Why Chinese Tourists Buy HK Personal Insurance Policies?

Why wealthy China mainland people love to buy insurance in Hong Kong instead in their home?

China mainlanders are flocking to Hong Kong to acquire insurance tools: In 2013, they spent HK$ 15 b on personal insurance policies sold by insurance companies operating in Hong Kong. The mainlanders’ share of new life insurance surged to 16 pc in 2013 from 13 pc in 2012, 9 pc in 2011 and 4 pc in 2010.

Can China mainlanders buy personal insurance policy in Hong Kong?

Yes, but the policy owners must sign the policy in Hong Kong, regardless of the owners’ nationality and citizenship.

According to Hong Kong Insurance Companies Ordinance, insurance companies operating in Hong Kong are not allowed to sell their policies in mainland China.

However, the laws do not stated that these companies cannot sell their policy to customers of specific nationality or citizenship. Therefore, Hong Kong insurance companies are legal to sell their policy to mainlanders.

As a free port without capital control, Hong Kong’s legal system is favorable to businesses, Hong Kong has jurisdiction of the contacts signned in Hong Kong. Therefore, the insurance policy is effective to cover the policy owner when the policy is signned in Hong Kong.

Policy owners of non-Hong Kong resident should be concerned about making payment to the insurance company on-time to avoid breaking the policy. They should also understand that they need to visit their insurance companies in Hong Kong to handle the case of compensation or dispute.

Finally, most of the Hong Kong insurance compnaies do only accpet the proof of disease and death issued by approved medical institutions and authorities. However, policy owners should pay attention on their policy.

Will Hong Kong insurance companies bankrupt?

In every economy system, insurance companies are not allowed to fall, government must stand out and prevent it at all cost from happening. Therefore, insurance companies must be operating under close regulation to prevent them from bankruptcy. This situation can apply to both Hong Kong and mainland China.

Under Hong Kong Insurance Companies Ordinance, policy owners must be able to obtain 100% insurance coverage even when the insurance companies are failed to pay. By offering such protection to policy onwers, insurance companies are required to locate certain amount of their capital in Hong Kong, the value of capatial must not be less than 80% of insurance coverage of their insurance policy sold.

In the case of poor managed insurance companies are spot by the regualatory bodies, Hong Kong government will act as middlemand to arrange other insurance companies to buy out those affected insurance policies, so that the protection to owners are not affected.

Will the exchange rate between strong Chinese yuan (CNY) and weak Hong Kong dollar (HKD) be risky to mainlanders?

Referring to change of currency value between mainland China and Hong Kong, exchange rate between CNY to HKD has been steadily moving from from CNY1:HKD1.2 to CNY1:0.8HKD in 8 years. It posts a strong statement in mainland investors: buying HKD financial products by CNY made loss in the past.

Undoubtedly, mainland China is the fastest growing eoncomy in the last decade. However, strong inflation in mainland China is also growing and hurts the return of CNY deposit in mainland, purchasing power of 1000 yuan nowadays is merely equal to 576 yuen a decade ago. Mainlanders investors suffer from high cost of buying insurance policy and high depreciation rate of their policy in CNY.

In recent years, the rapid devaluation of CNY under the control of China governemnt by CNY interest rate cut bas become the usual mean to combat slowing down of economy growth, mainlanders feel the preasure of inflation on living and devalutation of CNY on their deposit, they are eager to seek for stable financial products with reasonable return to leverage the preasure.

In the foreseenable future, financial products in HKD should become more attractive to CNY depositors who are looking for harbour to protect their capital from rapid devaluation.

Do Hong Kong legal system protect policy owners of China mainlanders and Hong Kong people equally?

In fact, every insurance company operating in Hong Kong are offering insurance policy to the world unless the policy read that it accept certain nationality of buyers. To ensure that the insurance policy sold by Hondg Kong insurance operators is under the legal protection of Hong Kong legal system, the policy must be signed within territory of Hong Kong. Insurance companies always offer witnessing services of the policy e.g. to witness a signature, to voice-record on signning of policy, etc.

Since 1st May 2013, The Insurance Claims Complaints Bureau, a Hong Kong regulatory body to handle claim complaint of personal insurance policies, can handle complaints logged by non-Hong Kong residents. When the policy owner and the insurance company go into dispute regarding claims of the policy, the bureau investigate the evidence provided by both parties, it can make decision on the case, and its decision has legal power.

Conclusion:

Generally speaking, Hong Kong is the third largest financial hub in the world, insurance industry is a mature market, regulatory bodies are well developed, personal and instutution investment on insurance products are popular. On the other hand, development of insurance industry in mainland China has begun for 23 years, development in regulatory has showed rooms for improvement, and the personal insurance market is still has a way to go.

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