HKMA Investigation Exposes Rampant Misselling of Ripoff Insurance Products in Hong Kong Banks

Cartoon by Patrick Chappatte

A Bank Robbery. Drawing by Patrick Chappatte

Last month, the Hong Kong Monetary Authority (HKMA) published the results of an undercover investigation into the selling practices of Hong Kong’s banks. The investigation, known as the “Mystery Shopping Programme“, confirmed what many of us already knew: that banks are systematically swindling customers with impunity, using so-called life “insurance” products that have little or no insurance content (namely ILAS, whole life, universal life, annuities, and endowment policies).

Many of these products, which I call “savings scams”, are designed to extract years of savings from victims without the victims realizing it. Insurance companies pay massive upfront commissions to the swindlers (i.e., salespersons) who assist in distributing this toxic waste.

Two months ago, I published a blog post titled, “Insurance Industry Finds New Ways to Rip Off Consumers after Regulators Crack Down on ILAS“. In that post, I highlighted the recent dramatic fall in ILAS sales (due to new consumer protection rules) and the simultaneous spike in sales of other “insurance” products, especially whole life, which is less regulated and pays a comparatively massive commission.

HKMA’s Mystery Shopping Programme findings provide an intimate look at how banks responded in this predictable, greed-driven manner. Unfortunately, the findings also highlight HKMA’s own incompetence and/or refusal to address the root of the problems: the inherently corrupt system of allowing product issuers to buy the integrity and objectivity of intermediaries with large, undisclosed commission payments.

By cracking down only on ILAS, instead of implementing an industry-wide crackdown on commissions and deceptive fee structures, regulators have allowed the insurance industry to keep pulling all of its same old tricks, which are nothing more than legalized forms of fraud and bribery (though in many cases, I believe the tricks are in fact illegal).

Regulators must wake up, stop letting themselves be fooled by the industry’s lies, and do what must be done: ban commissions and deceptive fee structures.

Tens of thousands of insurance agents and brokers, who make their living by swindling their fellow citizens, will have to find new work that actually contributes to society, rather than poisons it. This is inevitable and necessary.

Regulators must hold corporate rule-breakers accountable, which means forcing them to fully compensate all their victims. No more slaps on the wrist or closed-door scoldings. They must be shamed in public.

As long as corporations know they can break laws and regulations with impunity, nothing will deter them from continuing to do it in the future.

Highlights of HKMA’s Investigation

Below are notable excerpts from HKMA’s Mystery Shopping Programme Findings (8 Dec 2014). Each excerpt is preceded by my comments.

MSP = Mystery Shopping Programme
AI = Authorized Institution
ILAS = Investment-Linked Assurance Scheme
NLTI = Non-Linked Long-Term Insurance (i.e., whole life, universal life, annuities, and endowment policies)

HKMA says it found “weaknesses” in selling practices. HKMA needs to stop sugarcoating the ugly truth. What HKMA found is nothing more than white collar theft. Insurance intermediaries are using deceptive sales tactics and deliberately flouting regulations in order to maximize commissions at the expense of trusting customers.

HKMA - Weakness in Insurance Sales Regulatory Compliance (Highlighted)

Here, the sales staff recommended “insurance” products, even though clients did not need or want insurance. “Insurance” companies pay much higher commissions than other product issuers, so the sales staff was clearly motivated by greed. Note that the high charges and commissions are hidden by smoke and mirrors, which makes it easier to fleece the victims.

No Insurance Needs

The sales staff did not disclose the “insurance nature” of the products. What this really means is that the sales staff did not disclose the “exploitative nature” of the products.

Insurance Product Misrepresented as Investment Product

ACT NOW!!! QUICKLY!!! Don’t Think!!! Buy Our Toxic Waste Before It Sells Out!!! HURRY!!! My Early Retirement is Counting on It!!!

Hurry and Buy Before Our Toxic Waste Sells Out! (Highlighted)

HKMA is full of crap. Banks have not been required to take “appropriate follow-up actions”. That would mean banning conflicted remuneration and compensating victims.

Examine the Root Causes

Most banks stopped selling ILAS in mid-2013 after HKMA introduced enhanced consumer protections. In response, banks shifted to selling ripoff products that continue to be inadequately regulated.

Banks Stopped Selling ILAS in Mid-2013

In the salesperson’s mind, the customers’ needs do not matter. Only commissions matter.

The Customer's Needs Are Not Important (Underlined)

Here, the salesperson advised the naive customer to do something which would allow the salesperson to recommend an unaffordable policy that paid a higher commission. When the unaffordable policy inevitably collapses on the customer in the future, the salesperson will be protected from accusations of a regulatory breach, as no evidence will exist in the documents.

Juice Up My Commission Please!!!

Again, there is no focus on the needs of the customer. It’s all about swindling the customer, pushing whichever ripoff product pays the highest hidden commission.

My Commission Is All That Matters

This is another example of how salespeople avoid getting caught when they recommend unsuitable products that pay higher commissions.

Breaking Regulations Without Getting Caught

HKMA needs to pull its head out of its butt. It is impossible to sell scams without using deception. HKMA should just ban banks from selling this crap, and then the problems would be solved.

Disguising Fees, Charges, and Insurance

When salespeople say the insurance element of these products is so small that it can be disregarded, they are telling the truth. Only HKMA (and SFC) refuse to admit this obvious fact. The salespeople are dishonest only when they disguise the fact that the products are ripoffs.

Insurance Can Be Disreguarded

Here, the salesperson is a liar. Conceptually, the products are different. One is a scam, the other is not.

Non-ILAS Insurance Plan Misrepresented as Like a Deposit

While it is a complete load of bull to say that an insurance product has no fees or charges, it is probably true that many salespersons are so naive that they actually believe this nonsense. The policy structure and policy documents often disguise the real costs.

No Fees and Charges!!!

Risk free? What is going to happen to some of these insurance companies if they are ever held accountable for ripping off entire societies?

Risk Free Product

The art of selling snake oil.

Biased Representations

Maybe the sales staff was confused here and meant to say that the insurance product was 400 times worse?

400 Times Better

Here, the sales staff neglected to explain that all money paid during the initial payment period goes into the salesperson’s pockets, the bank’s pockets, and the insurer’s pockets. This information is probably not clearly disclosed in the policy documents, so the sales staff maybe didn’t realize it.

Did Not Explain that the Account Value Was a Sham and Initial Payments Paid for Commissions

Again, HKMA (and SFC) need to pull their heads out of their butts. It is factually correct to say that ILAS plans carry little or no life protection and their only value is as a fund platform. However, unlike a normal fund platform, such as Fundsupermart, “long-term” ILAS plans are an outright scam.

ILAS Is Fundamentally an Investment

It might take several hours to explain all the deceptive fees and charges contained in one of these scams. It’s no surprise that the salespeople don’t do it. You can’t sell a scam if you call it what it is!

Neglected to Explain the Numerous Charges

Here, the salesperson did not disclose that initial payments are deceptively transferred into his pockets. He told the victim that it was “ok” (for him) if the victim stopped payments after the wealth transfer was complete.

No Disclosure that the Initial Period is a Deceptive Transfer of Wealth

ILAS has free fund switching, but so do pure fund platforms, like Fundsupermart, which doesn’t scam investors out of their first years of savings. ILAS adds nothing of value to offset its deceptive high costs.

Free Fund Switching


The salesperson didn’t tell the customer about the risks involved in trying to access “her” money in her lifetime. This remark all by itself illustrates why ILAS products are a scam.

The policyholder’s “account value”, which is really a “death value”, is designed to deceive policyholders about the fact that they have been fleeced.

The salesperson was lying when he/she said it costs 10% per year to switch funds if one doesn’t buy an ILAS. See Fundsupermart, as mentioned above.

Get Back Money In Your Lifetime

ILAS is flexible for the salesperson—not the customer. If the salesperson recommends a 25 year policy, as opposed to a 5 year policy, he/she can collect 5 times more upfront commission just by ticking a box on a form.

ILAS is Flexible

Here, the salesperson did not provide a policy brochure during the sales process. In most cases, this probably would have made little difference, as neither the salesperson nor the potential customer would have understood the brochure, since it is loaded with smoke, mirrors, and omissions.

Did Not Provide Brochure

Here, the salesperson advised the victim to cancel a term life insurance policy—which is the only life insurance policy that is NOT a ripoff—and replace it with a whole life insurance policy, which is one of the biggest ripoffs. (Whole life is just a term life policy bundled with a savings scam.)

Replacing Term Life with a Ripoff Whole Life

Inconsiderate, selfish, commission-maximizing behavior.

Salesperson Introduces Insurance Product Despite Customer Objections

The products had a huge helping of “insurance elements”, if by “insurance elements”, one is referring to massive hidden commissions and deceptive fees.

Insurance Element

All of the gobbledygook below is just a technical explanation of how insurance intermediaries defraud victims.


This one is truly shocking, an example of outright robbery. The salesperson advises the victim to pay ever penny he/she has into the initial contribution period of an ILAS. Most of the money paid during the initial period is redistributed to the salesperson in the form of a secret commission.

Total Wealth Transfer


In this example, the salesperson robs a grandfather.

Robbing Grandpa

Absurd lies and high pressure sales tactics.

Lies and High Pressure Sales Tactics (Underlined)

It is perfectly natural to feel uncomfortable when you are being robbed.

Felt Pressured

This just proves that HKMA is utterly incompetent. Training and education of sales staff is not the problem. A total lack of ethics is the problem. Because it is impossible to eliminate people’s wickedness, HKMA must eliminate temptations to be wicked: namely commissions and all other forms of conflicted remuneration.

Laughable Way Forward

What a joke. HKMA says it “encourages” banks to adopt good practices. HKMA needs to punish non-compliant banks and force them to compensate victims.

HKMA Encourages - What a Joke (underlined)

I agree on this point and am happy to help publicize HKMA’s shocking findings. Maybe HKMA will finally be shamed into protecting consumers instead of unethical, if not criminal, banks.

Publish Results

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