Hong Kong’s Insurance Authority has warned that restrictions imposed on two insurance brokers are not one-off actions, as it steps up enforcement of new rules governing referrals, sales illustrations and intermediary commissions.

“These actions are not isolated initiatives and we will not end from there,” Alan Wu, acting head of conduct supervision at the authority, said in a commentary published on July 12.

In early June, the regulator placed conditions on the license renewals of two unnamed brokers after finding that they had failed to control referral activities effectively. The firms were ordered to stop accepting referral business.

“Should similar irregularities be identified in the market, we will respond promptly with proportionate and decisive regulatory action to restore market order,” Wu said.

The action comes as the authority begins enforcing three measures introduced since 2025 for participating policies, which combine insurance protection with savings and may include non-guaranteed dividends or bonuses.

The segment has expanded rapidly. New office premiums from participating business rose 55.1% to HK$282.8 billion in 2025, while total new long-term business premiums, excluding retirement schemes, increased 50.6% to HK$330.9 billion.

“Insurance companies and intermediaries must uphold the highest standards of ethical conduct and professionalism, which form the cornerstone of public trust in the insurance industry,” Wu said.

The first measure, introduced in July 2025, capped the rates insurers may use to illustrate potential policy returns at 6% for Hong Kong dollar policies and 6.5% for policies in other currencies. The caps apply to projected, rather than guaranteed, returns and were intended to limit illustrations based on aggressive assumptions.

Referral arrangements came under greater scrutiny in October 2025. Fees exceeding 50% of the commission received by a broker now trigger additional disclosure and explanation.

The threshold is a supervisory benchmark, not an outright ban. Brokers may need to explain how customers were sourced, how fees were calculated and what controls prevent improper conduct. They may also face inspections and governance reviews during license renewals.

The authority has said large referral payments may indicate that unlicensed individuals are effectively selling insurance or that the payments are being used for undisclosed rebates.

Wu said the regulator may restrict certain business models or require more frequent reporting from firms with improper or higher-risk practices: “Following the introduction of these measures, we have been proactively monitoring compliance with regulatory requirements and taking stern enforcement action to rectify market misconduct and ensure the robustness of our regulatory framework.”

The authority is also using operational data, inspections and targeted checks to examine illegal referrals and cross-border solicitation. Wu said senior executives remain responsible for compliance throughout the sales process.

A third measure, effective January 2026, limits insurers to paying no more than 70% of total commission during the first year of a regular-premium participating policy. The remainder must generally be spread evenly over the next five years or the premium-payment term, whichever is shorter.

The rule does not cover single-premium participating policies or qualifying deferred annuity policies. It changes when commissions are paid, rather than how much insurers may pay.

“The objective is to foster healthy competition among insurers, while better aligning the interests of policyholders and intermediaries, thereby incentivising intermediaries to deliver high-quality pre-contract and ongoing servicing after the point of sale,” Wu said.

The authority received 1,173 complaints in 2025, up 19.9% from 978 a year earlier. Conduct and representation-of-information complaints accounted for 45% of the total and were linked largely to intermediary sales and servicing. The figures represent complaints received, not confirmed misconduct.

“The IA is also committed to tackling conduct risks at their source,” Wu said. That includes the “rolling bad apple” problem, in which individuals with misconduct records move between firms. A reference-checking scheme introduced for individual agents in 2024 has since expanded to agencies and brokers.

In July, the Insurance Authority and Hong Kong Monetary Authority extended reference checking across the banking and insurance sectors. The arrangement covers more than 110,000 intermediaries across about 1,000 institutions.

For brokers, Wu’s warning is that weak referral controls may now result not only in greater scrutiny, but in direct restrictions on how firms obtain business.