23 October 2016
Many Hongkongers have started to recognize the significance of healthcare or critical illness insurance. Photo: HKEJ
Many Hongkongers have started to recognize the significance of healthcare or critical illness insurance. Photo: HKEJ

Hong Kong insurance sector has a bright future

Many believe Hong Kong’s insurance market is almost saturated.

However, the city’s new policy premiums increased 16.2 percent to HK$97.6 billion (US$12.5 billion) in the first three quarters of last year from the same period a year before, data from the Office of the Commissioner of Insurance (OCI) shows.

In fact, the insurance sector has posted double-digit growth for the last decade, which reflects the robust demand for insurance products and services.

Global financial markets have gone through great volatility this year, and major currencies, commodities and equities all posted huge ups and downs. Investors are considering defensive investment tools.

Some recognize that they need to review whether their portfolios are sufficiently diversified, apart from looking at the short-term performance of various investment tools.

Insurance can help them diversify risks and help protect their wealth during market turmoil.

In fact, equities and short-term fixed-income instruments are not enough to sustain the growth of wealth.

Investors are looking for products that have great flexibility and offer steady dividends.

Universal life insurance is favored by high net-worth individuals.

Simply speaking, universal life insurance is permanent insurance that provides protection in case of death, as well as a savings or cash-value component.

Universal life insurance policies usually pay interest every year or month and even guarantee the interest rate.

Customers can add premium at any time to boost interest income or reduce the coverage and withdraw cash from the account at different stages.

Such a policy could replace income lost because of the death of the breadwinner.

And it also gives customers a great amount of premium flexibility, depending upon their cash flow needs and accumulation goals.

At the end of 2014, there were 10.8 million individual policies in force in Hong Kong, OCI data shows.

It means that some of the city’s 7.3 million residents own more than one policy.

Many Hongkongers have started to recognize the significance of healthcare or critical illness insurance, apart from life insurance.

The younger generation can use well-covered healthcare and critical illness insurance to provide protection for their families, to save additional expenses and keep a dignified living standard when needed.

Those who have already had their families can plan for retirement and medical costs.

Also, there is vast potential to be tapped among mainland travelers.

And we should also explore other Asian markets, like Taiwan, Singapore and Indonesia.

A great number of people in the region will reach retirement age in the next 10 to 15 years. That will underpin future demand for retirement and healthcare insurance products.

For example, almost 3.6 million people in Taiwan will reach retirement age in the next decade, more than three times the 1.1 million in Hong Kong.

Also, many businessmen in Taiwan have close trading links with Hong Kong and mainland.

Hong Kong’s insurance industry has an edge in innovation and diversified product design to provide better coverage, competitive premiums and quality service.

Also, Hong Kong’s developed legal system and financial markets offer more tailored service for clients.

This article appeared in the Hong Kong Economic Journal on Jan. 22.

Translation by Julie Zhu

[Chinese version 中文版]

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Head of Independent Financial Advisory division at Metlife Hong Kong

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