Life and Health insurance in Hong Kong after the pandemic

Hong Kong's life and health (L&H) insurance industry is eagerly anticipating a rebound in business this year as cross-border travel resumes with mainland China after three years of restrictions. China's faster-than-expected exit from its zero-COVID-19 policy from December 2022 transforms the economic and insurance market outlook for the Greater Bay Area (GBA) as well.

The reconnection of GBA cities and the accelerating flow of visitors from mainland China, particularly Guangdong province, give Hong Kong insurers an opportunity to recover a huge customer base. Even a partial recovery of business from mainland Chinese visitors could be a significant boost to Hong Kong insurers' L&H premium growth.

However, much has changed in China since pre-pandemic, and the return of mainland demand to Hong Kong should not be taken for granted. We conducted a new consumer survey in mid-2022 – our third such survey of Guangdong and Hong Kong residents' insurance preferences since 2019. This latest survey finds a significant drop in the proportion of Guangdong residents who prefer Hong Kong insurance to the mainland offerings, compared with our two earlier surveys.

The post-pandemic recovery in incomes in China may be slow, and the consumption recovery gradual, as consumers show a preference to save more and spend less. L&H insurance sales in mainland China are coming under pressure now, after rapid expansion up to 2016 front-loaded a significant portion of the demand for basic protection. The introduction in 2020 of Huiminbao, a low-cost, inclusive supplementary medical insurance plan sold in mainland cities, has reduced commercial medical insurance sales. Despite wider economic recovery and a post-pandemic rise in risk awareness, we expect China's L&H insurance market to grow at a relatively moderate 5.2% annual average in the coming years.

Our survey finds that demand for L&H risk protection remains strong. More than half of surveyed Guangdong residents and around 30% of surveyed Hong Kong residents intend to purchase L&H protection insurance within the next 12 months. Medical reimbursement insurance products are still the top priority, followed by accident and critical illness (CI) covers. Guangdong residents, particularly the more affluent, retain a strong preference for medical treatment in Hong Kong, especially for critical illnesses.

Hong Kong's high-quality medical treatment, private hospitals and healthcare services, and shorter waiting times, are highly attractive to mainland customers. Medical reimbursement insurance products from Hong Kong are valued for features such as guaranteed lifelong renewal, which is not offered on the mainland. Hong Kong's CI insurance typically offers higher sum-assured limits and services such as second medical opinions from reputable overseas medical organisations.

On CI insurance, we observed Guangdong consumers' evolved preference for features such as additional coverage for family members; severity-based protection, and the flexibility to purchase higher coverage for specific types of illness. This evolution may reflect evolving product design of CI insurance on the mainland, as well as growing risk awareness from the pandemic. Consumers in both markets are increasingly digitally sophisticated, value professional support for their decision-making, and seek out products tailored to their needs.

Hong Kong insurers will need to make efforts to regain Guangdong residents' interest in cross-border L&H insurance, including by rebuilding salesforces and updating product offerings based on mainland residents' newer preferences. More market research and customer research could assist them in tailoring product features. We also recommend that Hong Kong insurers offer services that can help to facilitate the end-to-end process of obtaining cross-border medical treatment.

With GBA regional integration and transport connectivity plans active again, we expect cross-border movement of people, goods and capital to steadily increase once more. Still-low L&H insurance penetration in the nine major mainland GBA cities (average 3.46% of GDP in 2022) compared to Hong Kong (18%) suggests a huge as yet unmet need for cover. This implies significant growth potential for cross-border insurance from GBA residents.

The Chinese government is keen to deepen the insurance connections between Guangdong, Hong Kong and Macau. For insurers in both mainland China and Hong Kong, the GBA market continues to offer valuable opportunities for growth and innovation, working collaboratively with government, to improve people's livelihoods, security and societal resilience.