Hong Kong is set to license its first online-only insurer under a “fast-track” system next month, the regulatory head said, as it fights off criticism for being slower to make use of new technology than other parts of the financial services world.
The online platform will operate in a market worth more than $63 billion in insurance premiums, and will compete with players such as AIA Group and the local units of Prudential Plc and Sun Life Financial Inc.
The move comes as Hong Kong is pushing a number of financial technology or “fintech” initiatives in an effort to compete better with rival centres in Singapore and London to reel in more investment.
Hong Kong’s Insurance Authority (IA) plans to issue its first licence under the fast-track system, launched last year to speed up applications for insurers operating solely online to acquire customers and sell products, CEO Clement Cheung said.
At present, most insurance products in Hong Kong are sold via intermediaries such as agents, banks and brokers.
“It has taken a bit of time, and sometimes people say ‘your fast track is not so fast’ but I wanted to look at the potential disruption to the market,” said Cheung, who in August took over as the chief of IA that started operations last year.
More than 80 percent of customers are willing to use digital and remote contact channels including email, mobile apps, video or phone instead of interacting with insurers via agents or brokers, a report by consultancy EY shows.
Hong Kong is home to a developed life insurance market, with a life and health insurance premium to GDP ratio of 17.94 percent in 2017, the second-highest in Asia after Taiwan, according to insurer Swiss Re.
As part of Hong Kong’s fintech push, the banking regulator is also expected to issue the first batch of licences to online or “virtual” banks by end of this year, people familiar with the mater have said.
The IA is also looking to set up a so-called policyholders’ capital protection fund and implement a risk-based capital regime for insurers, in line with global standards, to protect customers from a severe downturn in the sector.
While the capital protection fund is expected to be launched by 2020, the regulator plans to roll out the risk-based capital regime by 2021-2022 after completing the consultation processes and making the required changes to laws, Cheung said.
“These two initiatives are on the top of our agenda,” he said. “This is a clear roadmap, and we are committed to it. The industry is aware of it … the overall transition will be smoother.”