With the effective date of the Insurance Companies (Amendment) Ordinance fast approaching, at which time the Independent Insurance Authority (“IIA”) will take over the work of the Office of the Commissioner of Insurance, this article provides general guidance on how to prepare clients to deal with any inspections or investigations launched by the IIA.
As an overview of the new regime was set out in Dawn Breaks on Hong Kong’s New Era of Insurance Regulation, which appeared in the February 2016 issue of Hong Kong Lawyer, we will dive straight into discussing what solicitors representing clients impacted by the new provisions of the Insurance Companies Ordinance (Cap. 41) (“ICO”) should keep in mind when working with clients to develop internal protocols in preparation for any inspections or investigations. Key considerations are set forth below:
(1) Preparation in the Event of Inspections and Investigations
Insurers and insurance intermediaries should prepare for any on-site inspections by IIA, and should have a clear process and train any staff (such as receptionist or customer service staff, IT staff and/or the legal team) who may need to accompany IIA inspectors/investigators.
(2) When Investigators/Inspectors Arrive
Staff and other key personnel should be briefed in preparation of any investigations/inspections, and should have the contact details of relevant internal (and external) lawyers.
For instance, staff should contact the relevant Compliance Officer or in-house (or external) lawyer and the most senior manager/executive available to assist in dealing with the investigation. Staff should also confirm whether the officials have appropriate identification and authorisation.
It is also advisable for insurers and insurance intermediaries to check any court warrant or notices authorising the investigations/inspections.
(3) During the On-Site Investigation
In preparation, it is highly recommended that a pre-designated "response team" is set up to readily deal with any on-site investigation. The following are recommended:
Alert staff within the premises on a need-to-know basis: the "response team" should be alerted and other staff, such as IT staff, may also need to be informed in the event inspectors/investigators are authorised to seize electronic documents. Staff should be advised of the investigation and they may contact the "response team" if they have any concern.
Ensure the investigation officials are accompanied throughout the inspection: The "response team" should accompany the inspectors/investigators, and a staff member should focus on creating a written record.
Provide assistance to the investigation officials: if inspectors/investigators request to copy or remove documents, where possible, it should be checked that the document falls within the scope of the investigation. Two copies of any document should be made, for the IIA and for internal record.
(4) Dealing with Questions
For any on the spot questions, the interviewee should be careful not to provide any false or misleading statements. If the questions are related to documents, the persons who are in custody or have knowledge of the documents should be the ones answering such questions. Any person who are questioned but do not have knowledge of the subject matter should inform the inspector/investigator accordingly and decline to answer.
Questioning pursuant to notice issued under the ICO: any person who receives such notice should seek legal advice without delay.
(5) Reinforcing the Confidentiality of Information obtained by the Inspectors/Investigators
In relation to any documents seized by the inspectors/investigators, the insurer/insurance intermediary should claim confidentiality and privilege (if applicable) over such documents and the documents contained therein. The legal team should be well versed on the concepts of privilege and how to use it.
(6) Preservation of Documents
Any documents relevant to the inspection/investigation but not seized by the inspectors/ investigators should be preserved.
The new provisions of the ICO give the IIA strong powers of inspection and investigation, including entry of premises and requiring production of documents, records and answering enquiries. Client’s failure to comply with the IIA’s requirements comes with strong implications such as offences.
As such, solicitors should instruct clients that will be impacted by the ICO with how best to deal with any potential inspection or investigation by the IIA to ensure they carefully comply with and follow the IIA’s requirements. Solicitors should also work with impacted clients to develop internal protocols in the event of any inspection and encourage clients to consider conducting internal audits in preparation of the commencement of the IAA in late June.
These guidelines provide general guidance and do not substitute the need to obtain appropriate legal advice.