Aviva, Chinese internet services provider, Tencent Holdings, and global investment management firm, Hillhouse Capital, are to develop an insurance company in Hong Kong, which will focus on digital insurance.
The joint venture will focus on selling basic life insurance and investment products online in the territory, according to the Financial Times.
The Wall Street Journal reported that the venture is aimed at undercutting the commission-heavy agency sales that dominate Hong Kong.
As part of the agreement, Hillhouse and Tencent will acquire shares in Aviva Life Insurance Company (Aviva Hong Kong).
Following completion of the transaction, Aviva and Hillhouse will each hold 40% and Tencent will hold 20% shareholdings in Aviva Hong Kong.
The transaction is subject to customary closing conditions, including regulatory approval.
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Digital HK focus
Given that less than one per cent of Hong Kong life insurance sales were made digitally in 2014, it makes commercial sense for Aviva to grow this channel and bypass agents and their commissions, which are said to be high.
The Financial Times reported that some agents charge up to 160% of the annual premium over the first five years of a 20-year policy.
A recent report from Timetric’s Insurance Intelligence Center (IIC) explains that bancassurance and agencies have been the most popular distribution channels in the Hong Kong life insurance industry in recent years.
The IIC report said bancassurance was the dominant distribution channel for life products in Hong Kong during review period, accounting for 50.6% of the new business gross written premium in 2014.
Timetric IIC Insight
Agencies were the second-most popular distribution channel in the Hong Kong life segment in 2014, accounting for 25.6% of the new business direct written premium.
The new business direct written premium through agencies is expected to record a forecast-period CAGR of 13.3%, to reach HKD53.4bn (US$6.9bn) in 2019.
Aviva operates in seven markets in Asia: Singapore, China, Indonesia, Hong Kong, Vietnam, Taiwan and India.
Aviva organisational changes
The insurer’s deal with Tencent and Hillhouse Capital comes after it announced an organisational restructure on 19 January to reflect its focus on customers’ needs.
It means Aviva is bringing its UK insurance businesses together – life insurance, general insurance and health insurance – under the leadership of Andy Briggs.
Briggs will become CEO UK Insurance, responsible for all Aviva’s insurance businesses in the UK.
To simplify and strengthen Aviva’s international focus, Maurice Tulloch will become CEO International Insurance, responsible for Aviva’s insurance operations in France, Canada, Ireland, Spain, Italy, Poland, Turkey and India.
Both appointments are subject to regulatory approval.
As a result of these structural changes, David McMillan, chairman of Aviva Global Health Insurance and CEO Aviva Europe, has chosen to leave Aviva.
Commenting on the organisational changes, Aviva’s group CEO, Mark Wilson said: “We see significant opportunities to differentiate our business in the UK post-Brexit. We like the UK, we are investing in the UK, and we are growing in the UK.
“Our priorities are to continue to deepen our position in our home UK market with our 16 million customers, and to continue to grow in our core international markets to diversify and strengthen Aviva. This puts us in a peer group of one.”
Tencent’s deal with Aviva comes after it was reported in November 2016 that Tencent and a group of seven investors had reportedly moved closer to launching a CNY1.5bn ($217m) HeTai Life Insurance, an online life insurer in China.
Reuters reported that the group had put up funds and signed an agreement to form the venture.
HeTai is reported to have received regulatory approval from Chinese regulators in July 2016 and has up to one year to prepare for its launch.
Tencent is also reportedly one of the companies behind Chinese internet insurer Zhong An Online Property and Casualty Insurance, which is looking to go public in Hong Kong in a $2bn deal.
For all the latest insight, news and data on the global life and health insurance and reinsurance markets, visit www.lifeinsuranceinternational.com