Roundtable: Hong Kong: The state of the insurance market in Hong Kong

How has 2015 been for business and is China’s economic slowdown hurting affairs?
While the gross domestic product of Hong Kong, with its bustling construction, retail and tourist economy, has been growing steadily over the last few years, clouds are gathering over China, where economic expansion is slowing down – GDP grew by 6.9% in Q3 2015, its worst performance since 2009–  and insolvencies are rising.

In addition, there have been fewer tourists from mainland China wanting to visit Hong Kong. Besides ‘visitor fatigue’, the opening up of new travel destinations and a crackdown on corruption have made other countries more attractive. This fall in demand has hit luxury retailers especially hard.

Despite these issues, encouragingly the consensus at the roundtable was that 2015 has been an agreeable year for business and that any China slowdown would not have an imminent impact on growth opportunities in Hong Kong.

Michael Lamb, CEO of CCW Global, said the year had been “great” and hoped there would not be a repeat of the Occupy movement, also known as the Umbrella revolution. The street protests disrupted business from late September to mid-December 2014.

This year has seen continued growth in personal lines, according to Brandon Hui, CEO of Groveland Financial Services. He believed there are still more opportunities in travel, medical and life insurance, as foreigners are still attracted to the city, despite a relative expat exodus from China as costs rise.

The commercial brokers around the table were also bullish about the year, although some noted competition is increasing.

Francis Chan, CEO of CIS Insurance Brokers, said: “On the construction side,
SME brokers are facing some challenges. Every broker appears to have become interested in building their construction portfolios despite profitability issues with employee liability [insurance].”

Mark Walker, the newly appointed QBE Hong Kong CEO, added the last few years have seen an increased appetite for business from other insurers. He commented: “From an insurer’s perspective, it is a lot more difficult to win business [in Hong Kong] because of increased competition than three years ago. The propositions that worked well then are not working as well. Differentiation is going to be key as we move forward. We need to be investing.”

Meanwhile, the introduction of the Independent Insurance Authority over the next 18 to 24 months could see some consolidation in a market that has around 100 general insurers and over 500 brokers.

Economists argue about an imminent ‘hard landing’ for China’s economy, but most of the brokers doing business there see the country as a growth area, with Hong Kong as an excellent base with its close proximity and cultural ties.

Alex Yip, CEO for Greater China at Lockton, is based in Hong Kong and oversees offices in China. “You need to look beyond the seven million people in Hong Kong. It is challenging to do business in China but we have the knowledge and talent to succeed there,” he said.

Howard Tsang, CEO at SAL Insurance Brokers, continued: “China is a large medium to long-term opportunity. A lot more Chinese money will enter Hong Kong in the next three years as they open up asset management companies and banks [here].”
Nova Insurance has a Chinese license and offices in Beijing, Guangzhou, Shanghai and Macau, another Special Administrative Region like Hong Kong. It’s general manager Patrick Chan, reflected: “Hong Kong could leverage more opportunities in China. We are trying to capture more market segments and utilise our license and offices. We have also been helping larger brokers grow their accounts in China.”

Hong Kong’s connections with China will grow as the Hong Kong/Zuhai/Macau bridge, expected to open in 2016, helps strengthen economic ties with the Pearl River Delta region. Beijing’s ambitious $900bn ‘One Belt, One Road’ initiative is also expected to open doors for business between Hong Kong and China. Mainland China is also opening up several economic trade zones to ease business restrictions, especially with overseas companies.

How can insurers differentiate and help brokers in Hong Kong?
There were differing views around the table on how insurers can best help brokers win more business.

Patrick Chan commented: “We seldom see innovative products [in Hong Kong], it seems everyone offers the same. For example, we could have product liability in office package policies.” He deplored: “We see little focus on the customer demand and we need to add more value-added services and differentiate.”

Lamb wanted insurers to trust brokers more and start investing in technology.
End-to-end credit card access for motor insurance via a broker’s website works in the UK and the US, he noted. “It should work here. The technology will help save my staff time.” He added: “People live on Facebook in Hong Kong and we have high mobile penetration. Our [industry] business model needs to make the change to reflect this.”

Bruce Howe, QBE’s chief operating officer for Asia-Pacific, recognised insurers need to do more with technology. His firm has set up an online portal for its agents and brokers; it allows intermediaries to transact insurance directly with QBE.

Tsang wanted insurers to work with SME brokers on more of a partnership basis.
Walker agreed: “We need to re-engineer the business so we have improved touch points between agents, brokers and insurers. The affinity market [for example motor dealerships adding insurance to the purchase] is becoming a nice integrated sales proposition and a potential model.”

Phil Bilney, CEO of FP Marine, felt insurers should be more positive about the benefits of working in the Hong Kong market to help raise the SAR’s international profile. This is especially important given the rapid rise of Singapore as an insurance hub, he added. “Hong Kong has an enormous pool of entrepreneurial talent and a flat, competitive business environment.”

Bilney also stressed the industry needs to work together to improve its reputation. He reflected: “The last thing we want to do is have an argument with the public over paying a claim – we want to the pay them, but they don’t see that.”

Walker remarked that insurers negotiate great deals on supply chains for when there is a claim, in order to get a competitive price to replace, for instance, a customer’s broken appliance quickly. However, the customer who doesn’t make a claim will never notice it. So perhaps insurers could make the clout they have with suppliers more available to their clients by providing, for example, discounted household goods.

Lamb agreed it would be a good idea to have a hook that was not insurance-related to help bring in customers, for example a home insurance discount buyers’ club. He said it could be a “wow” factor that could assist cross-selling possibilities.

Walker added there is “low hanging fruit” in Hong Kong and educating consumers about the value of insurance is vital. Hui noted Canadians were surprised that homeowners in Hong Kong were often not insuring their largest asset, their property.

For his part, Yip asked for Hong Kong insurers to take a more international approach. “We must look outside of Hong Kong to grow in the next 20 to 30 years. Insurers need to provide multinational programmes from Hong Kong – the Chinese players are lacking knowledge of this. They need people who can look after these investments. Can a Hong Kong or Chinese broker handle a big project in Dubai?”

Mark Lingafelter, Singapore-based managing director for QBE Asia-Pacific, agreed: “We are trying to map this out at QBE. We have assembled a global footprint and we need to work out how we can leverage off our network. Technology will help.”

What is the best way to improve talent and qualifications in Hong Kong?
Talent development is critical to the future of any industry. However, within insurance, the key facilitators to achieving this are a complex mix of associations, government and market participants. Despite numerous changes in insurance training and development ventures in Hong Kong over the years, there is a structural vacuum.

The brokers at the roundtable criticised the current exams, which use multiple choice questions, for being too easy to pass. In addition, with an international pool of talent speaking multiple languages, there was concern about continuing professional development courses and points, with some in the market sitting for hours without necessarily understanding the course.

The Chartered Insurance Institute is hoping to provide direction via its purchase of the Insurance Institute of Hong Kong. It has already helped some initiatives in Singapore such as the Singapore College of Insurance. Several Chinese universities are offering insurance courses, but Hong Kong is not currently offering such a curriculum.

Mark Greenwood, regional director Asia-Pacific CII, recently moved from Kuala Lumpur to Hong Kong and is on a fact-finding mission to see what the market wants and needs. He commented: “Taking over the IIHK gives us more momentum to discuss these opportunities. I have had discussions with Legco (the Legislative Council) and it is supportive. It is quite a fragmented market in Hong Kong for legislative bodies.”

He added: “We have the tools whether it is for life insurance, claims or general insurance brokers, and we want to work closely with the market to ensure we use the right ones in Hong Kong.”

The CII could build on some recent market initiatives, noted Patrick Chan: “You need people; we don’t have enough. The government has realised this and in its latest budget allocated HK$100m on a pilot programme for internship activities and career opportunities in financial services. In addition, the Hong Kong Federation of Insurers has a Young Insurance Executive Development programme.”

Howe recognised there are relatively few people under the age of 35 working in insurance while there is a large ageing agency base.

He noted: “We shouldn’t be picky about which graduates we take on. And many graduates leave us – we need to accept the costs of that. Education and making yourself accessible is important. I was recently on a web chat with around 60 graduates who wanted to learn more about careers in insurance. We are also helping the Australian government with university internships in Asia.”

Howe added investing in professionalism was also important: “We are going through a process to say to underwriters they need professional qualifications, for example with the CII. This will transfer to claims.”

Walker noted it isn’t just about attracting talent, but offering them a chance of a career that involves a lot of mentoring – something unfortunately senior executives have increasingly less time for these days. Walker pointed out some of the best people in the industry were self-taught traders and that recruiting out of universities and schools was only part of the process.

There will be no quick fix to Hong Kong’s young talent shortage and an industry perception problem. But everyone agreed that the insurance market in Hong Kong needs to work closely together to make it an attractive, vibrant, professional and fulfilling place to work; and instead of being inward looking, it needs to take a positive message to the public.

Asia Roundtable
Thank you for reading the Post Hong Kong Broker Roundtable in association with QBE. If you would like to make a comment or participate in our next Asia roundtable, please email Andrew Tjaardstra at andrew.tjaardstra@incisivemedia.com

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