Mainlanders bring insurance bonanza to Hong Kong

December 21, 2015 08:58
Insurance is a long-established industry in Hong Kong. Total gross premiums amounted to 16.2 per cent of the city’s gross domestic product in the first half of this year. Photo:

Mainland Chinese visitors have cut spending on many luxury goods in Hong Kong – but are not going short on insurance.

This year, they will spend a record of more than HK$30 billion (US$3.9 billion) on insurance policies in the city – a sixfold increase from five years ago.

What attracts them is a wider range of policies and higher investment return than in the mainland, the security of dealing with global insurance giants and buying in a sophisticated market with a long history in this industry.

Figures from the Office of the Commissioner of Insurance (OCI) show that in the first nine months of this year, mainlanders spent HK$21.1 billion, representing 21.7 per cent of new premiums.

For the full year, the figure will exceed HK$30 billion, compared with HK$24.4 billion last year and just HK$4.4 billion in 2010.

Last year, mainlanders accounted for 16 per cent of new life insurance policies in Hong Kong, compared with 13 per cent in 2012 and 9 per cent in 2011.

Dong Xiu-mei from Shenzhen is one of those customers.

After her first child was born several years ago, she came to Hong Kong to buy an education fund policy.

“I have more confidence in policies sold here,” Dong said.

“Firms in the city have been selling these major products for many years and have much experience.

“The policy is denominated in US dollars, which can avoid the currency risk in the mainland.

"My education policy is clear and well written and offers a reasonable return.

“I am pleased with the service. The agent met me at the border and was very patient going through all the forms I needed to fill in.”

Dong is paying HK$50,000 for 10 years to complete her payments under the policy; for the same product in the mainland, it would take 15 years.

Many residents of the housing estate in Shenzhen where she lives organized a group to come to Hong Kong to buy insurance.

Guo Xin-jie, a designer from Shenzhen, came to buy a policy for serious injury.

“It was nearly 30 per cent cheaper than a comparable one in the mainland," Guo said.

"It covers nearly 60 serious injuries, compared with 40 in the mainland, and is payable all over the world.

"So, if I am on holiday or study or emigrate abroad, it will be valid in that country.”

Industry estimates show the average cost of a policy for mainlanders is HK$150,000, with life and injury policies the most popular.

They usually buy savings-type policies, which offer an annual return of 4-5 per cent, compared with 1-2 per cent from comparable mainland policies.

Insurance agents from Hong Kong are restricted from selling any products in the mainland; so people there must come to the city in person to buy them.

The growth in business has been helped by the rise in individual, rather than group, travellers; they have the time to investigate and choose a policy.

Chan Kin-por, legislator for the insurance industry, said mainlanders had become an important source of business for Hong Kong-based life insurance compnies.

“We also need to be aware of the risk involved, as many are buying the policies during short trips here," Chan said.

"It would be a problem if the agents or the bank staff did not get time to fully disclose the risks or product features to them. Some mainland tourists could complain in future.”

The risks are, first, that most visitors sign for the policies in one or two visits.

In such a short time, they may not understand all the details and implications of the policy.

Second is the currency risk.

Insurance policies run for many years, even an entire lifetime.

During that time, the US dollar or Hong Kong dollar in which the policy is written may change considerably in value.

Hong Kong-based insurance companies can offer better returns than those in the mainland because they are based in a global financial capital and have a very wide choice of investment options, more than those available to insurance firms in the mainland.

The city has one of the most developed insurance markets in Asia, with 158 authorized insurers in July this year, figures from the Hong Kong Trade Development Council show.

About half are incorporated overseas, with Bermuda, the United States and Britain in the top three places.

The per capita insurance premium here is among the highest in the world.

In the first half of the year, total gross premiums increased 13.6 per cent year on year to HK$184.9 billion, representing 16.2 per cent of the city’s gross domestic product during the period, OCI figures show.

This rapid growth in mainland business has pushed insurance agents in the city to learn new skills – they must improve and polish their Putonghua and learn how to use the web-based systems popular in the mainland so that they can stay in touch with their clients.

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A Hong Kong-based writer, teacher and speaker.