Sales of traditional insurance products benefit from tighter rules on investment-linked policies

Enoch Yiu

A tightening of the regulations on investment-linked insurance policies since July has made insurers shift focus to basic life insurance policies and annuity products, a trend industry players expect to continue this year.

Statistics released by the government last week showed total premiums from new investment-linked insurance policies last year rose 11.7 per cent from 2012 to HK$19.1 billion last year.

The growth rate was lower than that of total premiums from traditional insurance policies, which grew by more than a fifth last year to HK$73 billion.

Tay Keng Puang, managing director and chief executive of MassMutual Asia, said insurers have had to cope with the challenges of the new regulation by urging sales agents to promote traditional life policies, which allow insurance companies to decide how to invest the premiums and pay guaranteed dividends to policyholders.

MassMutual also focuses on annuity products, a type of retirement policy that allows policyholders to pay premiums for some years for guaranteed monthly payments until death.

Sales of annuity policies rose 73 per cent last year to HK$3.13 billion, government statistics show.

"With an ageing population, the demand for annuity products has increased substantially in Hong Kong in recent years," Tay said. "This is also related to the fact that the retirement protection offered by the Mandatory Provident Fund is too small, and policyholders have to find alternatives."

Chan Kin-por, the lawmaker representing the insurance sector, said sales of investment-linked policies last year grew more slowly than those of traditional insurance policies as a result of market volatility and tighter regulation.

Several banks stopped selling investment-linked policies since the Hong Kong Monetary Authority imposed tougher regulations on these products in July. The tightening of the rules came after policyholders complained of misselling.

Investment-linked policies allow policyholders to choose how to invest their premiums in different funds, making them responsible for the losses as well as the gains from the investment.

Source South China Morning Post