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SCMP Reporter

INSURANCE used to be more than just a dirty word in the territory.

  The very act of taking out life insurance was considered a hazardous one.

  By doing so, it was traditionally supposed, one was tempting fate to take the life of the policy-holder.

  Hong Kong has come a long way since this was the prevalent view.

  Life insurance in its simplest form is a piece of paper that says the insurance company will pay a pre-determined amount of cash and give it to a pre-determined beneficiary at the time of the death of the policy-holder. All the policy-holder has to do isto pay a regular amount of money called a premium.

  Today it is estimated that about 15 to 20 per cent of the population is covered by some form of life insurance. This has come about over a little more than a decade and makes the industry one of the fastest growing financial service sectors in Hong Kong.

  It is a multi-billion dollar business. According to the Census and Statistics Department, in 1991, total premiums from all types of business, including general insurance, were $23.9 billion, 22 per cent more than in 1990. Of this, life insurance accounted for $12.21 billion, an increase of 29 per cent.

   In 1983, industry gross premiums totalled $6.25 billion, of which life insurance made up a mere $1.2 billion.

  Then, less than two per cent of the population were covered by insurance. This gives some indication of the strength of the industry's growth.

  Over a decade of sometimes hectic growth, life insurance companies were seeing their premium income rise by 40 per cent year after year.

  Edward Lau, agency vice-president at Manulife, noted three reasons for the market's growth:    The increasing influence of the West, where insurance is popular.

   Higher incomes and wealth, creating the need for some financial protection.

   The growth of huge insurance agencies.

  These factors came together to trigger a life insurance explosion in the 1980s.

    Three companies came to dominate this industry because of their success in developing agency forces able to sell to the population.

    They are American International Assurance, with about 4,600 agents, National Mutual, with 3,500 agents, and Manulife, with 1,200. There are estimated to be 17,250 agents in the territory.

  In the 1980s, the industry was unregulated, selling unsophisticated, low-premium products.

   Most people in the industry believe there is plenty of scope for growth in Hong Kong. Both new entrants and established firms who have decided to spruce up sleepy offices are seeking to expand market share all the time.

    Here lies the problem. While the population looks increasingly rich and old - just right for insurance agents to tap - high wage inflation, the high cost of living and the low esteem attached to the industry mean there is a severe shortage of good quality agents.

  With the huge margins available from insurance and the growing attractiveness of Hong Kong to insurers it was only have been a matter of time before someone turned up and tried to take agents away from a traditional player.

  This is probably what is behind the problems being faced now by National Mutual, which is going through a crisis of confidence involving its agents and shareholders.

  After the departure of the group's chief executive, Andrew Yang, rumours have spread indicating that NZI is planning to expand its operations in the territory, possibly with the help of Mr Yang and defecting National Mutual agents.

  Prudential Corp Asia managing director Mark Tucker said the insurance market remained attractive but there were more ways of entering the industry than taking agents from established firms.

  ''Anything that is not in the interest of the policy-holder is not in the interest of the industry.

  ''There are ways of expanding involving opening up other distribution channels.

  ''The growth of the industry is part of the development of medium to long-term savings. That is what we are looking at.''   Whatever the outcome of the agency war breaking out at National Mutual, it looks as if no one will see the insurance industry in Hong Kong in quite the same light again.

  Increasing disclosure, increasing regulation, imposed both by the Government and the industry itself, and the growing sophistication of both products and customers' needs are all factors likely to transform the way insurance is promoted and sold in Hong Kong.



Once-sleepy life market becomes coveted trophy