New insurance plan to provide higher compensation in the event of death
The Hong Kong Insurance Authority plans to launch a Protection Linked Scheme – a new category of investment-linked insurance scheme – with a high level of built-in protection that will provide at least 150% 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% of the policy value, but can be very low if the underlying investment performance of the ILAS is poor.
Under the PLP, even if the underlying investment performs poorly, the policyholder can still receive at least 150% of the total premium paid in the event of death at age 65 or younger.
Along with a higher death benefit, PLP also has a simpler fee structure while offering options for green funding and retirement coverage, according to the Insurance Authority.
Meanwhile, some traditional ILAS products may be on the way out as the Securities and Futures Commission tightens regulation on investment-linked insurance schemes.
Hong Kong’s securities watchdog issued enhanced ILAS product guidelines in early November to require greater transparency on the design of these products.
Under the new guidelines, the SEC said fees should be fair and insurance companies cannot charge fees for ILAS products that are higher than a regular term life insurance product. Also, product features should not be too complex.
There are currently 49 ILAS products on 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 objective of the new plan is to introduce a product with a higher mortality protection element, a simple and transparent fee structure and limited fund choices to reduce the protection gap and facilitate inclusion. financial, said Carol Hui, executive director of long-term business at the Insurance Authority. The launch of the PLP also aims to encourage early retirement planning for the underserved younger generation and expand the product choices available in the market to meet an individual’s retirement planning needs throughout their life cycle. of life, Hui added.
The new products are expected to be launched in the second quarter of next year.