27 Jul 2020
Posted in Insurance
Hong Kong insurance industry to stagnate in 2020 due to COVID-19, says GlobalData
Hong Kong’s HKD552bn (US$66bn) insurance industry is set to register a lower growth in 2020 due to the economic impact of COVID-19 outbreak. The total insurance premium, which grew by 6.3% in 2019, is expected to grow by 1.46% in 2020, says GlobalData, a leading data and analytics company.
The Hong Kong insurance industry is dominated by life insurance segment, which accounts for more than 90% share. It is expected to grow by 1.51% in 2020 against the pre-COVID forecast of 6.7%. Non-life insurance segment, which accounts for less than 10% share of the insurance market, is estimated to grow by 1.0% in 2020 against the pre-COVID forecast of 4.4%.
Swarup Kumar Sahoo, Insurance Analyst at GlobalData, comments: “The insurance business is expected to be adversely affected by the prevailing social unrest in the country, as significant part of the demand is based out of mainland China.”
Furthermore, insurers face the risk of lower return on investments, especially those held in corporate bonds, due to the adverse economic impact by COVID-19. The central bank’s benchmark interest rates declined from 1.65% at the end of March 2020 to 0.5% at the first week of June 2020, indicating pressure on returns.
To mitigate the impact of lockdown on business, insurers are accelerating the shift towards digital channels. Manulife, Hong Kong’s fourth largest life insurer, recently set up virtual sales platform to enable customers to connect with agents online for product queries and transactions. The regulatory authority is also issuing new licenses for digital-only life insurance companies.
Sahoo concludes: “The over-dependence on life insurance business makes it difficult for insurers as they will have to grapple with lower sales, uncertain returns and rising claims. The resurgence in COVID-19 infection rates and possible re-imposition of lockdown restrictions could further derail recovery prospect of insurance business.”