According to a recent news report, Hong Kong is set to license its first online-only insurer under a “fast-track” system next month, the regulatory head said, as it fights off criticism for being slower to make use of new technology than other parts of the financial services world.
The online platform will operate in a market worth more than HK$492 billion (US$63 billion) in insurance premiums and will compete with players other massive industry players.
The move comes as Hong Kong is pushing a number of financial technology or “fintech” initiatives in an effort to compete better with rival centres in Singapore and London to reel in more investment.
Hong Kong’s Insurance Authority (IA) plans to issue its first licence under the fast-track system, launched last year to speed up applications for insurers operating solely online to acquire customers and sell products, its CEO stated.
At present, most insurance products in Hong Kong are sold via intermediaries such as agents, banks and brokers.
IA’s Chief Executive Officer, who in August took overstated that, as started operations last year, it has taken a bit of time to get the ball rolling; he noted that it is often said that ‘your fast track is not so fast’ but the organisation had wanted to look at the potential disruption to the market.
More than 80 per cent of customers are willing to use digital and remote contact channels including email, mobile apps, video or phone instead of interacting with insurers via agents or brokers, according to a report by a major multinational consultancy firm.
Hong Kong is home to a developed life insurance market, with a life and health insurance premium to GDP ratio of 17.94 per cent in 2017, the second-highest in Asia after Taiwan, according to a major international insurer.
As part of Hong Kong’s fintech push, the banking regulator is also expected to issue the first batch of licences to online or “virtual” banks by end of this year, people familiar with the matter have said.
This was reported on earlier by OpenGov Asia, Hong Kong is working to facilitate the introduction of virtual banking as another model of service delivery, with the Hong Kong Monetary Authority stating, in early September 2018, that it welcomes the establishment of virtual banks in Hong Kong.
The development of virtual banks, according to the HKMA, will promote the application of financial technology [Fintech] and innovation in Hong Kong and offer a new kind of customer experience. In addition, virtual banks can help promote financial inclusion as they normally target the retail segment, including the small and medium-sized enterprises.
If Hong Kong keeps up this pace of manifestation (of the goals/objectives in the Smart City Blueprint), it will move up the ranks of the report.
The IA is also looking to set up a so-called policyholders’ capital protection fund and implement a risk-based capital regime for insurers, in line with global standards, to protect customers from a severe downturn in the sector.
While the capital protection fund is expected to be launched by 2020, the regulator plans to roll out the risk-based capital regime by 2021-2022 after completing the consultation processes and making the required changes to laws, IA Chief stated.
He noted that these two initiatives are at the top of the firm’s agenda, adding that it is a clear roadmap, and the organisation is committed to it.
The IA CEO noted that since the industry is aware of it, the overall transition will be smoother.