PROPELLINGTHEHONGKONGINSURANCE INDUSTRYTOGREATERHEIGHTS

By Lilian Ng, Managing Director, Strategic Business Group, Prudential plc

Last year, the Hong Kong government issued a development roadmap to position Hong Kong as a sophisticated insurance hub. It outlined visions and missions on how to realise this, while attaching great importance to bridging protection gaps and promoting financial inclusion in our society.

Insurers play an instrumental role in contributing to the competitiveness of the industry. At the same time, there is a lot of effort to educate consumers on financial planning and the importance of having a financial safety net.

Narrowing the protection gap in Hong Kong

Hong Kong is one of the more advanced insurance markets globally with more than 160 insurance companies operating in the city.

However, increasing life expectancies, rising cost of medical attention and very limited employer contribution schemes require more attention to health and financial protection. A study by the Hong Kong Insurance Authority estimated the protection gap to have been around HK$6.9 trillion in 2019 and the life insurance penetration rate at less than 20 percent . While the latter number is significantly higher than most economies globally, there is still a significant portion of the population that is either uninsured or underinsured.

Furthermore, an ageing population means that financial security in retirement is a cause for concern. According to research commissioned by Prudential plc, “Fulfilling Futures - Re-thinking well-being in Asia: How outlooks on life are changing”, residents in Hong Kong cited financial means as a major motivator to prolong one’s working life Only half of the respondents from the city said they are satisfied with the current state of their financial health today, while almost three in five are confident of saving enough financially to enable living to or beyond age 80.

So what are insurers doing to narrow the protection gap?

Leveraging technology to drive health and financial inclusion

Technology is an enabler on many fronts Insurers have been investing significantly in their digital capabilities so that products and services can be made more accessible as well as affordable to more people.

At the front end, many insurance companies equip their agents or financial consultants with tools that increase productivity so that they can focus on engaging the customer They are also provided with datadriven insights to start authentic conversations on health and financial risks with customers.

As people in Hong Kong become more health conscious, there is an increasing demand for accessible wellness solutions and healthcare services. Apps like ‘Pulse by Prudential’ deliver curated health information and key healthcare services, such as telemedicine and Traditional Chinese medicine assessment.

Insurers are increasingly collaborating with partners across diverse industries from technology to healthcare and consumer goods, to expand multiple offerings that combine health, wealth, retirement and lifestyle knowledge and solutions.

Technology also enhances back-end processes, such as supporting claims assessors in risk monitoring, and helping underwriters to come to a decision much more quickly by providing artificial intelligence (AI)-backed recommendations. Underwriting decisions today can be available in a matter of minutes instead of days, allowing policies to be issued much more quickly.

Such efficiencies could translate to more affordable premiums, which in turn could boost affordability of protection for customers, widens coverage, and enhances financial inclusion.

Underlying all of this is the critical need for continuous and regular financial education and engagement, to equip people with sufficient knowledge, confidence, and skills necessary to make the right decisions There are various channels for people to obtain financial knowledge; for example, digital wealth tools make it easier for consumers to access and learn about insurance AI-powered digital assistants or chatbots offer users wealth tips and answers frequently asked questions about retirement and insurance topics Consumers can also be connected to a real-life financial advisor or insurance agent to get in-depth, personalised advice.

Enhancing connectivity to the Greater Bay Area

As Hong Kong progresses to strengthen its domestic insurance market, there are abundant opportunities to enhance the insurance sector by leveraging its strategic geographical location in the Greater Bay Area (GBA).

Mainland Chinese customers provide a significant long-term opportunity for the Hong Kong insurance industry Since the re-opening of the Hong Kong and Mainland China border in February this year, insurance sales have grown significantly as Mainland Chinese visitors returned Reasons for Mainland Chinese interest in Hong Kong insurance products include diversification in currency and asset class, access to professional financial advice with a broad product spectrum, and easy access to high-quality medical care available in Hong Kong, amongst other factors.

With a population of more than 86 million and a much lower penetration rate than Hong Kong, the GBA presents significant growth opportunities into an untapped market. The "Dual Circulation" strategy will also enhance connections between insurance markets in the Mainland and Hong Kong. With Hong Kong’s sophisticated insurance market and a wide range of products, it has an advantage of being the insurance hub of the area.

The anticipated cross-border insurance initiatives such as the establishment of customer service centres in the GBA, allow insurance companies to provide after sales service that includes premium renewal and claims for Mainland Chinese customers who have bought insurance policies in Hong Kong. These service centres will attract Mainland Chinese visitors travelling to Hong Kong to purchase insurance which enhances the growth prospect for the industry.

In order to drive greater accessibility and affordability of financial services and healthcare, stakeholders from the public and private sectors should work even more closely together As technology and customer expectations are evolving at pace, it is essential that the insurance sector and policymakers have an open, ongoing and collaborative dialogue to propel the Hong Kong insurance industry to greater heights.

About Prudential plc

Prudential plc provides life and health insurance, and asset management in 24 markets across Asia and Africa This year, it celebrates its 175th anniversary, including 100 years in Asia Prudential's mission is to be the most trusted partner and protector for this generation and generations to come, by providing simple and accessible financial and health solutions.