Further to the Phase 1 temporary facilitative measures (TFMs) introduced by the Insurance Authority (IA) on 21 February 2020, the IA has announced the second phase of TFMs in view of the development of the COVID-19 pandemic, in order to reduce the risk of infection from in person meetings during the sales process for insurance policies.  The second phase broadens the types of insurance products that can be distributed through non-face-to-face methods, and extends the duration of the existing Phase 1 measures (due to expire on 31 March 2020).

Recap of Phase 1 TFMs

The first phase of the TFMs permits insurers and intermediaries to sell Qualifying Deferred Annuity Policy (QDAP) and Voluntary Health Insurance Scheme (VHIS) products which are eligible for tax deduction in the 2019-2020 assessment year, without being obligated to conduct a Financial Needs Analysis (FNA), subject to certain conditions being met (which are equally applicable to the second phase TFMs). In order for the tax deduction to be claimed, the relevant policies must have been issued on or before 31 March 2020.

Phase 2 TFMs

The second phase TFMs cover additional products including: (i) term insurance policies; and (ii) refundable insurance policies without a substantial savings component, or renewable insurance policies without cash value, that provide insurance protection (e.g. hospital cash, medical, critical illness, personal accident, disability or long-term care cover), as well as the QDAPs and VHISs covered by Phase 1.

The following implementation principles apply to the Phase 2 TFMs (in addition to the Phase 1 TFMs) to ensure authorized insurers and licensed insurance intermediaries achieve fair treatment of customers:

  • All non-face-to-face distribution methods (e.g. digital, tele-marketing, postal, videoconference or any combination of those methods) for the distribution of products covered in the Phase 1 and 2 TFMs are allowed.
  • Before a customer makes a purchase decision, the intermediary must provide upfront disclosures[1] (unless waived in the Guideline on Financial Needs Analysis) relating to the nature, features and risks of the insurance products concerned in lieu of an FNA. If the intermediary is aware of any issue or concern about the customer’s ability to afford the product, the intermediary should not continue the sales process.
  • The same principle of upfront disclosure can be adopted for the relevant supervisory requirements under the respective guidelines[2] for the sale of long term insurance policies. Any supervisory requirements that are not hindered by non-face-to-face distribution should continue to be complied with by insurers and intermediaries[3].
  • An extended cooling-off period should be applied to products that lasts for a minimum of 30 calendar days (for delivery of policy documents through the mail and for policy holders to seek professional advice if necessary).
  • Insurers and intermediaries should draw policyholders’ attention to the fact that specific supervisory requirements aimed to protect their interests have been varied under non-face-to-face distribution due to the current COVID-19 pandemic. Customers should be advised that they should seek professional advice as they deem fit.
  • To meet the signature requirement, insurers and intermediaries can implement appropriate measures in place of wet ink signature by customers, including electronic signature, onsite recording, personal identification number (“PIN”) verification, sign-and-return-mail and one-time-password.
  • Insurers and intermediaries must ensure that they have adequate policies and procedures relating to the TFMs in place, and are controlling and monitoring transactions taking place.
  • Staff training for adopting the TFMs should be provided by insurers and intermediaries as appropriate.

The Phase 2 TFMs have immediate effect and will last until 30 June 2020 (subject to any further variation by the IA).

A copy of the circular can be found here.

[1] The upfront disclosure should include, where applicable, objective(s); type and nature of the policy; target benefit period; payment period; level of premiums payable; prominent warning to the customer concerning affordability of the policy during the entire premium payment period; relevant information highlighting the liquidity risk associated with the product etc.

[2] The same principle can be adopted for the relevant supervisory requirements under the Guideline on Underwriting Long Term Insurance Business (other than Class C Business) (GL16), Guideline on Qualifying Deferred Annuity Policy (GL19), Guideline on Long Term Insurance Policy Replacement (GL27), Guideline on Benefit Illustrations for Long Term Insurance Policies (GL28), and Guideline on Financial Needs Analysis (GL30).

[3] This includes proper disclosure of product features, risk and benefit illustration at the point-of-sale, post-sale confirmation calls for vulnerable customers under GL16 etc.