ILAS sales plummet in Q1 after indemnity commission ban

Added 2nd June 2015

The number of investment-linked assurance schemes sold in Hong Kong almost halved following January’s ban on upfront payment to financial advisers.

ILAS sales plummet in Q1 after indemnity commission ban

In the first three months of this year, 7,556 regular premium products were sold, according to figures published by Hong Kong’s Office of the Commissioner of Insurance. This is a fall of about 42% compared to the 13,031 products sold in the same period in 2014.

"No Surprise"

“The figures come as no surprise,” said David Halley, managing director of Hong Kong-based advisory firm, Capstone Financial. “Insurance broking firms in Hong Kong had virtually all their products closed in the first quarter and the regulators have shown that long term, they wish to curtail the sale of ILAS in Hong Kong.

“Advisers are starting to question the options available to them under just a Confederation of Insurance Brokers (CIB) or Professional Insurance Brokers Association (PIBA) licence.”

Traditionally consumers investing in ILAS products, which are life insurance policies with underlying investments, were often faced with very poor surrender values if they encashed their policy early.

Regulators in Hong Kong decided to tighten the rules so that commission is paid over a number of years after there were complaints that the products failed to protect consumers and the high initial fees were unfair.

In April, the chairman of Hong Kong's Independent Financial Advisors Association said wealth managers will suffer “collateral damage” due to the short time frame businesses were given to make changes to the way ILAS products were sold.

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About Author

Katherine Denham

Last Word Media

Katherine is a reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2014 after working for a local newspaper. Katherine has a degree in English from the University of Liverpool and an NCTJ diploma in journalism.

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