Half of the local workforce in Hong Kong lack sufficient savings to last six months without income, according to a report released by Zurich Insurance (Hong Kong).
The global report titled "Embracing the income protection gaps challenge: options and solutions", is the culmination of an extensive three-year study in collaboration with the University of Oxford, and provides recommendations for how governments, employers, insurers, intermediaries and individuals can work together on the issue. Hong Kong was among 11 countries/regions surveyed in the global report.
The report also reveals that Hongkongers feel they are most vulnerable to income loss. Only a quarter of respondents believe they have a less than 10% chance of lost earnings due to illness or disability, versus the more confident 38% average of the 11 markets surveyed.
Mr Eric Hui, CEO of Zurich Insurance (Hong Kong), said: "The study highlights a serious issue with income protection gaps in Hong Kong. Income protection is not a pleasant topic, and it's complex, so people often need a trigger to motivate them to act. We hope the report will stimulate debate, and help more people in Hong Kong prioritize income protection, seek professional advice, and formulate a long-term plan."
The findings also reveal that Hong Kong workers are more likely (54%) to experience income loss in working life due to serious illness/disability than any of the respondents of the markets surveyed (average 44%).
The research also shows that 54% of those surveyed had personally experienced income loss due to sickness or accident.
Of those that experienced income loss, over one-third (38%) suffered income loss for longer than six months. Of those without income protection insurance, less than half (45%) said they would consider investing in protection, with most citing price as the biggest barrier.
Mr Hui said: "The lack of protection, combined with Hong Kong's increased longevity and rising healthcare costs, presents a significant protection gap challenge for the city."
Based on the research, Zurich recommends that government, employers, insurers, intermediaries and individuals work together to close income protection gaps. Key recommendations include:
- For insurers: Develop accessible insurance products to introduce via employers, with additional features available for individuals wishing to purchase them.
- For employers: Actively promote well-being programmes for employees for healthier lifestyles. Partner with the government and employers' associations to encourage return-to-work schemes. Provide employees with ongoing financial education and training, including the use of digital tools.
- For governments: Regulate and certify (or trademark) approved income protection insurance products and use fiscal incentives to encourage mainstreaming of adaptation. Harness the enthusiasm and efforts of various sectors by promoting collaboration and setting common goals to improve financial education literacy.
- For individuals: Consider competing priorities in life and future financial security when reviewing if enough income protection is in place.
- For insurance distributors and intermediaries: Agents, brokers, banks, employee benefits consultants and others have important roles, not just linking supply and demand but advising and educating customers and feeding market and customer requirements back to insurers.