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Tech alone can’t save Hong Kong’s insurers

The regulator and insurers have different priorities as they address the loss of mainland customers.



For many global insurance companies, Hong Kong, despite being only a city of 7.4 million people, has traditionally been their biggest market in Asia.

This is because the industry relied on visitors from mainland China: people came in large tour groups explicitly for “financial tourism”, and they thronged the streets, following a tour guide’s flag into non-descript office buildings in which they bought huge single-premium policies, in cash.

Mainland authorities began to crack down on this trade, fearing capital flight. But it remained vibrant until COVID-19 forced the border shut. With quarantines now into their third year, the impact on the insurance industry has been severe.

Clement Cheung, CEO of the Insurance Authority, says mainland Chinese visitors accounted for 39 percent of new premiums in 2016. That began to decline pre-COVID, with mainlanders 25 percent of new premiums in 2019 – still a substantial segment. This year, however, mainlanders account for less than 1 percent.

Big void

The industry has been stagnant, recording in aggregate zero growth for three years: total gross premiums in 2021 of HK$581.7 billion were about the same amount recorded by the I.A. in 2019.

“That’s a big void,” Cheung said, speaking at an Accenture event at Cyberport last week. “It shows a high level of dependence.”

The reliance on mainlanders went hand-in-hand with an industry that was very analog. More than 90 percent of policies are sold in person, by agents or bank relationship managers.

COVID has forced digital adoption. Cheung says now four out of five insurance companies sell via virtual platforms, and seven out of ten say they are investing more in insurtech. On average, 12 percent of insurance staff are in technology-related jobs.

Virtual insurers grow

Most encouragingly, the city’s small batch of purely digital insurers, both in life and non-life, are experiencing rapid growth. According to I.A. stats, the two virtual life insurers, Bowtie and Blue, have seen business volumes rise by around 10 times since they debuted in 2019. The non-life players OneDegree and ZA Insure have seen business volumes grow by 4x.

Fred Ngan, co-founder and co-CEO of Bowtie Life Insurance, says pre-pandemic, digital sales accounted for about 2 percent of industry premiums, even among young consumers. But that is changing, helped along by other changes in habit, such as using e-commerce and e-delivery services.

This has enabled a startup like Bowtie to aggressively use search-engine optimization and other digital market tools to target people searching for keywords such as “vaccines”.

Bowtie’s business model requires more agility than a traditional insurer could muster, given their dependence on well-planned marketing campaigns.

“When the government first offered vaccines, there was a spike in people buying term life, until they realized that the vaccines were safe,” Ngan said. But other aspects of health insurance are still big drivers, and Bowtie ensures anyone in Hong Kong googling for relevant terms sees Bowtie videos.

“Thirty percent of customers searching for VHIS [a local government subsidized program] are searching Bowtie content,” he said. “We don’t have 30 percent of online sales, so there is a conversion gap.” But the insurance market looks more like e-commerce than it did three years ago.

Incumbents going digital

Incumbents have also adopted digital strategies.

“We saw a willingness to adopt digital tools and technology across the value chain,” said Mark Van den Broek, Asia COO and chief information officer at Manulife.

Traditional insurers were forced to invest heavily in digital platforms. “We had to think end-to-end,” Van den Vroek said, from providing salespeople with digital tools to streamlining the online claims process. He says across Asia, 90 percent of sales and 75 percent of claims are submitted digitally. Tech has been both the means of keeping the business going, but also keeping it internally efficient.

Given the loss of mainland business, though, for the Hong Kong industry, going digital has kept it afloat but without growth.

Different priorities

There are also signs of differing priorities between the regulator and the industry around the next phase of digital development.

Cheung says the regulator would like to see the industry pivot more to selling protection, rather than investment-linked wealth products. “We want the industry to strengthen the social safety net, support our changing demographics, and be more inclusive.”

Those products don’t pay nearly as well, however, so it’s unclear how to square such a shift with the need for the industry to grow.

Cheung’s answer is the Greater Bay Area – the proposed economic integration of Hong Kong, Macau and nine cities in Guangdong Province.

“Connectivity within the GBA represents a data pool of 86 million people that can be analyzed and deployed,” he said, noting that technology can get around legislative barriers to transferring personal data out of mainland China.


The GBA remains a political aspiration more than a genuine business opportunity, at least for now.

One of the ideas agreed by Hong Kong and Guangdong authorities is to kickstart the GBA is to allow Hong Kong insurers to open after-sales service centers in Guangdong.

This would necessitate arrangements to allow cross-border payments, data and identity verification, so getting this up and running would represent a breakthrough. The idea was approved several years ago but mainland authorities haven’t provided the necessary details, and there is no timeline as to when the first service centers might open.

Although insurance company executives pledge fealty to the GBA, they aren’t doing much about it, because mainland controls prohibits meaningful activity.

Cheung, for example, noted the I.A. has issued a consultation paper regarding open-API frameworks. “We have received 108 use cases already, but not many involve the GBA,” he lamented.

Thrive, or…

Instead, insurers are focused on how to achieve elusive growth while developing internal efficiencies.

Ngan says Bowtie’s biggest priority is to achieve scale. “We’ve spent our first three years proving there is a market segment that will buy medical insurance online, and that the unit economics work. Now it’s about doubling down.”

His concern is ensuring the startup has a good story to tell investors in an environment in which access to venture capital is more difficult. That includes showing Bowtie can attract quality customers without having to subsidize them with discounts. “We are growing fast because the engine is working, but we need to prove we can scale,” he said.

Van den Broek says Manulife’s digital strategy across Asia has three priorities: improve the customer experience; enhance data protection and cyber security; and simplify products so they are more suitable for online sales.

While insurers talk about user experience and digital sales, there’s some overlap with selling more protection policies and growing GBA business – but only some.


These strategies bring new costs, moreover.

Digitization brings headaches around cyber and data, which require investment into regtech and artificial intelligence.

Hong Kong is also introduced new risk-based capital rules in 2024 and ESG-related disclosures in 2025. These initiatives will require insurers to submit new swathes of data to the I.A.

The next round of digitalization, therefore, looks likely to focus more on internal efficiencies, managing new regulations, and possibly meeting government initiatives around the GBA.

These needs will compete more for insurers’ budgets, at the expense of customer experience, product development, and marketing. Such tensions always exist, but they are a lot harder for firms to manage when the market pie isn’t getting bigger.

Over the long term, the GBA opportunity could replace or even surpass the business lost from mainland visitors. In a way, the COVID-forced acceleration of digital has been like a test run for a bigger opportunity. But for Hong Kong’s insurance industry, the tech is not enough.

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