14 June 2022
Hong Kong is widely seen as the international gateway to China, with systems such as Connect also allowing Chinese companies to tap into global funding opportunities. The combination of a strong financial sector, upbeat insurance industry and technological innovation has created a perfect storm. European insurance companies, with Irish groups particularly active, are now looking to tap into the APAC insurance markets.
So-called FinTech, an abbreviation of financial technology, is one of few growth markets at this moment in time. Amidst the fight for more FinTech business, many see Ireland as a central European hub for insurance technology (insurtech) and regulatory technology (regtech). There is no doubt these two areas offer significant growth potential in the short, medium and longer-term, but they also require a solid underlying market. So step forward the Hong Kong insurance industry!
The subject of AI and machine learning (ML) has been front and centre of the technology industry for some time. The ability to create "digital workers" that can be programmed to carry out monotonous activities at lightning-quick speed will be a game-changer for many companies. The introduction of AI and ML is akin to "on-the-job training", with new insurtech services able to adapt and learn automatically. The potential is frightening!
Hong Kong insurance regulator, the Insurance Authority (IA), has been highly proactive in pushing for greater uptake of insurtech opportunities. The creation of an “insurtech sandbox” in 2017 encouraged the development of new insurtech services and the use of digital channels. This comes at a time that consumers in Hong Kong and across the wider APAC are more appreciative of digital services.
While the Covid pandemic caused consumers and businesses to be more accepting of digital delivery systems, this trend is set to continue. As a result, many companies are working on insurtech and regtech, tackling significant inequalities across the worldwide financial sector.
It was interesting to see the Hong Kong authorities adopting a fast-track authorisation strategy towards new FinTech, focusing on insurtech. There are potentially substantial cost savings and access to broader markets, in Hong Kong, China and further afield. However, while there may be greater flexibility regarding authorisation, this is by no means a scattergun approach. All parties appreciate data protection issues will always be front and centre.
The world of insurtech is exceptionally fast-moving, and there is always the threat that innovation will be strangled by red tape. However, after setting up the insurtech sandbox in 2017, it would appear that the Hong Kong authorities are more forward-thinking than many of their counterparts.
While some of the larger insurance and tech companies may grab the headlines concerning insurtech, groundbreaking innovation sometimes comes from smaller operations. Consequently, there is growing investor interest in start-up insurtech companies, even if this area is highly competitive. Finding the next world leader will be challenging; many will fall by the wayside or be taken over by larger groups, but the potential rewards are significant.
While the FinTech industry is grabbing headlines across the global investment world, there is a growing focus on insurtech and regtech. While quite rightly Europe, and in particular Ireland, have been mentioned as significant players in this sector, Hong Kong is emerging as a honeypot for international investors.
The forward-thinking nature of the industry and regulator has not been lost on investors. Creating an appreciative yet protective regulatory environment is key to innovation and the emergence of new technology. We can likely expect more international partnerships, overseas cooperation and continued growth in the sector. This is just the start!Back to News