Agents Not Preferred In Life Insurance

Zurich Insurance, which dismissed its entire 700-strong team of life insurance agents in Hong Kong three years ago, has seen a dramatic drop in new sales of policies during the period.

But it still has no intention of going back to using them, its newly appointed chief executive has told South China Morning Post.

Eric Hui Kam-kwai, who became chief executive of Zurich’s general insurance business in Hong Kong in June 2012, expanded his role to also head the company’s life business in September, and became its chief executive in the city.

“It is true that new life sales have dropped since we stopped using agents. However, our overall costs are much lower since we started selling through brokers and independent advisors.

“We have no intention of rebuilding the life sales team but we do plan to develop other sales channels such as banking partners and the internet to sell our life products,” Hui said.

Zurich is Hong Kong’s second largest general insurance firm with total premiums of HK$2.4 billion last year, according to government statistics. It is among the largest providers of travel insurance, corporate, car and employees’ compensation cover.

But it ranks mid-tier for its life business, at around 20 out of the 46 life firms offering life products.

Its total new life insurance premiums were HK$188.33 million last year, a huge fall from HK$745.35 million in 2014 when the sales force was disbanded, and HK$773.54 million in 2013, the government figures show.

“We have found that 90 per cent of our customers stayed on with Zurich over the past three years, even after their agents left the company.Hui, however, said he is “satisfied” with current business levels, after changing to the current model.

“Our current cost structure is much lower, as we don’t have to pay out huge amounts in commission, incentives and other costs involved in running a team of agents,” he said.

“As long as we have good products and can expand into new banking and internet channels to sell in future, new life insurance sales will grow well in future,” he said, adding that Zurich’s general insurance sales team also sells life products.

It has become common practice for small and medium sized Hong Kong insurance firms to operate without large teams of agents preferring to use brokers or independent financial advisers to sell their product 

“Hiring and keeping agents is expensive. A company would need to have at least 1,000 to 2,000 agents to achieve the economies of scale to profit from such a model.

“Various companies that did have small teams of agents, have found it more preferrable to use brokers or the internet to sell,” he said.

“Larger insurance companies, however, which have big agency teams, continue to do well using that model as many Asian customers still like to buy from people recommended by friends or relatives,” Chan said.

Hong Kong largest insurer AIA has over 9,000 agents, while Prudential and Manulife both have about 6,000.