The case, against Royal Skandia Life Assurance and Clearwater International, had been brought by Jeremy Paul Egerton Hobbins. According to the court documents, Hobbins, who could not immediately be reached for comment, is an “extremely successful businessman” and a senior executive with Li & Fung Group, a major Hong Kong conglomerate.
Hobbins brought the case jointly against the broker and insurance company after he lost money in Royal Skandia Investment-Linked Assurance Scheme (ILAS) products that he purchased through Clearwater, beginning in March 2006.
The purchases followed his signing of a client agreement with Clearwater in December 2005, in which he acknowledged, the court documents say, “that the products had been explained to [him], and that Clearwater would be paid commission” by Skandia when he purchased them.
In bringing his case against Royal Skandia and Clearwater, Hobbins sought compensation for his losses on grounds that Clearwater had failed to inform him “precisely how much commission it would be earning on each ILAS product [he] purchased”, which he said violated Hong Kong’s Prevention of Bribery Ordinance.
However, in his ruling, the judge in the case, Hon Justice A Reyes, noted that “common law has long accepted the practice of an insurance broker receiving commission from an insurer, provided (as here) those commissions do not exceed the usual market rate”.
"That principle must be the starting point of any analysis in the circumstances of this case," he added.
If a client, such as Hobbins, having been "alerted by such disclosure as was made here" wished "further and better particulars of the commission to be received", he could "readily ask the insurance broker (such as Clearwater)… and then decide accordingly whether to proceed with a transaction".
Relief for brokers, Skandia
The resolution of the case, on 6 Jan, was greeted with relief by insurance brokers in Hong Kong, who, as reported, have been frustrated by a recent industry agreement reinforcing their obligation to inform clients whenever they are due a commission from the sale of insurance products.
The reason for their frustration is that their main rivals in the marketplace – insurance agents, which typically represent the major insurance giants – do not have to do likewise, since they operate under a different business model, which lacks a visible commission element.
For its part, Royal Skandia said in a statement that it also welcomed the court’s ruling, which it noted confirmed that it “did not act inappropriately in the case of Mr Hobbins”.
“The judgement is clear that all claims have been dismissed, and that certain claims should never have been made against Royal Skandia in the first place,” Royal Skandia said.
“Royal Skandia’s charges and product terms are clearly outlined and agreed to by customers, including Mr Hobbins, at the point of sale."
