Like every other sector, the insurance industry has struggled in recent months. Statistics from the Office of the Commissioner of Insurance show a massive fall of 77.4 per cent in individual life and annuity investment-linked business that accounted for HK$6.025 billion in the first half of this year.
"We can see that after the financial crisis, consumers prefer capital preservation rather than wealth maximisation," said Chan Kin-por, the Legislative Council member representing the insurance industry.
He suggested that to regain consumer confidence, the Insurance Authority and the Hong Kong Federation of Insurers should organise more talks and activities emphasising the regulatory standards and financial strength of the sector in Hong Kong. It also made sense, he said, to set up a policyholders' protection fund. The federation submitted a proposal to Legco's Panel on Financial Affairs in July this year and Chan hopes to see appropriate legislation in place next year.
"If consumers knew they would be compensated quickly if an insurer became insolvent, it would definitely ease their worries," he said. "Although our industry has sound foundations, we should still provide a safety net."
Chan said the government should introduce a tax deduction for insurance premiums. This is expected to encourage the public to think more carefully about their likely risks and insurance needs and reduce dependence on the authorities to provide funding in the case of accidents or emergencies.
"It would be a win-win situation, lessening the burden on the government and increasing the demand for insurance products," he said.
Regarding regulation of the selling process, he said it was necessary to strike the right balance. Insurers should provide more risk disclosure and proper documentation for clients and ensure their agents thoroughly explain all relevant details. However, it was also important to avoid over-regulation.
"The process should be simple and smooth. It is not necessary to make it too complicated and lengthy," he said.
All insurance agents aiming to sell investment-linked long-term insurance products will have to pass a tougher set of exams from March next year. There will be a two-year transition period during which existing qualifications will be recognised. But to continue after that, sales agents will need to pass the enhanced paper on or before March 2012 or, alternatively, complete 20 hours of the continuing professional development programme dedicated to investment-linked products.
Chan expects demand for traditional life insurance products and retirement planning business to pick up again. If the proposals for health care financing win approval, demand for medical insurance products should surge.
One of his concerns is that not enough university graduates are joining the sector. "We need a large number of individuals with diverse talent," Chan said. "The insurance industry also offers good salaries and smart young people will find a way to climb the career ladder."