Companies in Hong Kong
In order to have a broad outlook of the successful and admired companies in Hong Kong in line with the research objective it is important to have a basic idea about the insurance industry in general in Hong Kong and the life insurance industry in particular. The operations of the insurance industry in Hong Kong have been well understood by the people in Hong Kong. As a result there has bee a considerable growth in the industry during the recent past.
Presently the insurance industry is occupying an important position of the economy and can be considered as a very important segment. The insurance industry in Hong Kong is providing employment to more than 60,000 people presently. There are several types of insurance business is presently in practice in Hong Kong. The kinds of insurance business include among other general insurance, office all risk insurance, marine insurance, inland transit insurance, property all risk insurance, employees’ compensations insurance, life insurance, home insurance and travel insurance.
“As at 31 August 2004, there were 181 authorized insurers in Hong Kong, of which 117 were pure general insurers, 45 were pure long-term insurers and the remaining 19 were composite insurers. Total gross premiums grew by 14. 6% during 2003 to HK$102. 0 billion, representing 8. 3% of the Hong Kong Gross Domestic Product. ” “Taking advantage of a more liberal regional insurance market after the 1990s financial crisis in Asia, many foreign insurers and reinsurers has positioned to expand their market share in the region. The accession of China to the WTO has accelerated the process.
A number of foreign insurers and reinsurers have newly announced to expand their regional operations in Hong Kong to cater for the development of the regional insurance market (as well as the MPF market in Hong Kong). Mainland affiliated companies are also linking up with foreign insurers in Hong Kong to cater for the mainland business” . Out of the insurance companies a large number of companies are incorporated in the US and the UK. The insurance industry is dominated by the big players with 10 insurers holding one third of the general insurance market and top 10 insurance firms have more than 80 percent of the long term insurance market.
The sharp recovery of the economy in the country has greatly helped the insurance industry especially with the launch of ‘Mandatory Provident Fund’ which is expected to bring in to the economy amounts equivalent to US $ 4 to5 billion of retirement funds each year for the next 30 to 40 years. “Hong Kong’s insurance sector was given a stable outlook by ratings agency Standard & Poor’s in August 2004, although the firm warned that consolidation was likely in the territory’s fragmented industry.
S&P observed that the local insurance market has been resilient amid the economic downturn and has survived intense competition, volatile markets and the outbreak of SARS in 2003. ” The development in the industry and the market outlook indicate: • “Against the backdrop of a highly matured market, an ageing population and rising general affluence, many insurers are already venturing into retirement planning and wealth management to meet consumer demands. • In line with the regional trend, multi-channel distribution for insurance products is growing in popularity.
While insurance products are primarily distributed by insurance agents, bancassurance penetration (the distribution of insurance products by banks) has been growing rapidly. • Asia, in particular China, continues to be viewed by global insurers and reinsurers as the region of opportunities. In addition to the mainland’s WTO liberalisation, Hong Kong’s insurance sector and professionals can benefit from the CEPA agreement signed with the Chinese mainland. ” Life insurance business has been growing at a double digit rate in the past decade.
With the economic recovery witnessed in the Hong Kong and other far eastern region the life insurance business is growing continuously. 2. 10 RELATIONSHIP BETWEEN IMAGE, TRUST AND SUCCESS IN INSURANCE INDUSTRY IN HONG KONG: From the foregoing review of the attributes that determine the success and admiration for any company will be equally applicable for an insurance company even though the insurance companies fall within the purview of financial services industry.
Since the insurance products represent the financial services it becomes more important that the company should be financially sound to win the confidence of the prospective customers. Unless the company is financially sound it may not be possible for it to serve the customers efficiently in terms of immediate settlement of claims and also provide for extended risk coverage even when the customers need not pay the premium after a certain period as per the terms of the policy.
The company should be financially prudent to invest the premium amounts being collected by it in proper assets so that the customers can be offered attractive bonuses on the policies. Generally the life insurance policies are for a longer term. Hence the prospective customers would look into the returns they will get on the investments in the policies in addition to the life coverage. Under such circumstances there are basically two issues involved that necessitates the proper investment of the premium amounts by the insurance companies in safer as well as income generating securities.
The first issue is concerned with the return on the investment the customers will look for and the second one is the safety of the investments so that the insurance company can either settle the claim immediately or return the investments to the customers with the accumulated bonuses after the expiry of the policy period. In either case the insurance company should make its investments carefully so that it can accomplish these purposes.
Another dimension to this issue is that the capability of the company to financially satisfy the customers tells upon the trust that the customers can develop on the company. Unless the company is trustworthy it can neither be financially successful nor can be admired by the customers. The other issue concerned with the financial soundness is the image that the company can build among the customers. The image of any insurance company is particularly important as it is functioning in the financial services industry.
If the company is dealing with the customers financially efficiently it would be able to acquire a good reputation. That will enhance the image of the company in the minds of the existing customers. In this case the existing customers will recommend the company’s products to other friends and relatives. 2. 11 SUCCESSFUL INSURANCE COMPANY: From the above discussion it follows that in the case of an insurance company because of its nature and being in the financial services industry it is vitally important that the company should be financially sound to be able to claim that it is successful.
This is because of the success of any financial services company is determined only on the basis of its financial soundness as other factors like the compliance with social responsibility obligations or other attributes do not really matter in the case of companies in the financial services industry. The attributes like Strong Financial Background, Higher Rating from International Rating Organisations, Length of Standing in the Industry or Largest Market Share is totally dependent on the financial soundness of the company.
In the case of a life insurance company only these attributes will have relevance for determining the success. 2. 12 ADMIRATION FOR AN INSURANCE COMPANY: On the same analogy as in the caser of a successful insurance company the factors that determine the admiration of any insurance company depends on the customer satisfaction. For an insurance company it is important that the customer satisfaction is maintained at an extremely high level. This can be achieved by meeting the customer needs in respect of the insurance products that they are interested in.
In any insurance product the customer will be satisfied with t a comparatively lower premium than other competitors in the market. The customer satisfaction will also be enhanced when the bonuses and other incentive schemes being offered by the insurance company is attractive to the customers in improving the return on their investment in the premium amounts. Being a long term investment, though there is an aspect of a risk coverage, still the customers will be looking for higher returns on the regular premiums being paid by them.
A higher return on their investments would also satisfy the customer immensely. Any insurance company that would satisfy the customers will be admired by the customers as an efficient one. Hence it can be arrived that for being successful and also for getting the admiration of the people any insurance company should be financially sound. Therefore it can also be said that in the case of a life insurance company a financially successful company only will be admired by the people.