China Daily Global Edition (USA)
Taking cover in Hong Kong
A slew of factors drives coverage seekers away from the mainland
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