The Financial Services Commission (FSC) is tightening up on the operations of insurance intermediaries and their business relationships with insurance companies.
The island’s lead regulator has proposed new guidelines, to which it has sought comments from insurance sector.
The new rules seek to regularise the relationship between insurance providers and their agents, brokers, salesmen and sub-agents, which the FSC is grouping as a sub-sect and referring to them as intermediaries.
In many cases, these intermediaries also undertake the collection of insurance premiums, which the regulator is seeking to monitor and exercise greater control over their activities.
The FSC had originally given the insurance sector up to mid-June to submit comments on the new rules.
Within the guidelines, the regulator wants insurance companies to be satisfied that new intermediaries are financially sound, have the capability and expertise to properly carry out the functions expected of them, that the intermediaries are “of good character and has a sound reputation”; and that they are capable of meeting the criteria to be licensed with the FSC.
The regulator for the insurance sector, mutual funds, pensions, credit unions and the local stock market, wants insurance companies to ensure that they have “comprehensive, written agreements” with the insurance intermediaries that address critical aspects of their business relationship.
The new FSC guidelines will mandate that as part of the on-boarding process, especially for insurance salesmen, they should be adequately trained in the insurance business and products, as well as anti-money laundering and the prevention of terrorist financing.
And even after insurance salesmen and agents begin working with the insurance companies, the FSC wants to have evidence that they receive updated periodic training, and those records are kept and maintained as evidence of that training.
An important part of the guidelines includes monitoring of insurance intermediaries.
The FSC is seeking to enforce that insurance companies develop and maintain a plan for how they intend to monitor the intermediaries who are conducting business on their behalf.
This monitoring plan must include how customer complaints will be handled, the accuracy of information provided to intermediaries, and the handling of premiums collected by them. And to ensure that this is properly addressed by insurance companies, the FSC is including this when it undertakes evaluations and inspections of insurance companies.
Another key component of the new regulatory guidelines is the termination of the relationship between insurance companies and insurance intermediaries.
According to FSC guidance, “An insurer is expected to have procedures in place to address the termination of the relationship with an intermediary whether initiated by the insurer or not. An insurer is required by the legislation to notify the Commission of the termination of a relationship with salesmen, agents, sub-agents.
“Notification should also be required in respect of termination of a relationship with brokers. Notification should be undertaken particularly where the termination was a result of matters related to fitness and propriety or poor business practices.” (IMC1)