New life insurance sales rose 23% to HK $80.5 billion in the first half of this year, according to a report by the Insurance Authority. However, most people in Hong Kong are in it for the investment features rather than the protection value it can provide.
“Even though Hong Kong has a well-developed insurance market … many Asian and Hong Kong people want investment returns, or at least a decent guarantee of returns, from their insurance policies,” Prudence Ho, senior manager of policy and development division at Insurance Authority, told the South China Morning Post.
In fact, the Insurance Authority revealed that 59% opt for investment-linked policies with high savings value.
This is a stark contrast to the cheaper term life insurance. Since it does not have any savings or investment features, only 0.9% of insurance premiums paid for such products in 2019, even though investment-liked insurance is 20 times more expensive than term life insurance.
Many of those who cannot afford investment-linked policies don’t go for insurance compensation at all. Thus, the Insurance Authority report said Hong Kong faces a mortality protection gap of HK$6.9 trillion, putting many families at risk of financial troubles in the event of the breadwinner’s death.
The same report translated this gap to a shortfall of HK$1.9 million for every working adult in Hong Kong, leaving them financially vulnerable without insurance.
The South China Morning Post called this mortality protection gap “ironic” as Hong Kong tops the world ranks when it comes to premiums per capita at US$8,983 per person, even surpassing the global average of US$360 as reported by Swiss Re.
To increase awareness about insurance protection, the Insurance Authority will introduce a free online tool to allow people to calculate insurance protection needs based on their age, income, and number of children.
“Term life policies have been around for a long time but traditional agents have low incentives to sell the products as they cannot earn high commissions,” Fred Ngan, co-founder of Bowtie Life Insurance, told the South China Morning Post. “Virtual insurance companies can fix the protection gap by focusing on providing a simple and easy way for people to buy high-protection value insurance products.”
