AXA China Region plans to launch a unit-linked life insurance product by the end of year, giving policyholders the potential for higher returns on their insurance policies, according to the company. General manager for Mandatory Provident Fund (MPF) and employee benefits Alex Cheung Kim-fung said the insurer planned to introduce the unit-linked insurance product shortly after the implementation of the MPF in December. 'Under the MPF schemes, employees will be allowed to decide which investment funds to put their contribution money into,' he said. 'This will increase employees' awareness about the benefit of investing in unit trusts or mutual funds. It will be the right time to launch unit-linked insurance products.' Under traditional life insurance products, policyholders receive fixed guaranteed dividends of about 6 per cent to 7 per cent each year. The guaranteed returns force insurers to take a conservative approach to investing the premium income from life policies. In most cases, the insurer can invest only in bonds or the money market. Unit-linked life policies however provide no guarantees for policyholders and returns depend on the investment returns of the unit trusts invested in. Mr Cheung said AXA would offer a wide range of unit trusts for policyholders to choose from, with different levels of risk and different investment portfolios. Francoise de Meneval, AXA Group's international operations chief executive, said the group had launched unit-linked life policies in the US and Europe a long time ago. 'In many European countries and the US, more and more policyholders prefer buying unit-linked life policies rather than traditional products,' he said. 'This is because unit-linked products allow the insurer to take a more aggressive investment approach and put more investment into the equities markets. 'This offers much better returns for policyholders.' Mr Meneval said that since most life-insurance policyholders do not cash in their policies within 20 years, their returns are less likely to be affected by short-term stockmarket volatility. Mr Cheung believes it will be some time after the MPF is launched before Hong Kong policyholders feel comfortable to opt for unit-linked products. He said that in Australia now, only a small number of employees still put their money into guaranteed funds because they were offered returns of only 4 to 6 per cent compared with about 10 to 15 per cent for equities funds.