HSBC Eyes Retirement and Medical Insurance Markets in Hong Kong

HSBC Insurance (Asia) Ltd. [86812] is looking at retirement and medical insurance product development in Hong Kong, where the insurer sees room to fill a gap in inadequate coverage.

Hong Kong's life insurance business has shrunk 21% in the first half of 2009, as like other financial services sectors the market was adversely affected by the global financial crisis. Nevertheless, the fundamental trend of market development remains the same, said Jason Sadler, managing director of Hong Kong at HSBC Insurance.

Long-term saving plans are popular among Hong Kong residents because of increasing concern about inadequate retirement protection with reliance solely on the mandatory pension fund. Increasing medical cost is also a concern "on top of people's minds," said Sadler.

The economic downturn has led people in Hong Kong to evaluate their long-term financial plans more practically, as 59% of residents say they are looking for "regular and steady" income after retirement, according to HSBC's recent survey. Also, 26% of people surveyed want to recover their investment losses due to the market crunch.

People are looking for "simple and easy to understand" products along with a long-term financial goal for adequate retirement and medical protection, according to Sadler. The bancassurer is "positive" about the growth momentum for life insurance business in Hong Kong.

Demand for investment-linked insurance products has shown signs of pick-up in Hong Kong, supported by a more active stock market since the second quarter of this year.

In Hong Kong, sales of investment-linked insurance products have taken off, with their share of total life business rising from 33% in 2004 to 62% of the segment in 2007. The stock market plunge led to the proportion falling to 49% in 2008 and 25% in the first quarter of 2009.

"We see renewed appetite for investment-linked insurance products," said Sadler. "People are beginning to realize that regular savings and exposure to equity and bond markets, over the long term, can help them achieve their financial goal."

The recent launch of an investment-linked wealth insurance product, which combines savings and insurance protection, has contributed to about 30% of the bancassurer's new business since its rollout in July.

In Hong Kong, sales of new investment-linked individual life and annuity insurance fell 77.4% to HK$6.025 billion (US$777 million) in the first half of 2009, according to Office of the Commissioner of Insurance.

Despite of downward trend of life business in Hong Kong, HSBC Insurance posted a 1,506% surge in new investment-linked insurance business in the first half this year.

The bancassurer has snapped up market share for individual life insurance business in Hong Kong, growing to 22% of the market in this year's second quarter from 17% in the first quarter and 11% in 2008, according to Sadler.

The company's "ability to react quickly and effectively in a changing market" was critical to growth against the economic downturn, said Sadler. In the second quarter of 2009, HSBC Insurance took up 22.4% and 24.9% of market share for new life individual and investment-linked insurance businesses, respectively.

The financial crisis has demonstrated the need for sound financial advise, and this has been "a positive time" for making business progress and growing market share, said Sadler.

In lifting consumer protection on financial products, banks are asked by the Hong Kong Monetary Authority to make "clearer segregation" between the sales activities of general banking and investment products. All retail banks must make clear distinctions between services and selling areas for general banking and investment products.

This new move should "obviously" be the way of doing business so as to enhance protection for consumers who can get more time for product explanation and services, said Sadler. The bancassurer has implemented this segregation policy with designated color zones to separate various businesses in its retail outlets.