White Collar | Let SFC regulate investment-linked insurance policies
New insurance regulator may lack expertise when it comes to investment-linked policies
The Hong Kong government will finally push ahead with the long-awaited establishment of an Insurance Authority next year, but the reform has not gone far enough to solve the problem of investment-linked assurance schemes (ILAS).
To protect the interest of policyholders, the ultimate solution should be to move these products under the regulation of the Securities and Futures Commission instead of the Insurance Authority.
The products, which have become popular in recent years, are a combination of a life insurance policy and an investment fund. Policyholders choose how to invest the premium among various funds.
This is different from traditional insurance policies, where the insurer decides how to invest the premium and pays dividends to the policyholders.
Investment-linked policies have the advantage of providing a higher return in a bull market run. But what goes up can come down.
When the market declines, policyholders may have their fingers burned, and there have been many complaints from policyholders that salespeople did not tell them the whole truth about the risks of the products.
Another problem is that these policies provide less insurance protection. When the policyholder dies, the amount of money left for the family may not be as high as expected.