All forms of Policy Churning by a Company or a Distribution Channel are strictly prohibited.
All complaints of Policy Churning submitted to the Authority will be reviewed, in terms of compliance with the relevant licensing requirements for the Company or the Distribution Channels. The proceedings shall be taken in accordance with the provisions of the law, regulations, instructions and decisions issued pursuant thereto, to determine if the content of the complaint is justified, by the Director General.
A Company or a Distribution Channel can document that a policy termination and re-initiation or renewal does not constitute Policy Churning by demonstrating that:
The total Commissions paid to the Distribution Channel for the combined policies, such as the policy(ies) being terminated and the new policy(ies)being initiated or expired and renewed policies, do not exceed the commission limit rules in Articles (3) to (6) of these Instructions. During the alignment period, this rule remains in force, even if new policies which comply with the commission limit rules have not yet been submitted to the Authority;
The policy termination and re-initiation was requested by the policyholder without being prompted by the Company or Distribution Channel and that the policyholder has agreed in writing to total Commissions paid to the Distribution Channel for the combined policies which exceeds or may exceed the commission limit rules in Articles (3) to (6) of these Instructions.
All Companies should initiate market conduct practices to detect any violation in collecting commissions by Distribution Channels. This includes, but is not limited to, underwriting enquiries or requesting information about previous Life insurance policies, random audits of Distribution Channels, etc.