President, the policy address this year has raised a few significant points in respect of the insurance industry. I wish to discuss them here.
First of all, the recent financial crisis has caused great impact on various trades and industries, including the insurance industry. I hope that the Government will help the insurance industry in the same way as it helps banks and SMEs. As there are more than 60 000 insurance practitioners, assisting the insurance industry will definitely reduce redundancies in the industry, thereby reducing unemployment and preventing the emergence of a vicious circle which will cause an economic downturn in Hong Kong.
Therefore, in order to boost public confidence in taking out insurance in Hong Kong, I hope that the authorities can consider expanding the scope of the existing Deposit Protection Scheme for banks to various insurance policies. For example, I hope that the Deposit Protection Scheme can be expanded to cover the present value of life insurance premiums in order to restore people’s confidence in insurance and avoid the hasty cancellation of insurance policies by members of the public, which will in turn pre-empt the situation in which insurance companies are forced to sell their assets early and their asset value to plunges as a result.
Besides, I would also like to suggest that consideration be given expeditiously to implementing tax deduction arrangement for insurance premiums because the more the number of people who are willing to take out insurance on their own, the less the number of people who will have to reply on the Government. Therefore, the Government actually has the responsibility to encourage members of the public to take out more insurance, especially medical and retirement protection insurance. I hope that the Government can expeditiously consider the provision of tax deduction for those who have taken out insurance.
As for establishing the Policyholders’ Protection Funds, I am supportive of this idea. However, the numerous technical problems encountered during the process of establishing such Funds, in particular the funding sources, have yet to be solved. If insurance levies are the only source of funding, it may take five to six years to accumulate a relatively adequate amount. In order to enable the early implementation of the Funds, I hope that the Government can provide funding assistance so that there will be sufficient funding before an adequate amount is accumulated in the Funds, thereby enabling the early operation of the Funds and boosting public confidence in insurance.
As for the independence of the Office of the Commissioner of Insurance (OCI), I support any initiative to perfect the monitoring of the insurance industry. However, regarding the proposal of making OCI independent of the Government, as it will involve the need for OCI to increase resources and operate on a self-financing and cost-recovery mode, insurance companies may be most directly affected. It is because this will cause a rise in their licence fee and operation cost, which will in turn make their operation more difficult.
With the current blow dealt by the financial crisis, I suggest that the timeframe for the independence of OCI should be considered with regard to the prevailing economic environment of Hong Kong. Most importantly, it should be recognized that after the independence of OCI, recovery of its operation cost may not necessarily be achieved by increasing the licence fee, and consideration may also be given to other options, for example, a one-off resource injection into OCI may be made in order to avoid putting insurance companies under the pressure of licence fee increase immediately upon OCI’s independence, as a substantial increase in licence fee will add to the already heavy burden of the insurance industry.
As for co-operation with Guangdong, I am very glad that the Government has all along been implementing CEPA and I am very grateful to the Mainland for its support of Hong Kong. However, under the agreement of CEPA, Hong Kong insurance companies must possess an asset of US$5 billion and an operational experience of 30 years and must have established a mainland office for two years in order to enter the mainland market. As this threshold is very high, not many Hong Kong companies can enter the mainland market.
At present, the most desirable measures are the pilot measures for service industries implemented in Guangdong. I hope the Government can seize this opportunity and liaise with the Guangdong authorities for a lower threshold so that insurance companies in Hong Kong can develop their business in the Mainland. That way we can kill two birds with one stone. On the one hand, it will enable exchanges of knowledge on products, sales practices, coverage or even compensation between the two places; and on the other hand, many Hong Kong companies that have set up factories in the Mainland may also hope that other Hong Kong companies can set up operations in the Mainland to support their business.
As for other discussions on health care reform and environmental protection, I am prepared to raise them in the next session. Thank you.