CFA rules on Insurance Agents’ Industry Duties to their Tech Reps

In an interesting judgment in Gill Gurbux Singh v Dah Sing Insurance Services Ltd [2016] HKEC 752, the Court of Final Appeal recently confirmed that insurance agents owe a duty of care to their technical representatives (“TRs”) to comply with the mandatory requirements in the insurance industry’s code of practice and guidelines.

Insurance agents and TRs are regulated by the Code of Practice for the Administration of Insurance Agents (the “Code”). The Code is issued by the Hong Kong Federation of Insurers (“HKFI”) and administered by the Insurance Agents Registration Board (“IARB”). The IARB also issues guidance notes on how agents and TRs exercise their powers and fulfil their obligations under the Code.

The appellant (Mr. Singh) was appointed as a TR by the respondent company (an insurance agent). The case at first instance turned on whether the respondent company had breached a statutory duty by: (a) failing to inform the IARB of the cessation of the appellant’s appointment as its TR (a reporting requirement of insurance agents prescribed under the Code), resulting in the appellant being unable to work as a TR; and (b) failing to report the appellant’s CPD credits to the IARB (a further reporting requirement of insurance agents under the relevant guidance notes), resulting in a three-month compulsory de-registration.

The judge at first instance found in favour of the appellant and awarded damages. The respondent company appealed. A new point was taken on appeal; namely, whether the appellant suffered any actual loss because he could work as an insurance agent (albeit not as a TR). The Code provides that a TR can act for no more than one insurance agent at any given time, while an insurance agent can act for up to four insurers (provided he or she has the consent of the principal).

The Court of Appeal reversed the first instance decision, holding that there had been no breach of statutory duty and the respondent company did not owe the appellant a common law duty of care.

The appellant appealed to the CFA, which held that the respondent company did owe the appellant a common law duty of care. According to the judgment, there was a clear foreseeability of loss to the appellant in the respondent company’s failure to report the cessation of appointment and CPD credits to the IARB. Since the respondent company was required under the Code to report these matters (and the appellant had naturally relied on it to do so) the company was taken to have assumed a responsibility to comply with the requirements set out in the Code and guidelines. The CFA also commented that the Court of Appeal may have incorrectly considered the appellant to be an insurance agent (possibly, because of mistaken evidence) when in fact he was a TR according to his employment and his registration with the IARB.

This case reiterates the importance for insurance agents to have a clear understanding of the rules and regulations which govern their conduct; in particular, their responsibilities towards their TRs. A simple oversight could lead to possible breaches of their duty and a corresponding liability for damages.


Senior Associate

Smyth & Co in association with RPC