Long term business remained buoyant, feeding on an insatiable crave for wealth management and retirement planning products brought about by changing demographics and rising affluence. The ability to navigate in this competitive landscape hinges upon targeted manpower training as well as seamless interface between frontline and back-office personnel. Insurers should therefore strike a sensible balance between business expansion and capacity building when charting their corporate strategies. Going forward, the shift of priority from return maximisation to capital protection will be challenging for insurance practitioners. As financial information turns into a global commodity, clients expect nothing less than incisive analysis and insightful advice. Amid undulating economic conditions, quality of service is always the defining edge to win customer loyalty and trust.

On the other hand, general business continued to be haunted by excess capacity and price competition. Given that market volatility will induce stress on those insurers whose operating profit is derived largely from investment income, we will place particular emphasis on monitoring of risk concentration and pricing behaviour. In terms of product innovation, the public consultation document entitled “Your Health Your Life” is going to arouse a timely debate on the direction of health care reforms. The industry has a good story to tell when it comes to the positive role that insurance could play in optimising efficiency through risk pooling, in facilitating movement of patients across different service providers, and in alleviating common anxieties about high administrative expenses and induced demand for medical treatment.

On specific initiatives, the Travel Insurance Agents Registration System is moving slowly on track as the one-off waiver of Form 5 education paves way for experienced travel agency staff to be brought under regulation after passing the requisite examination. I am pleased that a partnership has been forged between the insurance and travel industries to maintain market discipline and safeguard interest of the travelling public, thereby enabling the Government to achieve its policy goal of encouraging people to take up travel insurance without compromising professional standards.

Furthermore, the Employees’ Compensation Insurance Residual Scheme has been running smoothly and is turning into a platform for propagation of safe work practices and prudent underwriting principles. Similar to the market agreement that facilitated early opening of the Hong Kong Shenzhen Western Corridor, this example epitomises a firm commitment by the industry to respond to societal needs and aspirations.

On cross-boundary liaison, relentless efforts to pursue recommendations of the Economic Summit on China’s 11th Five-Year Plan are beginning to bear fruit since promising progress has been made on a model of captives suitable for adoption by enterprises in the Mainland, and a delegation will be organised to discuss with the China Insurance Regulatory Commission on development of microinsurance and formation of captives.

During the year, we went through a vigorous mutual evaluation exercise on our anti-money laundering and combating the financing of terrorism regime conducted by a team of seasoned assessors from the Financial Action Task Force. I am indebted to everyone from the industry and my team of staff who took on this daunting task with a diligent, proactive and resilient attitude. All of us can indeed take pride in being part of a meaningful campaign to uphold and enhance the status of Hong Kong as an international financial centre.

Clement Cheung
Commissioner of Insurance
May 2008