Term life insurance in Hong Kong is among the most expensive in the developed world. Simple term life coverage lasting 20 years with a US$1 million death benefit from HSBC would cost a non-smoking, 39-year-old man an eye-popping US$3,050 a year. By contrast, annual premiums on a similar policy in the United States rarely exceed US$700 and about US$1,000 in Britain. This is despite the fact that mortality rates in Hong Kong are lower than anywhere else on earth except Japan. Why, then, do local insurers - often the very same firms that operate in the US - charge so much in Hong Kong? 'US margins are very thin - no one makes money on term life policies in the US anymore,' explained Charles Monat, chairman of insurance broker Charles Monat Group (CMG). 'With 200 million sophisticated consumers shopping for policies on the internet, US premiums have dropped to one-third or even one-quarter what they were 30 years ago.' Competitive as Hong Kong's insurance sector is - about 60 companies offer life policies in a city of seven million people - it remains one of the most profitable on a per-premium basis for global life insurers. The lowest-priced term life policies available in Hong Kong are probably those issued by US insurer TransAmerica. MoneyWeek purchased a US$500,000, 20-year TransAmerica term policy from CMG just before his 40th birthday for US$535 a year. He would have paid as much as 20 per cent less had his cholesterol been lower. Most local insurers dispense with a medical test if the applicant is gainfully employed in a white-collar profession and is less than 40 years old. With HSBC, the entire policy transaction can be conducted instantaneously over the internet - assuming you are willing to pay the sky-high premiums. Local online insurance portals such as www.insurancestreet.net and www.speedinsure.com also offer instantaneous purchase of life coverage, underwritten by a variety of insurers, but policy terms are limited to five years and the premiums are very high. The majority of local term policies, like that of TransAmerica, are convertible into a whole-life or universal life policy that provides modest investment returns and coverage into old age. accidents happen A poor man's alternative to term life insurance is the accident policy, which pays a death benefit if the demise of the policyholder arises through, as Mr Monat put it, 'violent external means'. Although they are available in Hong Kong at extremely low prices, these policies nonetheless generate handsome profits for insurers. That is because most of the local population work in low-physical-risk professions and few people spend much time in cars. Local accident policies typically offer death benefits of between $500,000 and $2 million. They will also pay a small benefit - $20,000 or so - for accidental medical expenses. Premiums are calculated by professional risk: office professionals pay the least, construction workers the most. The list of exclusions is long. Should you meet your end from any form of illness, 'dangerous' sport or terrorism or civil disturbance your beneficiary will receive nothing. Pregnant women are effectively denied coverage. Most policies also exclude motorcycling, an activity close to MoneyWeek's heart. He found just two exceptions: policies from Aviva, which covers motorcycle accidents in full, and Cigna, which offers a 50 per cent benefit for death by two-wheeler. The cheapest accident policy MoneyWeek has found is from Italian insurer Assicurazioni Generali, which charges low-risk policyholders just $33 for every $100,000 coverage. Caveat emptor: when MoneyWeek purchased a Generali policy on insurancestreet.net, the cover note referred to a policy different from that advertised. A terse note to the insurer rectified the problem.
