New insurance plan to offer higher payout on deaths

Staff reporter

Hong Kong's Insurance Authority plans to launch a Protection Linked Plan - a new category of investment-linked assurance scheme - with an embedded high level of protection which will provide at least 150 percent of the total premium paid on the death of the insured until the age of 65.

In traditional ILAS products such as Pure 105, the death benefit is 105 percent of the policy value but can be very low if the performance of the underlying investments of the ILAS is poor.

Under the PLP, even if the underlying investment performs badly, the policyholder can still receive at least 150 percent of the total premium paid upon death at the age of 65 or below.

Apart from a higher death benefit, PLP also has a simpler fee structure while offering green finance and retirement hedge investment options, according to the Insurance Authority.

Meanwhile, some traditional ILAS products may be on the way out as the Securities and Futures Commission tightens regulations on investment-linked assurance schemes.

Hong Kong's securities watchdog published an enhanced ILAS product guidance in early November to require greater transparency on the design of these products.

Under the new guidelines, the SEC said the fees should be fair and insurance companies cannot charge fees for ILAS products that are higher than an ordinary term life product. Also, the product features should not be unduly complex.

There are currently 49 ILAS products in the market and the SFC has requested that products that do not meet the new guidelines can only be sold by the end of April 2023.

The purpose of the new scheme is to introduce a product with higher mortality protection element,simple and transparent fee structure and confined fund choices so as to narrow the protection gap and facilitate financial inclusion, said Carol Hui, executive director of long term business at the Insurance Authority. The launch of PLP is also to encourage early retirement planning of the underserved younger generation, and to extend the product choices available in the market for satisfying the retirement planning needs of an individual throughout their life cycle, Hui added.

The new products are expected to be launched in the second quarter of next year.