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Insurance Digital Onboarding > Promotion of Insurtech development

Insurance Digital Onboarding

Promotion of Insurtech development

The development of financial technology (Fintech) is particularly important for strengthening the role of Hong Kong as an international financial centre. In recent years, as Fintech in Hong Kong has flourished, it has driven the rapid development of Insurtech, leading the Hong Kong insurance industry into a new era of digitalisation, creating new opportunities for the industry and promoting the sustainable development of the insurance market.

The Insurance Authority (IA) has been actively promoting Insurtech development in Hong Kong and is committed to building a regulatory environment conducive to the application of innovative technology in the insurance sector:

1. Initiatives to promote Insurtech

  • The IA launched two pilot initiatives, Insurtech Sandbox and Fast Track, in 2017 to promote the development and application of Insurtech in Hong Kong.
  • Insurtech Sandbox enables authorized insurers to experiment with innovative Insurtech and other technology applications in a controlled environment to demonstrate that the relevant Insurtech application broadly complies with the supervisory requirements of the IA.
  • Fast Track provides a dedicated queue for new authorization applications from insurers using solely digital distribution channels, without the use of any conventional channels involving agents, banks or brokers. Applicants seeking authorization through Fast Track must demonstrate an innovative and robust business model, while satisfying all the prevailing regulatory requirements regarding solvency, capital and local asset requirements.
  • For more information about Insurtech Sandbox and Fast Track, please visit the Insurtech Corner on the IA website.

2. Promoting exchange and maintaining close dialogue with the industry

  • In order to enhance the communication with insurers and businesses involved in the development of Insurtech, the IA established the Insurtech Facilitation Team to help the Insurtech community learn about the current regulatory regime, to provide a platform for exchanging ideas about innovative Insurtech initiatives among key stakeholders, and to provide advice about Insurtech-related topics, as appropriate.

3. Issuing the guideline on cybersecurity

  • The Guideline on Cybersecurity (GL 20), issued by the IA, takes effect from 1 January 2020. The guideline sets the minimum standard for cybersecurity that authorized insurers are expected to have in place and the general guiding principles the IA adopts in assessing the effectiveness of an insurer’s cybersecurity framework. The relevant guidelines cover areas such as formulation of strategy, governance, risk assessment and response plan to strengthen the insurance industry’s resilience in cybersecurity.


Exploring new opportunities in the "epidemic" crisis and accelerating Insurtech development

The COVID-19 pandemic has had an unprecedented impact on the Hong Kong insurance market. However, the social distancing restrictions have driven Insurtech applications, thus facilitating round-the-clock interactions with customers, broadening financial inclusiveness and narrowing protection gaps. The IA has adopted a three-pronged strategy to facilitate the purchase of insurance products by policyholders, and to promote the industry's application of Insurtech to embrace challenges and explore new opportunities resulting from the epidemic.

1. Implementing temporary facilitative measures

  • In view of the latest COVID-19 developments, the IA introduced temporary facilitative measures in two phases in February and March 2020, allowing the public to purchase specific protective insurance products (including Qualifying Deferred Annuity Policy (QDAP), Voluntary Health Insurance Scheme (VHIS) products, term life policies, refundable policies without a substantial savings component, and renewable policies without cash value that provide insurance protection) via non-face-to-face means (such as digital, telemarketing, postal or video conferencing) to reduce the risk of infection from face-to-face meetings during the sales process. 
  • The IA also implemented measures to ensure that the interests of existing and potential policyholders are not adversely affected, including requiring insurers and intermediaries to make upfront disclosure at the point of sale and requiring an extended cooling-off period of no less than 30 calendar days for policyholders to seek professional advice if necessary.

2. Promoting virtual onboarding

  • The IA encourages the industry to conduct trials of Insurtech through Insurtech Sandbox to help policyholders purchase suitable insurance products safely by using non-face-to-face channels.
  • In order to protect the interests of policyholders, the IA also formulated a set of regulatory requirements for virtual onboarding via video conferences, particularly for intermediaries, who must conduct an end-to-end video or audio recording of the entire video conference. For details of the regulatory requirements, please refer to the circular (English version only) issued by the IA to authorized life insurers on 5 August 2020.

3. Encouraging the industry to build a shared virtual onboarding platform

  • In the long run, the IA encourages the industry to build a shared virtual onboarding platform that can be used by different insurers (especially some small and medium-sized insurers that lack resources to build their own platforms). This is expected to help introduce more healthy competition and promote financial inclusiveness.
  • The Hong Kong Federation of Insurers announced the launch of the industry’s first Virtual Onboarding platform in early September 2020. For details, please refer to its media release.

The widespread application of Insurtech will help increase Hong Kong's insurance penetration rate and tap into underserved market segments, such as younger consumers. Insurtech is driving the flourishing development of online insurance, helping to simplify traditional manual procedures, reduce administrative costs, and create more room for innovation in different types of insurance. It also provides the market with more diversified premium levels and more personalised protection insurance products. This allows people of different ages and social strata to obtain the insurance protection they need, and promotes insurance inclusiveness in the long run to close the protection gap in Hong Kong.

The IA will continue to explore with industry stakeholders the development of sustainable digital distribution channels for other products, while ensuring that prudent supervision is maintained and the interests of policyholders are properly protected to facilitate product innovation and diversification, enhance insurance services, and promote the long-term development of Insurtech in Hong Kong.