With the highest per capita life insurance premium in the world, why Hong Kong still has such a big Mortality Protection Gap? (Updated Sep 2021)

Estimated reading time 6 minutes
01 Sep 2021
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01 Sep 2021

Estimated reading time 6 minutes

The overall protection gap in Hong Kong is as much as HK$6.9 trillion, according to a study published by the Hong Kong Insurance Authority (note 1). The study shows that the mortality protection gap per working person is HK$1.90m. However, the Hong Kong life insurance premium per capita is the number 1 highest in the world. At HK$63,991 per capita, it is four times higher than the US, and much higher than other mature markets in Asia such as Singapore, Taiwan and Japan (note 2). How is that possible? Can this protection gap ever be closed?

Mortality Protection Gap is the difference between the amount needed to substitute a household’s future income if a major income earner dies, and the existing resources available (e.g. cash, investments, life insurance) to repay outstanding debts (e.g. mortgages) and maintain living standards (e.g. dependents’ ongoing living and education expenses).

Insurance companies and intermediaries in Hong Kong often talk about the big protection gap and ask us to buy more insurance. But Hong Kong already has the world’s largest life insurance premium per capita – aren’t we already buying enough life protection? The mortality protection gap can be explained by the fact that Hong Kongers are buying mainly whole life insurance which focusses on savings over protection, hence the death coverage may not be sufficient. The term life insurance market is Hong Kong is still relatively small, as many Asians tend to prefer savings over buying pure protection. Further, as term life insurance has low premiums and therefore limited commissions compared to whole life insurance, intermediaries tend to be less keen on selling.

From a coverage perspective, there is a huge difference between term life insurance (no savings element, only covers for a defined term) and whole life insurance (with savings element, life-time coverage). Within whole life insurance there are products that focus more on wealth accumulation, and other more conservative products that offer certain death coverage. The latter type is used to compare with term life below. For the same first year death benefit of HK$1m, the death benefit multiplier (sum assured per premium paid) differs substantially between the two product types.

Table 1: Insurance product protection comparison (10-year renewal)
Based on age 35 non smoking male and 1,000,000 (HKD) death benefit, 10-year renewal

Catergory Product First Year Premium (HKD) AnnualPremium (HKD)6 Death Benefit Multiplier2 Guaranteed/
Projected return
Premium Payment Period Coverage
Period
Death occurs at 1st Year Death occurs at 10th Year
Term Life3,5 FWD - My Term (Online Underwriting) $5007 $6807 2,000.0 X 147.1X X 10Yr 10Yr
ZA - ZA Life Protection $6968 $8538 1,436.8 X 117.2 X X 10Yr 10Yr
Blue - WeCare Term Life Protection Plan2 $7209 $8829 1,388.9 X 113.4 X X 10Yr 10Yr
BOC Life - iProtect 10 Years Insurance Plan $980 $980 1,020.4 X 102.0 X X 10Yr 10Yr
HSBC Life - HSBC Family Protector $68710 $99610 1,455.2 X 100.4 X X 10Yr 10Yr
Whole Life4,5
(Protection Focus)
AXA - LifeDelight Insurance Plan $20,389 $20,389 49.0 X 4.9 X
10Yr Whole Life
Prudential - PRUlife Protector 2 $27,400 $27,400 36.5 X 3.6 X
10Yr Whole Life
Chubb - Custom Whole Life (100% Life Protection) $28,314 $28,314 35.3 X 3.5 X
10Yr Whole Life
FTLife - My Love Insurance Plan 2 $34,020 $33,720 29.4 X 2.9 X 10Yr Whole Life
China Life - Perfect Wealth (10-Year) Whole Life Plan $35,070 $35,070 28.5 X 2.9 X 10Yr Whole Life
 Remarks:
1.Death Benefits refers to guaranteed amount and exclude any non-guaranteed amount.
2.Death Benefit Multiplier= Death Benefit/Premium paid, assuming death occurs at policy year 1 or year 5 respectively.
3.Term Life product assumptions: age 35 male non-smoker, first year benefit $1,000,000 HKD, 5 year premiums and 5 year renewal.
4.Whole Life product assumptions: age 35 male non-smoker, first year benefit $1,000,000 HKD, 5 year premium payment period (or closet) and whole life coverage. The annual premium is based on the death benefit multiplier.
5.Selected products are based on the same product type and assumptions with the top 5 ranked by death benefit multiplier.
6.The annual premium is 5-year average premium.
7.The first year premium of FWD My Term may enjoy a 50% off discount on 1st year premium and 30% off on 2nd year onwards in initial renewable period, upon entering the promo code "MYT50TL". Terms and conditions apply.
8.The annual premium of ZA Life Protection includes first year premium 20% off promotion, upon entering p
romo code "Life20" on ZA website. Terms and conditions apply.
9.The annual premium of blue WeCare Term Life 2 includes first year premium 20% off promotion, upon entering promo code "FT220" on blue website. Terms and conditions apply.
10.The annual premium of HSBC Family Protector includes a 4-month premium waiver promotion in the first year, upon entering promo code "4MTHFR" onHSBC Life website. Terms and conditions apply.
11. The information above is provided by 10Life as of 2nd Sep 2021. All information is for reference only and does not constitute any insurance sales advice.
12. Insurance companies have the rights to amend the offers without prior notice. Readers should verify the offer details (if any) with the relevant insurance company before application.

The difference becomes more obvious for the products with 20-year premium payment period.

Table 2: Insurance product protection comparison (20-year renewal)
Based on age 35 non smoking male and 1,000,000 (HKD) death benefit1, 20-year renewal

Category Product First Year Premium(HKD) Annual Premium(HKD)6 Death Benefit Multiplier2 Guaranteed
Projected return
Premium Payment Period Coverage
Period
Death occurs at 1st Year Death occurs at 20th Year
Term Life 3,5 FWD - MyTerm $7157 $9727 1,398.6 X 51.4 X X 20Yr 20Yr
Blue - WeCare Term Life Protection Plan 2 $10568 $13078 947.0 X 38.3 X X 20Yr 20Yr
FWD - MyTerm Series $1,430 $1,430 699.3 X 35.0 X X 20Yr 20Yr
China Taiping - China Taiping Fortune Life Term Protector $1,470 $1,470 680.3 X 34.0 X X 20Yr 20Yr
China Taiping - iLife $1,480 $1,480 675.7 X 33.8 X X 20Yr 20Yr
Generali - Supreme Gold Plan $1,690 $1,690 591.7 X 29.6 X X 20Yr 20Yr
Whole Life 4,5
(Protection Focus)
Sun Life - Vital $12,029 $12,029 83.1 X 4.2 X
20Yr Whole Life
FTLife - “On Your Mind” Insurance Plan (Smart Version) $13,533 $13,533 105.6 X 3.7 X 20Yr Whole Life
Prudential - PRUlife Protector 2 $14,750 $14,750 67.8 X 3.4 X
20Yr Whole Life
Chubb - Custom Whole Life (100% Life Protection) $19,015 $19,015 57.8 X 2.6 X
20Yr Whole Life
FTLife - “On Your Mind” Insurance Plan (Supreme Version) $19,029 $19,029 75.1 X 2.6 X
20Yr Whole Life
AXA - Fortune Protector Life $20,650 $20,650 48.4 X 2.4 X 20Yr Whole Life
 Remarks:
1.Death Benefits refers to guaranteed amount and exclude any non-guaranteed amount.
2.Death Benefit Multiplier= Death Benefit/Premium paid, assuming death occurs at policy year 1 or year 20 respectively.
3.Term Life product assumptions: age 35 male non-smoker, first year benefit $1,000,000 HKD, 20 year premiums and 20 year renewal.
4.Whole Life product assumptions: age 35 male non-smoker, first year benefit $1,000,000 HKD, 20 year premium payment period (or closet) and whole life coverage. The annual premium is based on the death benefit multiplier.
5.Selected products are based on the same product type and assumptions with the top 5 ranked by death benefit multiplier.
6.The annual premium is 20-year average premium.
7.The first year premium of FWD My Term may enjoy a 50% off discount on 1st year premium and 30% off on 2nd year onwards in initial renewable period, upon entering the promo code "MYT50TL". Terms and conditions apply.
8.The annual premium of blue WeCare Term Life 2 includes first year premium 20% off promotion, upon entering promo code "FT220" on blue website. Terms and conditions apply.
9. The information above is provided by 10Life as of 2nd Sep 2021. All information is for reference only and does not constitute any insurance sales advice.
10. Insurance companies have the rights to amend the offers without prior notice. Readers should verify the offer details (if any) with the relevant insurance company before application.

It turns out that to close the per capita mortality protection gap of HK$1.90m, a person (assuming age 35, male, non-smoker) only needs to buy a term life policy for around HK$1,000 per annum or less. Compared to the total per capita annual premium of over HK$60,000 it is not that Hong Kongers are not buying enough insurance, but we are just not buying enough protection focused products. If you already own an existing whole life policy, you only need to add a term life policy to enhance your protection and reduce your mortality protection gap substantially. If you do not want to go through an insurance intermediary, some of the term life insurance products can be purchased directly online. Some examples are as follows: 

Term Life Insurance Maximum Sum Assured (HKD)
China Taiping - China Taiping Fortune Life Term Protector $16,000,000
ZA Insure – ZA Life Protector $10,000,000
Bowtie – Bowtie Term Life $8,000,000
HSBC Life – Family Protector $7,000,000
Blue – WeCare Term Life Protection Plan 2 $5,500,000
FWD – MyTerm $4,000,000 (Note 3)
Hang Seng insurance – eFamilyPro Life Insurance Plan $3,000,000


10Life has compared most of the term life insurance products in the market – please refer to the 10Life Insurance Product Decoder for details.

If you have any questions, please use the 10Life Q&A function to ask anonymously and get instant response from multiple licensed advisors.

Notes﹕
  1. Insurance Authority,   “Mortality Protection Gap Study”
  2. Swiss Re Sigma 2019/03, Insurance density: life insurance premiums per capita for Hong Kong USD$8204 (assuming HKD/USD FX @7.8)
  3. Maximum sum assured: insurance age 50 and below - HKD$ 4,000,000; insurance age 51 to 60: HKD$ 2,000,000.
  4. The content of this webpage is for reference only and not a financial advice. The above information is provided by 10Life and as of Sep 2, 2021. 

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