Hong Kong’s health insurance and pension saving ‘tax deducting schemes’ find traction in the first two weeks since launch
- Major insurers record brisk sales in the new tax-deductible schemes since launch on April 1
- Fitch and Moody’s believe the tax schemes will boost growth of insurance companies in Hong Kong
Two government programmes to encourage individuals to buy private health insurance and save more for retirement have been well received in the first two weeks since launch, providing what could be a long term growth engine for local insurance companies, according to industry players and credit rating agencies.
Several major insurers including Prudential, AXA, AIA, Manulife and HSBC Life all told the Post that they have recorded strong sales in the new tax-deductible schemes over the first two weeks.
“With the increased awareness on medical protection needs, customers are proactively reaching out to our financial consultants to inquire about the Voluntary Health Insurance Scheme (VHIS),” Priscilla Ng, chief customer and marketing officer of Prudential, said.
Over 80 per cent of Prudential’s customers who bought the VHIS schemes are also buying the flexible plan which has more coverage but charge a higher premium than the standard plan, she said.
“Prudential’s tax deductible deferred annuity scheme saw strong growth in new business during the past two weeks, which has increased by more than 60 per cent from the prior month,” Ng said.
“The government initiative to offer tax concessions has also helped to encourage the acceptance of annuity products.”
AXA found its “flexi” plans represent 75 per cent of all its VHIS sales.
“The early sales is encouraging and satisfactory. In particular, we have a good turnout for our flexi plans. This is better than we expect. It shows that the public are willing to pay more to get better coverage,” said Alex Chiu, medical director of AXA Hong Kong and Macau.
HSBC said the response to its tax-deductible MPF voluntary contribution and qualifying deferred annuity policies over the last two weeks has been encouraging.
“The tax concession measures have encouraged the public to revisit their existing retirement coverage and financial planning,” said Greg Hingston, Head of Retail Banking and Wealth Management, Hong Kong, HSBC.
A spokesman for HSBC said it was considering offering VHIS plans and would work with its partners to ensure the right solution was provided for customers.
Credit rating agency Fitch expects Hong Kong life insurance companies to benefit from the tax deductible schemes.
“The schemes will encourage people to buy health insurance and deferred annuity products from insurance companies. The other MPF providers will also benefit from the schemes as it will encourage more [individuals] to voluntarily contribute more to their MPF,” said Terrence Wong, senior director of Hong Kong office of Fitch.
“The insurance companies will have more premium income by selling these tax-deductible products. They can also cross-sell other products to these customers.”
He said those earning HK$500,000 (US$63,742) or higher per year would be attracted by the tax-deductible schemes, especially the voluntary MPF contribution.
Wong said the tax benefit would not have a big impact on government income.
“The reduction in tax revenues, as a result of the purchases of these schemes by taxpayers, is unlikely to be significant,” he said.
The Hong Kong government collected HK$60 billion in salary tax during the financial year ending March 31,2018, representing 18 per cent of its total revenue, government data shows.
Beginning from April 1, the government for the first time will offer tax incentives to encourage people to buy health insurance products and to save more for retirement. One can enjoy a HK$60,000 tax deduction if they buy a deferred annuity scheme or voluntarily contribute to the Mandatory Provident Fund. Depending on an individual's salary and other allowances, an employee could save HK$180 to HK$10,200 per person on tax.
The VHIS can offer up to HK$8,000 in tax deduction per person per year. There are 25 insurance companies that have approval to launch such products.
Credit rating agency Moody’s said in a report that the government tax incentive programme will be “credit positive for Hong Kong insurers because it is likely to increase demand for private health insurance and insurers' retirement planning products.”
“AIA, Manulife, and Prudential will be the main beneficiaries because of their strong distribution capabilities with large agency force and comprehensive product offerings in Hong Kong, which will help them capitalise on cross-selling opportunities for more lucrative products, such as long-term savings, annuities and critical illness products,” the Moody’s report said.
