Last Friday, news started circulating in mainland media that UnionPay would ban from the next day the use of its cards to pay for Hong Kong insurance policies, but the company denied it.
A day later, the state-backed bank card services provider said it has banned mainlanders from using its cards to buy investment-related insurance products in Hong Kong with immediate effect.
Mainlanders using debit and credits cards issued by UnionPay will only be allowed to buy tourism-related insurance policies overseas, but other insurance products are prohibited.
In February UnionPay set a US$5,000 cap on every transaction to stop mainlanders from using the card to purchase Hong Kong insurance products.
“We’ve found a spike in transactions with multiple swiping of a single card at a single merchant to buy offshore insurance products recently,” UnionPay said in the statement issued on Saturday.
It was reported that a number of residents from nearby Shenzhen have rushed to Hong Kong to buy insurance products late Friday night.
Many insurance companies in Hong Kong extended their business hours to accommodate the surge in demand.
UnionPay’s move is part of the country’s efforts to stem the outflow of funds after the weakening renminbi prompted mainland investors to buy Hong Kong insurance as an investment.
Purchases of insurance products by mainland visitors in Hong Kong reached HK$31.6 billion last year, representing a quarter of the city’s total new insurance policies sold to individuals.
Why are mainlanders so crazy about Hong Kong insurance products?
Catastrophic illness insurance and life insurance are two major types of insurance products they are interested in.
The coverage of Hong Kong’s medical insurance is typically more extensive. And the premium is 20-30 percent cheaper than similar products offered by mainland insurers.
Also, China’s emerging middle class is becoming increasingly aware of the need to diversify the allocation of their assets in the face of a weakening yuan.
Buying insurance products in Hong Kong enables them to bypass forex regulation.
As such, the UnionPay ban is unlikely to reduce mainland investors’ appetite for Hong Kong insurance policies.
This article appeared in the Hong Kong Economic Journal on Oct. 31
Translation by Julie Zhu
[Chinese version 中文版]
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