Local sources estimate that up to three-quarters of high street banks in Hong Kong have either slowed sales or are no longer offering ILAS products to retail investors, but rather are offering whole of life insurance products on which the compliance requirements are less stringent.
A spokesperson for Skandia International, the offshore business of Old Mutual Wealth, which is licensed to sell ILAS products in Hong Kong, said: “Bancassurers do appear to be reviewing the situation in light of the recent regulatory changes that came in to effect at the start of July.
“The bancassurance channel is largely based around the promotion of contractual savings plans whereby there is an explicit commitment to fund premiums for a given time frame.”
Another ILAS provider, Friends Provident International, said, while it only distributes through IFAs, it is “aware that some banks in Hong Kong have taken measures to review their offering of ILAS products at this time”.
Meanwhile, Glenn Turner, former chairman of Hong Kong’s Independent Financial Advisers Association, estimated that up to three-quarters of Hong Kong’s mainstream banks “have basically stopped selling ILAS” products. Turner added it is likely these banks are now looking to market whole of life policies.
The former HKIFAA chairman and current chief operating officer of Altruist Financial Group also suggested banks may be put off selling the complex plans because they would be unable to complete the required financial needs analysis, risk profiling and other compliance elements within the short period of time often allocated to each client.
Commission disclosure was introduced in Hong Kong on ILAS products at the end of July.
In addition, those selling the products are now also expected to provide what some have described as a very “anti-product” ILAS benefit illustration document during the sale.
Indeed, on 23 July, the Hong Kong Confederation of Insurance Brokers issued a circular to its members informing them of some additional details to be added to the benefit illustration document which must be implemented by January 2014.
These new requirements include the inclusion of three “assumed rates of return” at 3%, 6% and 9%, the inclusion of a “statement on significant loss due to earlier premium discontinuation” and a requirement that each illustration must be made specifically for clients.
However, Rosetta Fong, chief executive of Convoy Financial Services, said she had noted that some banks had pulled back from this market as long ago as 2008.
“Some of the local banks had already stopped selling ILAS products before the implementation of commission disclosure, while some have stopped it since 2008.
“So, I am not sure if it is the impact of implementing commission disclosure policy. However, referring to newspaper articles, some banks used to comment publicly that the policy was too complicated, and they had encountered difficulties when executing the policy.”
