HKMA sets commission-spreading requirements for banks selling participating insurance policies via bancassurance
Banks selling participating insurance policies through bancassurance must cap upfront commission and spread the remainder over at least five years — no more than 85% upfront for policies issued from 1 July 2027 and no more than 70% from 1 July 2028.
Change
On 5 June 2026, the HKMA set commission-spreading requirements for Authorized Institutions acting as licensed insurance intermediaries on participating policies with regular payment terms sold through bancassurance: for policies issued on or after 1 July 2027, no more than 85% of total commission may be taken upfront, falling to no more than 70% for policies issued on or after 1 July 2028, with the remainder spread evenly over at least five years or the premium payment term if shorter; appointed technical representatives' commission income is subject to the 70% upfront cap from 1 July 2028 unless a compliant balanced-scorecard approach applies.
Why it matters
The circular brings the bancassurance channel into line with the Insurance Authority's remuneration framework by capping how much commission AIs and their appointed technical representatives can take upfront on participating policies, forcing the balance to be deferred and spread across the early policy years. The caps tighten in two steps — 85% upfront from 1 July 2027, 70% from 1 July 2028 — so AIs must redesign insurer-commission arrangements and frontline-staff remuneration ahead of those dates. Technical-representative pay set through balanced scorecards escapes spreading only where there is genuinely no commission-income component and 'treating customers fairly' is adequately assessed, judged on substance not form.
Implications
- — Authorized Institutions selling participating policies through bancassurance must restructure their commission arrangements with authorized insurers so that no more than 85% of total commission is received upfront for policies issued on or after 1 July 2027 and no more than 70% for policies issued on or after 1 July 2028, with the remainder received evenly over at least five years or the premium payment term if shorter.
- — Authorized Institutions must bring appointed technical representatives' commission income within the same spreading requirement for policies issued on or after 1 July 2028, or ensure any balanced-scorecard or comparable remuneration approach qualifies for exemption by having no separate commission-income component (assessed on substance over form) and adequately evaluating adherence to the 'treating customers fairly' principle.
- — Authorized Institutions must implement controls, procedures, monitoring and recordkeeping to demonstrate compliance with the spreading requirements to the HKMA on request, and review and refine frontline-staff scorecards ahead of the effective dates to avoid a scorecard being deemed non-compliant for exemption.
Who is affected
- — Authorized Institutions acting as licensed insurance intermediaries in the bancassurance sale of participating policies
- — Remuneration, conduct and compliance functions at AIs responsible for insurer-commission arrangements and frontline-staff pay design
- — Appointed technical representatives of AIs remunerated through commission income on participating policies
What to watch
- — 1 July 2027 — for participating policies issued on or after this date, no more than 85% of an AI's total commission may be received upfront.
- — 1 July 2028 — for participating policies issued on or after this date, the upfront cap tightens to 70% for both AIs and their appointed technical representatives' commission income.