Manulife says investment-linked insurance products set to boom

PUBLISHED : Tuesday, 26 March, 2013, 12:00am
UPDATED : Tuesday, 26 March, 2013, 3:18am

Manulife Hong Kong expects sales of investment-linked insurance products in the city to boom despite the regulator's intention to increase scrutiny of the sales process.

The financial services firm, a subsidiary of Canada's largest insurer, plans to hire 400 more agents in Hong Kong this year and aims to increase its sales of investment-linked products, given investors' growing appetite for equities, its chief executive, Michael Huddart, told the South China Morning Post.

The company plans to increase the number of agents in Hong Kong to 7,000 in three years, at a rate of 9 to 10 per cent a year, Huddart said.

One big driver of its sales and manpower growth in future will be sales of investment-linked insurance products, he said.

The chairman of the Securities and Futures Commission, Carlson Tong Ka-shing, said last month that the SFC would review its stance towards investment-linked insurance products in light of their growing popularity.

Huddart said: "Increasing regulation always has the risk that the longer process makes customers impatient. It is potentially a hurdle, but I don't see it as a major one. I don't think anything we do is going to be inconsistent with the regulations they want to bring in."

Investment-linked insurance products are closely tied to the performance of the stock market, as a significant portion of their returns come from investing in a portfolio of equities or investment funds.

Hong Kong investors continue to strongly favour stocks over all other asset classes, according to Manulife's first Investor Sentiment Index, based on 500 investors in Asia, from middle-class to affluent.

The finding has given Manulife confidence in the growth prospects for investment-linked products, Huddart said. Such products accounted for about a quarter of the firm's insurance sales last year. He said this fraction would increase slightly.

Unlike traditional life insurance policies, holders of investment-linked products face potential losses, depending on the investments they are tied to.

"If investors want to get extra return amid such a low-interest environment, investment-linked products offer more upside potential, and you don't need switching fees," Huddart said.