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Customer and Channel

GBA's post-COVID insurance era demystified

July 20, 2022 5-MINUTE READ

Last year (2021) Hong Kong saw an increase in both total premium revenue of in-force long-term business and general insurance business. Simultaneously, it experienced a slump in new business derived from mainland visitors compared to 2020—from HKD 6.8 billion to HKD 688 million (89.9%).[1] This was believed to be largely a result of the aggressive spread of the pandemic and subsequent closure of the Hong Kong border with Chinese mainland.

Demand remains strong in Hong Kong

The relaxation of global COVID-related social distancing measures raised hopes of the border with Chinese mainland reopening. Coupled with low insurance penetration in the GBA (Greater Bay Area) mainland cities (5.5%) compared to Hong Kong(20.8%), the prospect of access to Chinese mainland represents a large growth opportunity.[2]

42%

of mainland customers in GBA prefer Hong Kong health and medical insurers.[3]

Once border restrictions are lifted, we expect a significant shift in demand back to Hong Kong. Leading insurers are rightly preparing for the opportunity and consider the GBA as their primary growth driver for 2022 and beyond.

Mass affluent customers’ (MACs) needs are growing

Medical reimbursement and critical illness cover are the most desired insurance products among GBA customers. As people age, critical illness is a higher priority than medical insurance.[4] Insurance products as alternative investments are stronger motivators for wealthier individuals among the MACs. Aside from premium pricing, they want higher quality healthcare and services that are easy to understand and provided by Hong Kong insurers.

 

Mass affluent customers tend to be well-educated, married millennials with 1-2 children

Motivations for purchasing insurance are to protect and care for the health of their family members and friends through simple medical and critical illness products

MACs perceive Hong Kong insurers to offer better coverage and after-sales service, and reliable payout. They also expect that Hong Kong insurance services will be more digitalized, less expensive and not only targeting customers with high-end needs. 

Customer behavior has changed during COVID

COVID travel restrictions increased customers’ acceptance of online services significantly over the past two years. Active Chinese mobile users of online insurance services rose from 316 million in the first quarter of 2017 to 800 million in the third quarter of 2020.[5] According to a Swiss Re survey, more than half of Guangdong customers prefer digital channels for insurance renewals and life claims applications.[6] The survey says Hong Kong insurers are not as strong in this area. On the other hand, studies have also shown that customers (especially new insurance purchasers) generally favor in-person support and professional advice on complex decisions and offerings from partners.[7] Connection with ecosystem partners may help insurers to reimagine the insurance offering as a seamless integration of digital services and physical interaction.

Competition in the GBA region increases

Mainland customers are turning to Macau to purchase insurance because of border restrictions between Hong Kong and mainland cities due to COVID-19. Statistics from the Monetary Authority of Macau, (Autoridade Monetaria De Macau, AMCM) show that the city’s total life insurance industry premiums have risen to MOP 33 billion in 2021—a 29% increase from 2019. In addition, mainland customers contributed MOP 4.2 billion in new insurance business—six times higher than Hong Kong.[8]

Travel restrictions also created opportunities for mainland insurance companies. With better digital channels, product innovation, competitive pricing and integrated local ecosystems, mainland customers are buying medical insurance from mainland insurers. According to the China Banking and Insurance Regulatory Commission (CBIRC), total health insurance premiums in Guangdong and Shenzhen have increased by 104% (from CNY 18.23 billion in March 2020 to CNY 37.2 billion in March 2022).[9]

In recent years, the CBIRC and the Hong Kong Insurance Authority (IA) have focused strongly on the “Insurance Connect” scheme to make cross-border health insurance purchases and claims settlement more convenient. Practical examples include supporting Hong Kong-registered drugs and certain medical devices in designated facilities in the GBA, direct settlement of health claims in Shenzhen and the creation of insurance service centers to provide cross-boundary after-sales service such as claims reimbursement and policy administration. Hong Kong insurers need to start defining their GBA strategies to capture GBA customers—who rank service highly when choosing an insurance provider.

Reimagine Customer Servicing with Ecosystem Partnerships

Ecosystem partnerships landscape for life and health insurance

Connection with Health and Wellness Ecosystem partner may help insurers to re-imagine the insurance offering with innovative product proposition, value-added service

To meet MACs’ needs, work around COVID travel restrictions and compete in a highly competitive region, insurers need to localize customer services—but also partner with local businesses to develop brand awareness among mainland customers. Several leading insurers have started forming bancassurance partnerships with mainland banks to tap into their customer pools. The partnerships will also help them better understand mainland customer behavior and provide competitive advantage in capturing vast GBA growth opportunities.

For existing customers who cannot visit Hong Kong for medical service, Hong Kong insurers have partnered with local telemedicine companies like WeDoctor, Ping An Good Doctor and Meditrust to offer remote medical consultations. They have also formed selected local hospital partnerships which allow GBA customers to receive high-quality medical services at specific hospitals in Chinese mainland using cashless payments.

The right ecosystem partners bring greater size and reach. Some of the most successful ecosystems are effective data aggregators with a clear strategy on how to share and leverage data in the best interests of all parties. Insurance companies should select ecosystem partners that help to expand their value proposition in the GBA market. The right partner should be able to help extend the carrier’s offering and introduce new services.

 

Sources from:

[1] Insurance Authority. Mar 2022. Press Release: Insurance Authority releases provisional statistics of Hong Kong insurance industry in 2021

[2] Insurance Asia. Apr 2022. Hong Kong Insurers Step Up to Seize Opportunities in Greater Bay Area

[3] Swiss-Re Institute. Sep 2021. Health and medical insurance in China’s Greater Bay Area

[4] Insurance Authority. Mar 2022. Press Release: Insurance Authority releases provisional statistics of Hong Kong insurance industry in 2021

[5] Mordor Intelligence. 2021. Life & non-life insurance market in China - growth, trends, covid-19 impact, and forecasts (2022 - 2027)

[6] Swiss-Re Institute. Sep 2021. Health and medical insurance in China’s Greater Bay Area

[7] iResearch. May 2021. 2021 Chinese insurance consumers' needs trends

[8] Autoridade Monetária de Macau. Mar 2022. Insurance sector and private pension funds statistics

[9] China Banking and Insurance Regulatory Commission. National primary insurance premium income reports for 2022, 2021 and 2020

Meet the team

Marco Tsui

Managing Director – Hong Kong Financial Services Lead, Accenture Greater China
LinkedIn

Sher Li Tan

Managing Director – Financial Services, Accenture Greater China

Fanny Yuen

Managing Director – Financial Services, Accenture Greater China

Mandy Leung

Senior Manager – Financial Services, Accenture Greater China

Kevin Tay

Senior Manager – Financial Services, Accenture Greater China

Sunny Wong

Senior Manager – Strategy and Consulting, Accenture Greater China

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