Hong Kong's insurance industry is undergoing a significant shift as the "Hong Kong Business Insurance Rankings" reveal a trend towards more life insurers joining the list of the top 50 insurers.
A total of 30 life insurers made it onto the top 50 list, compared to 20 general insurers. This is different from the previous rankings when the top 50 list had an equal number of life and general insurers.
This shift can be attributed to the opportunity in the mainland China insurance market.
2022 industry trend
If 2021 saw an increase in health-focused trends, in 2022, insurers shifted their focus towards digitalisation, environmental, social, and governance (ESG), and workforce trends, according to several analysts interviewed by Hong Kong Business, an English-language business magazine.
Some of the trends are:
There has been a shift to remote or flexible work arrangements. “Insurers have adapted by transitioning to a remote workforce, as well as adopting virtual customer and distributor engagement, and are capitalising on a more agile digital infrastructure to meet evolving expectations for customised products, channels, and services,” said Ms Joanna Wong, HK Insurance Leader at Deloitte China.
Simplified on-demand digital insurance products have gained traction. Consumers are increasingly open to buying insurance as long as it is not too complicated.
Inflation continues to pose challenges for both insurers and consumers. For life and retirement insurers, this means increasing rates which can reduce reinvestment risk and make rate guarantees more cost-effective from an economic perspective, according to Mr Billy Wong, insurance leader at PwC Hong Kong.
However, too sharp a rise in rates could introduce disintermediation risk, negatively impacting balance sheets. To mitigate this risk, insurers may need to frequently reset rate guarantees and pricing to respond to market pressure on book value guarantees.
Higher interest rates may also make certain product types less appealing to consumers, Mr Wong warned. Even without rate hikes in insurance premiums, inflation is already affecting consumers. In Hong Kong, 16% said they would reduce spending on insurance.
Higher interest rates coupled with fluctuating equity markets may also make certain product types less attractive. Mr Wong advised insurers to consider rebalancing portfolios, possibly moving back to more traditional investments and relying less on alternative asset classes.
This is also relevant for general insurers, he added. "From a pricing perspective, one key focus of insurers is to embed the longer-term market trends into the generally shorter-term nature of the products."
Mr Leslie Foo, insurance director at Deloitte China, added that these trends have challenged insurers to be adaptive and resilient in the process of reinventing the insurance industry over the past few years whilst overcoming obstacles raised by the pandemic.
He said, “Whilst the industry continues to make customer-centricity a focal point of the industry's standard operating model, the emerging trends have pushed insurers to maintain an ongoing culture of innovation. Insurers should pivot from having laid the foundation for operational transformation, such as transitioning to the cloud, to fully realise the value and benefits of infrastructure and technological upgrades."