Broken-hearted Hong Kong insurers long for the mainlanders’ return

As travel between the mainland and Hong Kong ground to a halt during the pandemic, insurance premiums paid by mainlanders in collapsed to the lowest point since 2011.

Photo from CFP

Photo from CFP

By ZENG Lingjun


Last year was the worst of Hong Kong insurance broker WANG Liang’s career. With the border between the mainland and Hong Kong closed, business from the mainland has dwindled to nothing, not even a trickle. Mainland visitors used to stand in line for hours to sign policies.

Premiums from mainlanders fell last year by 84 percent to HK$6.8 billion (US$870 million, 5.7 billion yuan) from 2019’s HK$43.4 billion, the lowest amount for ten years. Encouragingly, mainland residents may soon have no need to travel to Hong Kong to buy insurance or make claims.

Stay at home, stay uninsured

In 2012, mainland visitors spent HK$10 billion on new insurance policies. One of the most popular products was whole life insurance, which can serve as a form of long-term USD saving account with attractive returns and protection against RMB depreciation. An AIA policy, for example, offered a return of around 7 percent, much more than similar products on the mainland. Also, Hong Kong policies were usually cheaper than those available on the mainland. From 2011 to 2015, mainlanders increased their spending from HK$6.3 billion to HK$31 billion, which doubled in 2016 to over HK$60 billion, to make up 40 percent of Hong Kong’s personal insurance businesses.

The boom ended late in 2016 as abruptly as it had started. China restricted the purchase of insurance through foreign exchange quotas, a limit on UnionPay transactions and controls on mainland brokers. Mainlanders became more knowledgeable risks associated with different insurance products. From 2017 to 2019, mainland spending shrank every year, dropping to HK$43.4 billion in 2019.

Last year, of course, travel between the mainland and Hong Kong ground to a halt and – since Hong Kong regulations demand policyholders be physically present to sign contracts – new policies could not be issued. All large marketing events were canceled and morale sank to an all-time low.

Most of the obstacles facing Hong Kong’s insurance industry are travel-related and since last May, the Greater Bay Area has been working on a scheme to free up insurance cash flow through the mainland, Hong Kong, and Macau.

As both AIA and Prudential reported new policy premiums dropping by at least 50 percent in Hong Kong last year, some have looked to Macau, where the picture is slightly rosier for new opportunities. In 2020, new premiums there actually grew with business already back to pre-pandemic levels.

Get what you can

Hong Kong and Macau policies usually share the same terms and return if underwritten by the same company. The only difference is in regulation, particularly with regard to the location of the insured party.

It seems unlikely that Macau will usurp Hong Kong as the regional insurance hub any time soon. For one thing, Macau’s network of professionals is much smaller, and Hong Kong’s financial hub status will keep its insurance companies there in the long run.

Recovery may be just around the corner.  The sharp decline at the depth of the pandemic has slowed. In Q4, net premiums increased 19 percent, still minuscule compared to the year before, but better than nothing. There may not be an immediate explosive recovery, but at least people have started to buy what they need instead of whatever they can get.