Sales of unit-linked savings and investment life policies in Hong Kong in particular have been decimated, falling by a whopping 89% across the last five years, in the 2016 results from Asia’s two main business centres.
This is in direct contrast to Asia’s continued economic prosperity and investment by the offshore life companies in establishing branches and ‘boots on the ground’. The key factor underlying this slump in business is the regulatory changes that are impacting on the advice process, adviser remuneration and product structures in both jurisdictions.
The next jurisdiction where this will be played out is the UAE where the regulator’s initial proposals suggest a Hong Kong-style scenario that would have a significant impact on advisers’ use of unit-linked linked life products and therefore on many advisers’ traditional business models. Of course, the impact on offshore life companies would be even more profound.
Hong Kong sales down 89% in five years
Formerly the jewel in the crown of offshore life sales with new business of over HK$10bn (£1.0bn, $1.3bn) Annual Premium Equivalent (APE) in 2012, total unit-linked sales in Hong Kong slumped to just over HK$1bn last year, down 48% on 2015 and 89% down over the five-year period.
Regular premium savings products, with sales traditionally driven by high initial commissions, fell by 52% in 2016 to only HK$661m. This marks a decline of 93% from 2012’s heights of HK$9.7bn with the sharpest falls following the introduction of the GN15 rules on sales of ILAS (investment-linked assurance products) at the start of 2015.
Single premium new business has suffered a less dramatic decline with 2016’s HK$ 507m APE down 31% year on year, although 59% down on 2013’s figure.
These dramatic decreases in Hong Kong ILAS business are consistent across both the broker channel and the agency (excluding banks) channel.
