HONG KONG–(BUSINESS WIRE)–High out-of-pocket payments by patients at private hospitals and
overwhelming demand for public health care underscores the need for
further development of Hong Kong’s health insurance sector, according to
a new AM Best market segment report. With the recently launched
Voluntary Health Insurance Scheme (VHIS), which encourages individuals
to utilize insurance protection, and the subsequent regulatory approval
for more than two dozen insurers to launch VHIS insurance products, the
uptake of health insurance in Hong Kong should grow significantly.
In the new Best’s Market Segment Report, titled, “Growth
Opportunities Abound in Hong Kong’s Health Insurance Market,” AM Best
notes that while insurers are cognizant of and keen to leverage the
growth potential, they must also be mindful of challenges affecting
profitability and sustainability of the health insurance business. Total
non-life gross premiums from direct medical insurance expanded robustly,
with year-over-year growth rates rising to 11% from 4% in a five-year
span (2013-2017). As direct medical products account for approximately
three-quarters of the accident and health (A&H) line, A&H business now
represents the largest share of domestic non-life gross premiums
written, at 33% as of 2017. Despite the strong growth momentum, the A&H
line of business has shown declining profitability. A&H underwriting
performance has remained close to breakeven and the underwriting margin
has declined sharply. Additionally, the expense ratio on direct medical
insurance has continued to edge upward, to 21.3% in 2017 from 18.9% in
2013.
Intense competition on A&H business, along with rising demands for
greater transparency and standardized product designs, will continue to
exert pressure on underwriting profitability. AM Best considers it
important for the industry to embrace a lean structure and adjust
marketing and distribution strategies to lower acquisition and
operational costs. At the same time, the VHIS plans present market
players with an opportunity to strengthen their customer base, while
gradually paving the way to upsell more profitable products.
AM Best believes that insurers will pay close attention to consumer
sentiment toward VHIS, and adjust their strategies accordingly. In
addition, smaller market players that can find sustainable ways to
refine cost structures and enhance operational efficiency while
maintaining disciplined underwriting strategies likely would experience
better-than-average profitability in the A&H line. Insurtech also can
play an increasingly influential role in insurance companies’ customer
acquisition, sales and cost management strategies.
“The need to raise public insurance awareness remains critical in
addressing social and economic issues stemming from Hong Kong’s
fast-aging society,” said James Chan, AM Best senior financial analyst.
“In turn, companies that adopt a corporate culture that promotes
innovation are more likely to reap tangible benefits—such as lower
expense ratios, greater brand recognition and stronger customer
loyalty—and maintain a competitive edge over the long term.”
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=285572.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
James Chan
Senior Financial Analyst
+852 2827
3418
[email protected]
Christie Lee
Director, Analytics
+852 2827
3413
[email protected]
Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
[email protected]
