Insurance product faces gloomy future

It is hard to be a vendor of insurance-linked investment funds these days, as regulators come under pressure to outlaw sales of such products that are worth HK$17 billion a year.

Also known as investment-linked assurance schemes (ILAS), these products are on the ropes, with big banks such as Citi, Hang Seng Bank, Bank of China and DBS no longer selling them and other banks reviewing their sales.

Meanwhile, regulators are piling on rules governing how they are sold amid scores of consumer complaints about high fees, poor performance and mis-selling.

At stake is a business based on one of the most profitable instruments sold to the public by banks and financial advisers and one that accounted for about 23 per cent of the city's life insurance business last year, according to the Insurance Authority.

ILAS products are savings plans created by insurance companies that are billed as combining a mixture of investment, tax efficiency and insurance.

For a small outlay, typically starting at HK$1,000 a month, they allow savers to invest in a broad range of different mutual funds. The tax mitigation potential makes them popular with expatriates who may move between different jurisdictions during their careers before returning to their home country.