Chinese officials are readying a plan to introduce an «insurance connect» scheme to further financial integration of the Greater Bay Area.

The 11-city Greater Bay Area (GBA) will see greater connectivity in the insurance sector under the new plans to roll out a «connect» scheme, according to an «SCMP» report citing unnamed sources. 

Authorities from Hong Kong and mainland China are finishing up details to introduce the new scheme which initially will not involve any cross-border policy sales but will focus instead on post-sales services such as the handling of claims, policyholder information and premium payments.

Mainland Service Centers

In addition, two service centers will be located in mainland cities to house counters set up by the Hong Kong Federation of Insurers (HKFI) – the city’s industry body – to serve GBA-based policyholders. According to the sources, HKFI will take the lead in renting office space in the two cities based on a shared office model.

Shenzhen was earmarked is one of the likely cities for a service center, the report added.

2020 Launch

«The Insurance Authority has been liaising closely with relevant mainland authorities to pursue the idea of setting up post-sale service centers in the Greater Bay Area, whose practical importance is clearly demonstrated by the impact of the Covid-19 outbreak,» according to Hong Kong’s insurance regulator. «We will sustain this dialogue to achieve some concrete progress within this year.»

Although mainland Chinese policy buyers have been a huge driver of Hong Kong’s insurance market, the recent protest and ongoing pandemic have significantly dented new demand. 

At its peak in 2016, mainland Chinese bought nearly $73 billion worth of insurance policies – one-third of that year’s total premiums collected – ongoing unrest and the pandemic has caused a severe dent to the industry. In the first quarter of this year, the segmented yielded just $700 million in policy sales, down 58 percent.

Mainland Connects

China has long adopted the concept of «connect» schemes to link its mainland financial markets abroad including to Hong Kong, for its widely successful «Stock Connect» scheme, or even with foreign countries such as its «Shanghai-London Stock Connect» scheme. 

Within the GBA, the introduction of an insurance connect scheme would follow closely on the heels of the recently announced «wealth management connect» scheme enabling cross-border financial advice and product distribution.