate emphasis on proper business practices and conduct, as well as clear disclosure and communication to protect the interests of their customers. The HKMA requires AIs to ensure the suitability and affordability of an insurance policy when making recommendations to their customers. In the light of potential conduct risks in relation to premium financing, AIs should also review from time to time the adequacy and effectiveness of their systems and controls, observe the relevant regulatory requirements, and draw reference where appropriate to the good practices we have observed:
- illustration on the calculation of interest payment in premium financing is clearly stated in marketing materials, as well as product documents;
- in case the lending rate is of a benchmark-based percentage, the floating rate nature of the premium financing, and its potential fluctuation affected by local and/or global economic development, are properly explained to customers during the selling process; in particular, customers are made aware that the lending rate is not
capped; - while the insurer provides information on policy
performance, the AI concerned updates the customer regularly on the interest cost of premium financing and reminds the customer to review his/her premium financing needs on an on-going basis; and - another staff not involved in the sales process will re- confirm with the customer that he/she is aware of the risks and features of the insurance policy and premium financing.
2) Instant messaging
Instant messaging (“IM” Eg. WhatsApp, WeChat and Line) is used by many banks and their staff to communicate with customers on financial services. It is important that AIs remain vigilant in protecting the interests of customers and adopt proper controls on the use of IM. Insights from the HKMA’s handling of related complaint cases and some good industry practices are shared below. In a few cases, bank staff were alleged to have used IM to provide customers with materially incorrect information prepared by themselves about customers’ bank accounts, or inappropriate description of the features and risks of investment products. The AIs concerned found such allegations substantiated and resolved those disputes with the affected customers.
To safeguard customers’ interests, AIs should ensure that information provided to customers is accurate and not misleading, and proper records and audit trails are maintained. There should be adequate policies and procedures regarding the use of IM and effective monitoring measures to identify any improper use of IM.
Some examples of good industry practices:
- Set up a governance framework for reviewing and approving acceptable IM systems;
- Establish minimum requirements for access to and define the scope of allowable activities
that staff can conduct through permitted IM systems; - Put in place procedures that staff should follow when they are contacted by customers
through non-approved IM channels; - Use business IM systems and/or dedicated official IM accounts which enable record keeping
and monitoring; and - Conduct surveillance of IM communications and establish model-based alert systems to detect and prevent inappropriate activity.
AIs are encouraged to make reference to these good industry practices and, in staff training, emphasise proper business conduct across all communication channels.
Customers should be reminded to read carefully the official documents issued by the relevant bank or product issuer regarding account details, transaction summaries and product information. It is advisable to understand key product features and risks and seek clarifications where necessary before making investment decisions. Prompt checking of account statements may also help customers identify any errors or discrepancies as soon as possible, and report to the AI concerned for appropriate follow-up.
Comments and feedback on Complaints Watch are welcome. Please email them to [email protected].
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