market dynamics and corporate vision of the insurance
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Market Dynamics and Corporate Vision of the Insurance AuthorityMr. Clement CheungChief Executive OfficerInsurance Authority of Hong Kong (IA)11 October 2019
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Agenda
123
45
Market Overview
Macroeconomic Environment
Regulation of Insurance IntermediariesInsurTech Development
New Initiatives
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(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
400,000
500,000
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Year
Per Capita GDP (RHS) Per Capita GDP Year-on-year Growth Average Salary Year-on-year Growth CPI Year-on-year Growth
HKD(%)
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Macroeconomic EnvironmentEconomic Cycle
Global Financial CrisisSARSAsian
Financial Turmoil
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-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
(%)
Composite Interest Rate Change in Composite CPI
Macroeconomic EnvironmentNegative Interest Rates
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Macroeconomic EnvironmentChanging Demographics
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Agenda
123
45
Market Overview
Macroeconomic Environment
Regulation of Insurance IntermediariesInsurTech Development
New Initiatives
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56.6%
17.7%
10.6%8.5%
4.8%1.0% 0.8%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Individual whole life Individual lifeinsurance (others)
Individualinvestment linked
insurance
Individualendowment
Annuity and other in-force business
Individual term lifeinsurance
Group life insurance
Market OverviewLong Term Business – Product Mix
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0%
10%
20%
30%
40%
50%
60%
70%
80%
0
10
20
30
40
50
60
70
80
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Market shareof ILAS
Premiums(HKD billion)
ILAS Market share of ILAS (RHS)Implementation
of GL15*
GlobalFinancial
Crisis
Market OverviewLong Term Business - ILAS products
* Previous known as Guidance Note on Underwriting Class C Business
74%
32%12%
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Market Overview Long Term Business – Term Life Products
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Market sharePremiums(HKD billion)
Individual Term Life Market share of Term life & Group Life (RHS)
1.9%
1.3%
0.3%
(RHS)
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10
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Percentage of Premium contributed by MCV
Premiums(HKD billion)
Mainland China Visitors Premium contributed by MCV (RHS)
Market Overview Long Term Business – Mainland Chinese Visitors
4.0%
39.2%
29.3%
Implementation of GL16*
* Previous known as Guidance Note on Underwriting Long Term Insurance Business (other than Class C Business)
Regulatory intervention by former CIRC
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Market OverviewDistribution Channels
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Insurance intermediaries contribute…
New Individual Life premium in 2018
Distributed through insurance intermediaries Others
New Individual Life policies in 2018
99% 97%
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Market OverviewImplications
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Social Implications• Low interest rate and excess liquidity• Decent economic and salary growth
• Desire to preserve wealth • Aggressive investment appetite • Bank deposits unable to hedge against inflation
Market implications• Poor awareness of risks exposure• Focus on short-term returns
• Attempt to capture low cost of borrowing• Incomplete perception of market volatility• False sense of security
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Agenda
123
45
Market Overview
Macroeconomic Environment
Regulation of Insurance IntermediariesInsurTech Development
New Initiatives
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Regulations of Insurance Intermediaries Widened Mandate and Mission
Perform conduct regulation
Protection of existing and
potential policy holders
Solvency and Governance
Facilitate sustainable market
development
Deepen public understanding
Promote market breadth and depth
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Regulation of Insurance Intermediaries Policy Objectives
Promote fair and transparent
regulation to facilitate market
development
Upgrade the professionalism
of licensed insurance
intermediaries
Advocate a robust but flexible regulatory
approach to increase
efficiency
Public Confidence
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Regulations of Insurance Intermediaries Promote Fair and Transparent Regulation
Set out licensing, Fit and Proper and conduct requirements
Impose disciplinary
actions
Perform inspection and investigation
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Regulation of Insurance Intermediaries Licensing Requirement
Form 5 or equivalent
Individual Licensee - Level 2 in 5 HKDSE subjectsResponsible Officer - Bachelor degree or other acceptable qualifications
Previous framework New regulatory regime
Insurance Intermediaries
Qualifying Examination
(IIQE)
Postgraduate Diploma in
Insurance in Risk Management
(PgDIRM)
The Professional Diploma in Insurance
(PDI)
Examination and Professional Qualification by VTC/PEAK
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Regulation of Insurance Intermediaries Code of Conduct
General Principles:
GP 1 - Honesty and Integrity
GP 2 - Acting Fairly and in the Client’s Best Interests (Agents); Acting in the Best Interests of Clients and Treating Clients Fairly (Brokers)
GP 3 - Exercising Care, Skill and Diligence
GP 4 - Competence to Advise
GP 5 - Disclosure of Information
GP 6 – Suitability of Advice
GP 7 - Conflicts of Interest
GP 8 - Client Assets
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Regulation of Insurance IntermediariesContinuous Professional Development
Previous framework New regulatory regime
10 hours15 hours*
At least 3 hours on Ethics or Regulations*
Online training courses max 5 hours annually
Certain insurance-related CPD courses provided by the Institute of Professional Education And Knowledge (PEAK), retrieved on 19/9/2019
*Effective on 1 Aug 2021
New requirement on Ethics or regulation training – Aiming to further enhance professionalism
Continuous & Professional
Development (CPD)
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Insurance Appeals Tribunal
Appeal
Notice of Decision
Decision
Notice of Proposed Disciplinary Action
Notice
Oral/Written Representation
Response
Conduct Investigation
Investigation
Regulation of IntermediariesInvestigation and Disciplinary Action
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Agenda
123
45
Market Overview
Macroeconomic Environment
Regulation of Insurance IntermediariesInsurTech Development
New Initiatives
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Positive disruption
Broader inclusiveness Operational efficiency
Consumer empowerment Customer experience
Market DevelopmentInsurTech StrategyPositive disruption
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Digital insurers* Traditional insurers with digital channel
and more…
InsurTech DevelopmentPositive Disruption
*Avo will be a virtual insurer authorized under the Fast Track (to be announced)
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Operational Efficiency
Customer Services
Licensed Insurance
IntermediariesCustomers
InsurTech
E-submission
Financial Needs Analysis
Customer Relationship Management
InsurTech DevelopmentPositive Disruption
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Uninsurable / Emerging risks / New opportunities
e-wallet insurance
Pet insurance
ID-theft insurance
InsurTech
On-demandInsurance
Mobile appNon-invasive sensors
InsurTech DevelopmentBroader Inclusiveness
Parametric travel delay
API
Wearable insurance
Blockchain
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Agenda
123
45
Market Overview
Macroeconomic Environment
Regulation of Insurance IntermediariesInsurTech Development
New Initiatives
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New InitiativesTax incentives
Marine and Specialty Insurance• 50% reduction in profits tax rate for marine insurance and
underwriting of specialty risksP&I Clubs• Regulatory concessions and business facilitation
Captives• Tax incentives and scope of insurable risks• Dialogue with State-owned Assets Supervision and
Administration Commission
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New InitiativesProduct Innovation
• Increase awareness of longevity risk• Induce retirement planning• Enrich available choice of protective products
• Focus attention on medical needs• Shift demand towards private sector• Lay foundation for further development
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New InitiativesInsurance-linked Securities (ILS) – Prospects and Opportunities
USD$ 13.8bn
USD$37.8bn
Suggest to delete the speaking
notes in Chinese
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New InitiativesInsurance-linked Securities – Basic Concept
Ceding (re)insurer
Investor• Additional options for
risk diversification• Geographical
imbalance ofglobal ILS market
• Spectre of financialvolatility and turbulence
• Looming CAT riskposed by globalwarming
Insurance premiums
Risk diversification and investment
return
• Alternative riskmanagement tool
• Additional underwriting capacity
• Insurability and viability of parametric covers
• Stimulates research andmitigation measures
Special Purpose Vehicle
Capital marketInsurance market
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Collaboration with Investor and Financial Education CouncilExamples: • “Tips on Buying Insurance”
Publicity Leaflet• Insurance Education Seminar• Education campaign on
deferred annuity products
“Koi Sai Po Kam” (蓋世保鑑) Facebook page• Provide credible, impartial
information and knowledge about insurance to the public
Research Publicationson “Mortality Protection Gap”• Research Report on Mortality
Protection Gap in Hong Kong
New InitiativesThematic Research and Public Education
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Corporate Vision of Insurance Authority
HONG KONG
Greater Inclusion and Public Awareness
More Harmonious Society
Reduced Social Burden for the Government
Better Protection for Policyholders
Enhanced Market Stability
Stronger Market Resilience
01
02
03 04
05
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Insurance AuthorityTel: (852) 3899 9983Fax: (852) 3899 9993Email: [email protected]: https://www.ia.org.hk/en/index.htmlFacebook: https://www.facebook.com/KoiSaiPoKam/