The Hong Kong insurance industry has, of all financial sectors, the most to win or lose from integration with cities in neighboring Guangdong Province and Macau, as part of the Greater Bay Area initiative beloved by policymakers.
Mainland individuals who visit Hong Kong to buy life and health insurance have been the biggest revenue generators for most of the carriers operating in the territory. The Covid pandemic put a halt to that activity, which is sputtering back but not to the extent hoped for a year ago when China dropped its zero-Covid strategy.
Capital markets and asset management are, to some extent, enabled via the Hong Kong Exchanges’ various ‘Connect’ schemes with its Shanghai and Shenzhen counterparts. This enables exchange members to offer stock trading and the distribution of mutual funds from one jurisdiction to partners and customers in the other.
Given the stringent licensing around lending, it is not likely to be part of cross-GBA flows. Trade finance and foreign exchange are active, but don’t need special treatment within the GBA.
That leaves insurance as the short- to medium-term opportunity for financial services, enabled by fintech, to realize new businesses within the specific context of GBA.
How Hong Kong-based industry defines this opportunity has changed. Today executives talk about health and wellness in-app services as the focus of developing a GBA business.
What GBA used to mean…
This is different from the last time when GBA insurance and insurtech was a relevant topic: in 2019, before Covid.
Five years ago, GBA was little more than an idea or a slogan. Some Hong Kong-based groups hoped it would mean the gradual opening of Guandgong so they could sell Hong Kong-based insurance policies to mainlanders, without needing people to cross into Hong Kong in person. The first step of this was the establishment of service centers in Guandgong cities, presumably followed by digital apps or partnerships to facilitate marketing and sales.
At the time, the Hong Kong Federation of Insurers noted that only 6 percent of households in Guangdong had insurance coverage. While the size of policies bought by wealthy mainlanders with the resources to visit Hong Kong would always be much larger, the volume of demand in the mainland would be huge, especially given the lack of investment choices.
Authorities in Hong Kong also saw opportunities for the property and casualty side of the business: maritime insurance, commercial insurance, and catastrophe insurance, particularly for mainland enterprises. The Hong Kong P&C industry has a long history of international experience it can offer.
But the Hong Kong government’s lobbying in 2019 was for service centers for life and health insurance, to enable Hong Kong-based carriers to help people in Guangdong manage claims and renewals.
For insurance companies, the question was how to take advantage of any such openings. In 2019 the industry was not digital. The Insurance Authority had just issued the first virtual-insurance licenses, with the idea that these might be the vanguard players – the only ones with the digital chops to navigate the sophisticated mainland environment. Similarly, it’s no surprise that the introduction of virtual banks in Hong Kong saw seven out of eight licensees backed by big Chinese tech companies.
…until Covid
But GBA remained fuzzy in practice. Details such as cross-border payments or data sharing were never addressed. There was talk of an e-KYC utility in Hong Kong, or enabling a blockchain-based corridor that authorities could easily monitor. But Beijing’s fears of capital flight, among other issues, meant insurers had little to work with.
Then came Covid, which on the surface of things put everything on hold. No GBA initiatives were advanced; the mainland market for life insurance evaporated.
But beneath the surface, Hong Kong’s insurance and banking industry put digitalization at the top of the agenda. Consumers in old-fashioned Hong Kong were suddenly open to app or QR-code-based services and activities. And, at a societal level, issues such as wellness and mental health became dinner-table talking points.
A year has now passed since China, including Hong Kong, lifted zero-Covid restrictions. The pandemic has changed things. GBA is back on the agenda, and insurance is still the most likely candidate for making something happen. But the whats and hows are different.
GBA renewed
The GBA idea regained steam in October 2022 when the Hong Kong Insurance Authority tabled a proposal for opening service centers in nearby Shenzhen. In June, 2023, the Guangzhou government proposed enabling this in its Nansha neighborhood. Nothing has been finalized but the involvement of high-level officials suggests a deal is likely.
Today the Hong Kong industry knows not to expect mainland authorities to allow it to sell directly to mainlanders in Guandong Province. Whatever GBA means to insurance, it isn’t selling product.
But the rise of digitalization and the new emphasis on wellness means that service centers in Guandong can take on a new function, giving Hong Kong insurers a toehold onshore.
‘Wellness’ was not a broadly used term in 2019 but it is today, representing a blurring of lines between aspects of health and lifestyle. It’s at the nexus of food, exercise, chronic disease, sleep, drugs, surgeries, home care, and travel and entertainment. Moreover, all of these things can be tracked and measured, as more people use digital devices in their everyday lives.
That complexity, filtered through data-rich algorithms, can lead to personalization at unprecedented granularity. This is leading to a new race for ‘Healthcare as a Service’.
This isn’t just for insurtechs: giant cloud companies are investing in this trend. Big Tech companies are working on virtual-reality capabilities for remote examinations or even surgeries. That’s a big project. But insurers are already looking at HaaS solutions in the simplest lifestyle aspects of HaaS – which is another way to say, they are looking at marketing and engaging with customers, in a way that doesn’t alienate their agency sales forces.
From products to services
These efforts are, for now, not about direct sales. Trying to commercialize a wellness app to, say, help someone track their diet or their sleep is likely to backfire. Instead, insurers are exploring ways to turn these services into either games or rewards, to build user trust and awareness.
There’s limited space in such an approach for selling products, other than the most simple and easy to access. Insurers are experimenting with services that help people think more consciously about their health and lifestyle. That’s good in the long run for insurers, who hope this will reduce claims. In the short term, the objective is to win new customers and retain them through trust.
It’s not a replacement for agents or bancassurance. The products that generate the biggest revenues are hard to sell online, especially through a wellness portal. Digital engagement is a slow burn for insurers, which are trying to find the sweet spot between growing their brand among consumers without having to actually deal with consumers – that’s what the agents are for.
In the context of GBA, this wellness trend is likely to take on a new form. If Hong Kong carriers are able to open service centers in Guandong, expect wellness apps to be at the fore. These definitely won’t be selling products. They will provide rewards, build customer loyalty, and provide a means of compliant marketing.
The challenge is that China’s insurance industry has possessed tech capabilities for several years already, from video consultations to automated drug delivery by drone. Hong Kong insurers that can operate digital services in the mainland will have a lot to learn. But they can bring global best practices to the services themselves.
Insurance in GBA isn’t about product. Maybe one day that opportunity will arise. Payments will become one area of focus, to enable claims settlement for mainland policyholders of Hong Kong-issued policies. That can be addressed through various fintech tieups. But the foot in the door, to get those service centers up and running, is going to be through digital delivery of wellness services.
