GL 25

GUIDELINE
ON
OFFERING OF GIFTS

Insurance Authority
 Contents Page

1. Introduction………………………………………………. 1

2. Interpretation…………………………………...………… 1

3. Relevant Regulatory Documents and Status of this

Guideline…………………………………………………. 2

4. Scope of Application……………………………………... 3

5. Restriction on offering Gifts ……………………………... 4

6. Premium Rebates and Commission Rebates ……………… 5

7. Procedures and Controls ………………………………….. 5

8. Commencement…………………………………………... 6

9. Transitional Provision…………………………………….. 6

Permitted Gifts Annex

1. Introduction

1.1 The Insurance Authority (“IA”) issues this Guideline pursuant to section
133 of the Insurance Ordinance (Cap. 41) (the “Ordinance”), its principal
function to regulate and supervise the insurance industry for the
protection of existing and potential policy holders and its function to
promote and encourage the adoption of proper standards of conduct and
sound and prudent business practices by authorized insurers and licensed
insurance intermediaries. This Guideline also takes into account the
Insurance Core Principles, Standards, Guidance and Assessment
Methodology (“ICP”) promulgated by the International Association of
Insurance Supervisors, in particular ICP 19 which stipulates that the
conduct of the business of insurance should ensure that customers are
treated fairly.

1.2 The offering of Gifts (as defined in Section 2 of this Guideline) or other
similar gratuities in the marketing, promotion or distribution of insurance
products may unduly influence or otherwise distract customers when it
comes to making informed decisions in relation to insurance products and
the suitability of such products to meet their insurance needs and other
circumstances. In view of this, this Guideline provides guidance on
certain restrictions on the use of gifts and rebates which authorized
insurers and licensed insurance intermediaries should follow when
marketing, promoting or distributing insurance products classed as long
term business.

2. Interpretation

2.1 In this Guideline, unless the context otherwise specifies:

(a) “Class A Product” means any contract of insurance in Class A

(Life and annuity) of Part 2 of Schedule 1 to the Ordinance.

(b) “Class C Product” means any contract of insurance in Class C

(Linked long term) of Part 2 of Schedule 1 to the Ordinance. These
are usually known as Investment-linked Assurance Scheme
products.

(c) “Class D Product” means any contract of insurance in Class D

(Permanent health) of Part 2 of Schedule 1 to the Ordinance.

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 (d) “Customer” bears the same meaning as policy holder or potential
policy holder, as those terms are used in the Ordinance.

(e) “Gift” may include any kind of gift, incentive, enticement or

inducement, whether financial or non-financial, but does not
include:

(i) the payment of fees or commissions to licensed insurance

intermediaries; or

(ii) any discount of premiums, fees or charges payable under a

contract of insurance (i.e. insurance policy), provided that
the discount is expressly stated in the quotation, offer letter,
promotional materials, insurance policy or the policy
schedule, thereby reducing the amount of premium, fee or
charge the policy holder is obliged to pay under the terms
of the insurance policy.

(f) “Permitted Gift” means a gift listed in the Annex to this Guideline.

(g) “Rebate” means:

(i) in relation to premiums, any repayment made as a gratuity

directly or indirectly to a customer of an amount of
premium previously paid by a customer; or

(ii) in relation to commissions, any payment made as a gratuity

directly or indirectly to a customer by a licensed insurance
intermediary of part of the commission received by the
licensed insurance intermediary.

2.2 Unless otherwise specified, words and expressions used in this Guideline
shall have the same meanings as given to them in the Ordinance.

3. Relevant Regulatory Documents and Status of this Guideline

3.1 This Guideline should be read, where appropriate, in conjunction with

the relevant provisions of the Ordinance and all other relevant rules,
codes, circulars and guidelines issued by the IA or other regulatory bodies,
including but not limited to the following:

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 (a) Guideline on Underwriting Class C Business (GL15) issued by the
IA;

(b) Guideline on Underwriting Long Term Insurance Business (other

than Class C Business) (GL16) issued by the IA;

(c) Code of Conduct for Licensed Insurance Agents issued by the IA;

(d) Code of Conduct for Licensed Insurance Brokers issued by the IA;

(e) Code of Conduct for Persons Licensed by or Registered with the

Securities and Futures Commission; and

(f) All relevant rules, codes, circulars and guidelines administered or

issued by the Hong Kong Monetary Authority in relation to gifts.

3.2 This Guideline does not have the force of law, in that it is not subsidiary
legislation, and should not be interpreted in a way that would override the
provision of any law. A non-compliance with the provisions in this
Guideline would not by itself render an authorized insurer or licensed
insurance intermediary liable to judicial or other proceedings. A non-
compliance may, however, for example reflect on the IA’s view of the
continued fitness and properness of (i) the directors, controllers and key
persons in relevant control functions of the authorized insurers to which
this Guideline applies and (ii) the licensed insurance intermediaries to
which this Guideline applies and (in the case of licensed insurance
agencies and licensed insurance broker companies) their directors,
controllers and responsible officers. The IA may also take guidance from
this Guideline in considering whether there has been an act or omission
likely to be prejudicial to the interests of policy holders or potential policy
holders (albeit the IA will always take account of the full context, facts
and impact of any matter before it in this respect).

4. Scope of Application

4.1 This Guideline applies to all authorized insurers carrying on long term
business and all licensed insurance intermediaries carrying on regulated
activities in relation to long term business.

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5. Restrictions on offering Gifts

Class C Products

5.1 Authorized insurers and licensed insurance intermediaries should not

directly or indirectly offer Gifts to customers when marketing, promoting
or distributing Class C Products.

Class A Products and Class D Products

5.2 Authorized insurers and licensed insurance intermediaries should not

directly or indirectly offer Gifts to customers when marketing, promoting
or distributing Class A Products or Class D Products, unless the
requirements in paragraph 5.3 are satisfied.

5.3 A Gift for the purposes of paragraph 5.2 may be offered or made to a
customer only if, according to a reasonable assessment made by the
authorized insurer or licensed insurance intermediary, the Gift would not
distract the customer from making an informed decision on whether or
not to purchase the product. Accordingly, the responsibility lies with an
authorized insurer and licensed insurance intermediary to make an
assessment as to whether, in their reasonable opinion, the proposed Gift
would distract a customer in making such informed decision. In making
such assessment, the authorized insurer or licensed insurance
intermediary should take account of all the circumstances in which the
Gift is proposed to be offered or made (including the value of the Gift
relative to the amount of premium payable by the customer in relation to
the product and the manner in which the Gift is to be marketed or
offered). This assessment may be made either on a case-by-case basis or,
if Gifts are to be offered or made as part of a marketing campaign or
programme, at the time the marketing campaign or programme is
formulated.

Permitted Gifts

5.4 As an exception to paragraphs 5.1 to 5.3 above, authorized insurers and

licensed insurance intermediaries which offer Class A Products, Class C
Products or Class D Products may offer Permitted Gifts as shown in the
Annex, provided that the criteria referenced in the Annex in relation to
each Permitted Gift is strictly adhered to.

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 Miscellaneous

5.5 The restrictions in paragraphs 5.1 to 5.3 also apply:

(a) in relation to the marketing, promotion or distribution of a range,

group or collection of insurance products, where one or more of
those insurance products is a Class A Product, Class C Product or
Class D Product; or

(b) in relation to the offering or provision of any Gift by an authorized

insurer to a licensed insurance broker representing a customer.

6. Premium Rebates and Commission Rebates

6.1 Rebates of premiums or commissions should not be offered or paid to

customers in relation to long term insurance products.

6.2 Paragraph 6.1 does not apply in relation to any rebates which are recorded
in the contract of insurance, whether in the insurance policy, the policy
schedule, the quotation or offer letter, or in any promotional material (the
terms of which are incorporated by reference into the contract of insurance).

7. Procedures and Controls

7.1 Authorized insurers, licensed insurance agencies and licensed insurance

broker companies should maintain robust internal procedures and controls,
including adequate record keeping (with such records to be made available
to the IA upon request), to ensure that they and their staff, including but
not limited to their licensed individual insurance agents, licensed technical
representatives (agent) or licensed technical representatives (broker),
where applicable, comply with this Guideline. Authorized insurers should
also give due consideration to the requirements of this Guideline when
considering their sales practices and their dealings with their licensed
insurance agents and the licensed insurance broker companies with which
they do business (as the case may be).

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8. Commencement

8.1 This Guideline shall take effect from 23 September 2019 (“Effective
Date”).

9. Transitional Provision

9.1 The IA recognizes that the authorized insurers and licensed insurance
intermediaries to which this Guideline applies may require time to update
their documentation, controls and processes to align with the requirements
in this Guideline. A transitional period of 12 months from the Effective
Date (i.e. from 23 September 2019 to 22 September 2020) will therefore
apply in respect of certain requirements of this Guideline (“Transitional
Period”). During this Transitional Period, authorized insurers, licensed
insurance agents or licensed insurance brokers shall comply with the
provisions in this Guideline unless an alternative requirement is identified
in the table below. If an alternative requirement is identified in the table
below, during the Transitional Period, the alternative requirement may be
followed in place of the identified provision in this Guideline by the
authorized insurer or licensed insurance intermediary as referenced in the
table below.

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Topics Provisions in Alternative Requirements
this Guideline
Restrictions on Section 5 During the Transitional Period, as an alternative
offering Gifts to the sections of this Guideline referenced in the
column headed “Provision in this Guideline”,

a) Authorized insurers which were carrying

on long term business immediately prior
the Effective Date and their licensed
insurance agents (including, in the case of
licensed insurance agencies, the licensed
technical representatives (agent) of the
agencies) may continue to comply with
the “Guidance Note on Gifts, Promotions
and Incentives for Class A and Class C
Products” and also, in the case of licensed
insurance agents, paragraph 80(l) of the
Code of Practice for the Administration
of Insurance Agents (7th version dated
Procedures and Section 7
1 March 2010);
Controls
b) Licensed insurance broker companies
registered immediately prior to the
Effective Date with the Hong Kong
Confederation of Insurance Brokers
(“CIB”) and their licensed technical
representatives (broker) may continue to
comply with Rule 7.13 of the
Membership Regulations of the CIB
(version dated 15 July 2015); and

c) Licensed insurance broker companies

registered immediately prior to the
Effective Date with the Professional
Insurance Brokers Association (“PIBA”)
and their licensed insurance technical
representatives (broker) may continue to
comply with Rule 5(d) of the
Membership Regulations of PIBA
(version dated 1 February 2015),

and the referenced documents are adopted for

the purposes of the Transitional Period.

September 2019

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 Annex

Permitted Gifts

For the purposes of this Annex, “Relevant Products” means a Class A Product, Class
C Product or Class D Product.

(a) Allocation of bonus fund units and other similar product specific bonuses in
respect of any Relevant Products (where applicable).

(b) Gifts that are offered for “relationship building” purposes and are not tied to
the marketing, promotion or distribution of any Relevant Products.

(c) Gifts that can be redeemed at a later date under a customer loyalty programme
through the accumulation of points provided that the number of points earned
is not directly or indirectly linked to the volume or value of sales (or both) of
any Relevant Products or, in the case of a licensed insurance broker, are not
directly or indirectly linked to the distribution volume or a pre-determined
level of sales of any Relevant Products.

(d) Provision of sponsorship and support for customer information seminars,

compliance support and financial planning software. The level of
sponsorship and support should not be in the form of subsidy or cash
equivalents and should not be directly or indirectly linked to the distribution
volume or a pre-determined level of sales of any Relevant Products.

(e) Brand building campaigns such as lucky draws that are open to all policy
holders and potential policy holders and are not tied to the marketing,
promotion or distribution of any Relevant Products.

(f) Ancillary services that are relevant and reasonably found in any Relevant
Products at no extra charge, such as medical check-ups, medical consultancy
services or emergency SOS services.

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