China’s demand for insurance products in Hong Kong reflects asset diversification need

Growing mainland Chinese interest in buying insurance products in Hong Kong reflects an asset diversification need from wealthy individuals and highlights the need for domestic insurance reform, participants told a symposium in Shanghai on Monday.

Hong Kong life insurance products are gaining popularity among mainlanders due to their availability in foreign currency settlement, lower premiums than similar mainland policies, and more flexible longer-term “free coverage” marketing gimmicks, participants told a Shanghai Insurance Institute symposium.

“There are signs mainland buyers of Hong Kong insurance policies are expanding from high net worth individuals to a vast group of middle class clients,” said Chen Qian, vice general manager, actuarial division at China Pacific Life Insurance Co, adding that regular premium products are gaining popularity in Hong Kong.

Mainland insurers are under pressure to fight Hong Kong rivals for similar insurance products, by trimming premium charges by 40 per cent to become more competitive, he said. This has pushed them to increase their assets management capability, adopt better risk control, and cut their costs, he added.

He also argued that it may trigger reform support from the industry watchdog, such as gradually loosening a more-than-decade-old ban on offering investment returns to critical illness insurance policyholders, noting that such loosening could be done step by step as trials in some cities.

It is also arguable whether the China Insurance Regulatory Commission would lift its ban on long-term free coverage in the mainland to make it more flexible for mainland insurers to sell products, he noted, admitting that such loosening, if not properly managed, could lead to disruptive price wars.