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HSBC Insurance gets ready to expand beyond Hong Kong

By Ma Zhenhuan and Tang Zhihao (China Daily)
Updated: 2009-07-20 13:59

Terry Lo

London-based financial heavyweight HSBC wants to promote its successful bancassurance model in Hong Kong to the rest of China.

"Whether the economy is on the upswing or experiencing a downward trend, the insurance sector belongs to the category that is less affected," Terry Lo, CEO of HSBC Life Insurance Company Ltd, told China Business Weekly.

In a booming economy, customers chose investment-related insurance products, Lo said in Shanghai.

But in a gloomy business environment, many turn to indemnity insurance to avoid risks, he said.

"That's why even during the Asian financial crisis in 1997, the overall insurance market in Hong Kong maintained double-digit growth," Lo said.

HSBC Life's bancassurance model is the main insurance sales channel HSBC employs in Hong Kong.

An actuary-turned CEO, Lo said he hoped HSBC Life will promote that model in Shanghai and the rest of China to better compete with domestic rivals.

Bancassurance is a word evolved from bank insurance model, or BIM, to describe the practice of selling insurance products through a bank. The banks and insurance companies share commissions.

Lo said HSBC can offer a comprehensive range of life, retirement and medical insurance in demand in the mainland's insurance market.

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HSBC will also seek bancassurance partnerships with other banks as new channels for distribution, he said.

During the third quarter of this year, the bank also will launch its own agency force on the Chinese mainland to enhance the bank's distribution reach, Lo said.

Bancassurance is the only sales channel HSBC employs in Hong Kong for life insurance, taking advantage of its massive network of outlets throughout the special administrative region.

Lo said the bancassurance model still is in the developing stages in much of the rest of China.

"In Hong Kong, insurance has become a key financial planning tool among our wealth management products," Lo said.

"For example, if a client walks into any HSBC outlet, the staff will provide an overall wealth management plan, where certain insurance products are suggested in line with the client's own needs. We hope to promote such a mature model to the rest of China," Lo said.

China's bancassurance businesses enjoyed record growth in 2008, accounting for almost half of all premiums. Their share was a mere 26 percent in 2003.

Lo said a major challenge now is attracting a talented staff.

"In mature markets like Hong Kong, financial professionals account for 14 percent of the overall working force, while here in Shanghai, it only stands at 1 percent, so the gap is huge," Lo said.

Half of his current management team in Shanghai is from Hong Kong. They work in positions ranging from actuary, operations and sales positions to marketing, human resource and finance jobs.

To help close the experience gap, Lo said his company would provide professional training and management courses, including LIMRA and LOMA courses popular among Western insurance professionals.

HSBC in June received final approval from the China Insurance Regulatory Commission (CIRC) to open its new, jointly held insurance company, HSBC Life Insurance Ltd.

The new company, which will open for business in the third quarter of 2009, is jointly held with Beijing-based National Trust Ltd.

Each holds a 50 percent stake, and the new company will have a registered capital of 500 million yuan ($73.20 million), according to HSBC.