Online sales of insurance policies have grown swiftly in Hong Kong since the introduction of digital insurers five years ago, but the city still lags behind overseas markets, according to the head of the city’s first online insurer.
The company, which has 150 employees, has secured about 140,000 customers and sold total protection value of HK$90 billion (US$11.5 billion) as of the end of April, according to Insurance Authority data. It sold almost 6,000 policies in the fourth quarter last year, 10th best in the city.
“The achievement of Bowtie’s sales data shows that Hong Kong customers accept the idea of buying insurance products online without agents,” Fred Ngan Yiu-fai, Bowtie’s co-founder and co-CEO, said in an interview.
Bowtie focuses purely on protection products, as opposed to investment-linked offerings. Policies under the Voluntary Health Insurance Scheme account for 60 per cent of its sales, simple term life policies for 20 per cent and critical-illness protection for 15 per cent.
“The three-year Covid-19 pandemic helped encourage people to buy products online,” Ngan said. “However, even a year after it ended, we saw our sales rise to HK$250 million last year, up 50 per cent from a year earlier.”
About 8.5 per cent of all life or medical policies sold in the city last year were bought through direct channels, compared with 2 per cent in 2018 before the virtual insurers joined the market.
Yet Hong Kong still trails overseas markets in online sales of insurance products. For example, 16 per cent of customers in the UK and Europe buy insurance digitally.
Hong Kong’s more than 160 insurers paid out a total of HK$61 billion in commissions to the city’s 105,000 agents or brokers in 2021, according to Quinlan & Associates data.
“Our customers are typically younger with an average age of 35, but we recently have seen an increasing number of buyers aged in their 40s or 50s,” Ngan said.
Virtual insurers can compete on price because they do not need to pay agent commissions, Ngan said.
Medical insurance plans are more expensive for older customers, which gives them an incentive to buy online, where they can secure bigger discounts than they could through agents, Ngan said.
Hong Kong’s total medical spending rose to HK$243 billion in 2022, according to government data, with half paid by government schemes, one third by patients and only 16 per cent via insurance policies.
“This shows there is a lot of room for growth in the medical insurance market in Hong Kong, which has an ageing population and rising medical costs,” Ngan said. “It is thus vital to have online channels to sell medical plans cheaper and quicker than the traditional manner.”
When customers are willing to buy simple life and medical products with online insurers, the sum of the premium and the value of the policy is lower than it is for the savings products and investment-linked policies offered by traditional insurance companies.
“It will still take time for the digital insurers to establish trust with the public,” Ngan said. “But we have seen customers wanting to buy bigger life policies from us, and we issued our largest yet sum of life policies – HK$20 million – in November.”