Tak­ing cover in Hong Kong

A slew of fac­tors drives cov­er­age seek­ers away from the main­land

China Daily (USA) - - BUSINESS - By CHAIHUA in Shen­zhen, Guang­dong grace@chi­nadai­lyhk.com

Hong Kong’s re­tail in­dus­try may be in pain due to the dwin­dling num­ber of tourists from the main­land, but the spe­cial ad­min­is­tra­tive re­gion’s in­sur­ance sec­tor is do­ing well on the back of sup­port from main­land con­sumers.

Noth­ing re­flects this trend bet­ter than in­sur­ers op­er­at­ing out of Har­bour City, the pop­u­lar shop­ping mall in Tsim Sha Tsui area of Hong Kong. Here, it is com­mon to find main­land buy­ers in ser­pen­tine queues wait­ing to buy new in­sur­ance poli­cies.

Zhou Xin, 32, is one such con­sumer from Shen­zhen, Guang­dong prov­ince, not very far from Hong Kong, which is now among the world’s lead­ing in­sur­ance mar­kets.

In March, Zhou bought two 20-year crit­i­cal ill­ness pro­tec­tion in­sur­ance schemes cov­er­ing him­self, his wife and their one-year-old son from dif­fer­ent firms.

Ac­cord­ing to the Of­fice of the Com­mis­sioner of In­sur­ance, in­sur­ance spend­ing by main­land pol­i­cy­hold­ers surged from HK$4.4 bil­lion ($567.6 mil­lion) in 2010 to HK$31.6 bil­lion last year.

Main­land buy­ers now ac­count for 24.2 per­cent of Hong Kong’s in­sur­ance sales.

In the first quar­ter of 2016, grosspremi­um­sof per­sonal life in­sur­ance poli­cies di­rectly sold by Hong Kong in­sur­ance com­pa­nies to main­land buy­ers reached HK$13.2 bil­lion, up about 93 per­cent year-on-year.

CaoHengqian, an an­a­lyst of GF Se­cu­ri­ties Co, wrote in a re­port that the main­land is now the key source of cus­tomers for Hong Kong in­sur­ers, and their num­ber will likely con­tinue to grow.

Asked why he prefers Hong Kong, Zhou from Shen­zhen said: “Be­cause, they (Hong Kong in­sur­ers) of­fer higher re­turns.”

Hong Kong’s cover prod­ucts typ­i­cally bun­dle in­sur­ance with in­vest­ment.

Suki Mok, an agent at the HongKong branch of aUnited King­dom-based in­sur­ance firm, said the div­i­dend rate of an in­sur­ance pol­icy in Hong Kong is about 5 to 10 per­cent, dou­ble that in the main­land.

What’s more, pre­mium of Hong Kong in­sur­ance, es­pe­cially life and health prod­ucts, is 30 to 40 per­cent lower on av­er­age.

For in­stance, Pru­den­tial Plc, a UK in­sur­ance com­pany op­er­at­ing in Hong Kong, of­fers a 20-year crit­i­cal ill­ness pol­icy whose pre­mium works out to HK$399,000 in to­tal, while cash value with div­i­dend pay­ment could reach to HK$1.54 mil­lion at the age of 66.

But, China Life In­sur­ance (Group) Co of­fers a com­pa­ra­ble pol­icy on the main­land, with to­tal pre­mium of 630,000 yuan ($94,750) and al­most zero div­i­dend pay­out.

Hong Kong’s in­sur­ance 35 30 25 20 15 10 5 0 2010 2011 2012 2013 2014 2015 Ju Lan, prod­ucts also of­fer wider cov­er­age and fewer ex­cep­tion clauses. Crit­i­cal ill­ness in­sur­ance is a good ex­am­ple. A pol­icy in Hong Kong cov­ers up to 100 dis­eases, much higher than about 40 in the main­land, where cancer is not cov­ered. 5 2010 2011 2012 2013 2014 2015

In re­cent years, the yuan’s de­pre­ci­a­tion also prompted main­land vis­i­tors to shop for Hong Kong poli­cies, a seg­ment where prom­i­nent in­sur­ers in­clude Pru­den­tial, AIA Hong Kong and AXA Hong Kong.

Ju Lan, di­rec­tor of the Risk Man­age­ment and In­sur­ance Re­search Cen­ter in the Shen­zhen-based HSBC Busi­ness School of Pek­ing Univer­sity, said she be­lieves Hong Kong in­sur­ance can help main­lan­ders di­ver­sify as­set al­lo­ca­tion and avoid risk.

“As the yuan is ex­pected to weaken fur­ther, Hong Kong’s in­sur­ance prod­ucts pose less risk be­cause they are as­sets in Hong Kong dol­lars,” she said.

She also said the idea of global as­set al­lo­ca­tion ap­peals to main­lan­ders, so it is nat­u­ral they pre­fer Hong Kong in­sur­ance poli­cies to main­land’s.

But a twist in the tale ap­pears pos­si­ble. Main­land au­thor­i­ties have tight­ened reg­u­la­tions in a bid to stem large out­flows of the yuan to­wardHong Kong in­sur­ance.

As of March, main­land cus­tomers are no longer al­lowed to pay for life in­sur­ance or in­vest­ment-re­lated prod­ucts through elec­tronic pay­ment ser­vices.

Credit card op­er­a­tor UnionPay in Fe­bru­ary also capped over­seas in­sur­ance prod­uct pur­chases at $5,000 per pay­ment.

But the re­stric­tion did not bother Shen­zhen’s Zhou much. His fam­ily’s an­nual pol­icy pre­mium is only about 40,000 yuan. And he has opened an ac­count in a Hong Kong bank to make that pay­ment.

As the yuan is ex­pected to weaken fur­ther, Hong Kong’s in­sur­ance prod­ucts pose less risk be­cause they are as­sets in Hong Kong dol­lars.”

di­rec­tor of the Risk Man­age­ment and In­sur­ance Re­search Cen­ter in the Shen­zhen-based HSBC Busi­ness School of Pek­ing Univer­sity

BLOOMBERG

Two men walk past Amer­i­can In­ter­na­tional Group Inc’s AIA Tower in Hong Kong.

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