A growing number of Chinese mainland residents are going to Hong Kong to buy insurance products and services, as latest statistics show that mainlanders have paid more than one-fifth of new office premiums in the first three quarters of 2015, according to a report by CRIENGLISH.com.
The report said that although Hong Kong insurance agents are prevented from selling their products on the mainland, mainland travelers are allowed to buy policies when they visit the city.
Data from Hong Kong's office of the Commissioner of Insurance showed that insurance premiums worth $2.7 billion in the city were bought by mainlanders in the first three quarters of last year, accounting for 22 percent of new office premiums in Hong Kong in that period.
According to the commissioner's office, the data represent nearly a five-fold increase from 2011.
Mainland buyers were primarily attracted to the cheaper prices and higher returns of insurance products in Hong Kong, said Hong Hao, an analyst working for the local BOCOM International Holdings Company.
"Insurance products sold in Hong Kong are, in general, cheaper than those sold in the mainland market," Hong said. "In some extreme cases, we've seen 50 percent discount between Hong Kong products and mainland products."
Hong added: "For example, in the past 10 years, the average expected return for Hong Kong insurance products is five to nine percent. I think on the mainland it's probably less than five percent. So if you assume the currency exchange rate is stable, then the return of the Hong Kong insurance products here can be a lot more attractive."
Analysts said that insurance products offered on the mainland are surpassed by those provided in Hong Kong in many other aspects, such as scope of protection, product innovation, and quality of service.
The report said that local insurance policies attract mainlanders due to the wider variety of currency and investment choices as Hong Kong can offer products in U.S. or Hong Kong dollars denominations as well as in yuan. In addition, HK policies offer a wide range of investment choices and available terms.
Compared to HK policies, insurance policies on the mainland are denominated in yuan and are mainly invested in bank deposits or bonds.
Hong, however, warned about the danger for investors who want to hedge risks by diversifying investment tools, especially when it comes to currency fluctuations.
"In the past 10 years, the Hong Kong dollar has depreciated against the mainland currency by about 24 percent," Hong noted. "So even if you get a more attractive return from the Hong Kong insurance product, you stood to lose 24 percent over the past five to 10 years. So in that way, from the investment perspective, you may not be able to get the expected yield you are getting from the Hong Kong insurance product after factoring in the currency fluctuation."
The report said that the insurance market in Hong Kong has been expanding rapidly in recent years.
Hong Kong, with a population of around 7 million, has about 160 insurers and the largest number of authorized insurance companies in Asia.