According to the Insurance Authority’s statistics, Hong Kong has sold over 1.7 million individual life insurance policies to the Mainland customers since April 2005, proving that there is a great need for Hong Kong insurance for the Mainlanders. However, Hong Kong insurance companies still face many complicated entry barriers when they try to enter the Mainland insurance market. Before we could resolve all the problems, it is our responsibility to provide quality services to the Mainland policyholders. Many Hong Kong people migrated to the Mainland in the last few years, we are also obligated to provide appropriate services to them. Therefore, I have made a request to the Chief Executive and hope that the Government can work with the Central Government to establish Hong Kong Insurance Service Centers in the Greater Bay Area to provide services to the policy holders such as information enquiries, claims, handling settlements, and payment of premiums without having to come to Hong Kong.
Speech at the Council
The Greater Bay Area development will soon become the new driving force for Hong Kong. The Hong Kong insurance industry has always wanted to conduct business in the Mainland but still faces many difficulties regarding the entry threshold. Therefore, entering the Greater Bay Area through the electronic platform will be the new direction. The Hong Kong Federation of Insurers (HKFI) has proposed the “Greater Bay Areas Health Insurance Connect” (Health Insurance Connect) scheme to provide regulated medical and critical illness insurance plans to residents of the Greater Bay Area via the internet. The HKFI can establish an electronic platform, so that residents of the Greater Bay Area can choose different insurance products provided by various insurance companies. These insurance companies can also form alliances with quality hospitals in the Greater Bay Area to provide a one-stop medical services for the applicants. Since the scheme is handled through an electronic platform, the premium and claims payment need to go through the same platform, which can address the concern of capital flight. Moreover, most of the procedures such as policy enrollments, declarations, claims, settlement and payment of premiums, can be handled through the online electronic channel as well. I have promoted this plan in the Legislative Council numerous time and have made a direct request to the Chief Executive to suggest the Financial Services and Treasury Bureau (FSTB) and the Insurance Authority (IA) to join hands and actively communicate with the China Banking and Insurance Regulatory Commission (CBRC) to approve the policy direction and sign the cooperation framework as soon as possible, and HKFI will take forward the project.
Insurers in Europe and the US are fully dedicated to the development of InsurTech while Hong Kong is developing slowly. We must rouse to catch up and the Health Insurance Connect introduced above is precisely the new InsurTech project. The programme requires a new model of electronic application platform, applying a large amount of innovative technology, and the sales will help establish a big database of the Greater Bay Area, which would help accelerate the promotion of InsurTech development. On the other hand, besides the Health Insurance Connect, the industry also strives to promote financial innovative technology such as blockchain technology to digitize motor insurance and artificial intelligence to detect fraud claims. However, according to the HKFI’s research, financial innovative technology cannot be well-developed without the synergies of various industries. For example, it is impossible to achieve a standalone comprehensive e-KYC (electronically know your customer system). I have made suggestions to the Chief Executive that the three financial regulators (the HKMA, the Securities and Futures Commission and the IA) should work together to establish a cross-industry platform model and implement throughout these three industries. That way, it can facilitate the consumers, accelerate the practice of innovative technology in Hong Kong, and promote the development of smart cities at the same time.
The Government proposed a voluntary MPF contributions and deferred annuities tax deduction in the Budget 2018. The Bill will be submitted to the Legislative Council before the end of this year, taxpayers may contribute to the MPF or deferred annuity plan voluntarily and the maximum deductible amount for tax is $36,000. After discussing with the industry, I recommended that the Government should consider raising the tax deduction ceiling to $60,000 in order to provide greater incentives for the public to prepare for their retirement at the earliest time, which could also reduce the reliance of the middle class on public resources. I will continue to push the FSTB to reduce the guarantee expected return requirement of the eligible deferred annuities from 70% to 60%, to attract more insurance companies to provide different products for different age groups for the public to choose.
Visit the Greater Bay Area
With the opportunities brought by the Belt and Road Initiative and the Greater Bay Area development, the insurance industry has an enormous demand for talents, especially in claims, risk assessment and underwriting. However, the insurance industry is facing the challenge of the retirement peak of the work force too. The industry is worried that if the younger generation is not trained in time, Hong Kong’s position will be taken over by other countries in the area. In 2016, the Government launched a three-year pilot scheme to enhance the training for the insurance industry which will be completed in a few months. I have already made recommendations to the Government to review the effectiveness of the Pilot Scheme as soon as possible and to make it a long term training programme to ensure that there are enough talents in Hong Kong to face the challenges in the future.
With the opening of the Hong Kong-Zhuhai-Macao Bridge and the high-speed railway, the travel time to the Mainland will be shorten dramatically, which creates favorable conditions for cross-border retirement. However, even if the elderly are interested, they will have to worry about the availability of quality medical service in the Mainland. The insurance industry has recently studied the development prospects of the Greater Bay Area. Some industry researchers believe that it is possible to develop insurance products for cross-border elderly and provide convenience for them to go to the Mainland for retirement. At the same time, it is recommended to discuss with both sides of the Governments to encourage insurance companies to participate in the investment of elderly facilities in the Bay Area, to provide high quality residential care homes for people who invested in elder care insurance products. I always advocated using insurance models to help solving the social aging problem, thereby leading to a multi-win situation. I suggested the HKFI to conduct an in-depth studies and ask the Government to provide assistance, including follow up specific matters with their Mainland counterparts and provide tax initiatives for such schemes.
Many citizens may be interested in the voluntary medical insurance scheme (VHIS). At present, the scheme only regulates the transparency of insurance premiums, but not the charges of the medical service providers (such as private hospitals and doctors). In the case of insufficient transparency of medical charges, medical inflation will only continue to rise, resulting in the increase in medical insurance premiums. I have suggested the Government that after the implementation of the VHIS, a comprehensive review should be conducted. Meanwhile, packaged charging should also be introduced for private hospitals and private doctors to enhance the transparency and safeguard people’s right to know. I also suggested the Government to reconsider a high-risk pool to increase the attractiveness of the scheme, to truly benefit all people and achieve the original goal for public-private partnership.
Reducing administrative expenses is an effective way to reduce the MPF fees. The Government plans to introduce the eMPF Platform in 2022 for the public to manage their MPF through the internet, to promote the standardization, simplification and automation of the MPF’s administrative procedures, thereby reducing administrative expenses. However, the industry is concerned about the cost and technical complexity for the MPF trustees and providers’ computer systems to migrate to the Centralize Computer Center. I have already expressed the related concerns to the Government and asked them to allow appropriate transitional arrangements to the industry. More importantly is how to make SMEs employers willing to switch to electronic payment methods and help employees to receive and operate MPF electronically. Otherwise, if the process cannot be automated, there will be no savings in the administrative expenses.
Express opinions to the Chief Executive regarding the Policy Address
The IA was established last year and has gradually taken over the regulatory function from the three self-regulatory bodies. The IA also started to collect levy for paying the IA’s expenses. In the past year, I have been communicating with the IA to understand the progress of their operations. In the future, I will continue to act as a communication bridge between the industry, the Government and the IA to ensure that the voice of the industry is heard and will monitor the financials of the IA to ensure proper use of the funding.