Turmoil affects HK's insurance sector

Business dips as mainland group tours fall, customers go slow in purchasing policies

As political protests continue in Hong Kong, the local insurance sector has taken a hit.

Juwena Lai, an insurance agent in Hong Kong at Canada-based Manulife Financial Corp, said some of the insurer's Chinese mainland business was affected by recent social unrest.

"To my knowledge, one of my colleagues, who has many mainland customers, has seen his new business value fall at least 50 percent in recent months compared with a year ago." Lai said.

"Some mainland customers do have hesitation in visiting Hong Kong to sign insurance policy contracts due to the unrest," she said.

The industry rules stipulate that policyholders should be physically present to sign policies in Hong Kong before insurance contracts can be finalized.

According to market sources, UK-based insurer Prudential Plc and pan-Asian insurer AIA Group have cultivated agents in Hong Kong that are targeting customers in the mainland. The unrest in the city is expected to exert more pressure on their business.

Some insurers believe business from the mainland has dropped 20 percent year-on-year over the last two months, market sources said.

Amid the prevailing market environment, Lai has developed a mix of Hong Kong corporate and individual customers as well as mainland customers.

Lai said Hong Kong-based insurers will be more aggressive in acquiring a large customer base in group medical and critical illness business as well as give more incentives to customers and commission rebates to insurance agents.

Insurers are also expected to ramp up their cross-selling channels through banks and hire more insurance agents to accelerate sales in these difficult times.

The total number of individual insurance intermediaries reached 104,200 last year, representing a 34 percent increase compared with 2013.

The number of individual agents grew 68 percent during the same period, according to Hong Kong insurance industry watchdog Insurance Authority.

Insurance agents' contribution to new business through office premiums has grown from 25.2 percent in 2014 to 38.5 percent last year.

Lai's experience reveals how the Hong Kong insurance industry has suffered recently because of social unrest, Sino-US trade frictions and slowing of the mainland economy.

New premiums from policies sold to the mainland visitors increased 18 percent to HK$26.3 billion ($3.37 billion) in the first six months of this year, accounting for 26 percent of total new premiums from individuals, according to Insurance Authority.

The number of mainland group tours to Hong Kong fell 90 percent in the first 10 days of September as against the same period last year, following a 63 percent drop in August, according to data compiled by the Travel Industry Council of Hong Kong.

The mainland customers have long flocked to Hong Kong to buy insurance policies because the products offer an investment component and payouts in foreign currencies that are hard to come by on the mainland.

Lai's mainland customers come from Beijing, Shanghai and Guangdong-Hong Kong-Macao Greater Bay Area, and these customers are going slow in purchasing more policies.

"It is a challenging stage for the insurance industry. We expect it will take at least several months to restore confidence in mainland customers so they can come to the city and sign insurance contracts," said Chan Kin-po, the Hong Kong Legislative Council member representing the insurance industry.

In 2018, the industry's total gross premium amounted to HK$531.5 billion, a 78 percent increase over 2013. This was mainly because of an 86 percent increase in the long-term business, according to a document released by the Legislative Council Secretariat Research Office in May.

The share of office premium in respect of new long-term business with mainland visitors has grown from 16.1 percent in 2013 to 39.3 percent in 2016, the document said.

However, there has been a visible decline since 2016 when the central government implemented measures to ban the mainland customers from buying any investment-related insurance policy to prevent capital outflows.

The current business uncertainty has also delayed the proposed implementation of the Insurance Connect, a scheme that is expected to allow the mainland customers to buy policies from any Hong Kong-based insurers without having to leave the mainland while the Hong Kong people could buy products from the mainland companies.

"The first phase of Insurance connect, in which Hong Kong-based insurers will establish service centers in the Bay Area, remain on the agenda while a full-scale Insurance Connect would be delayed," Insurance Authority Chairman Moses Cheng Mo-chi said on September 9.