Multiple Risks Should Not Be Underestimated
Everything that has advantages also has disadvantages. Due to differences in investment models, legal policies, and other aspects compared to the mainland, mainland residents seeking insurance in Hong Kong must base their decisions on a thorough understanding of the risks involved and should not follow the trend blindly.
Mr. Xiong, a resident of Shenzhen, purchased a dividend-type accident insurance policy from East Asia Life in Hong Kong in 2013. This policy requires a monthly payment of 1,000 yuan, and after five years, the cash value will equal the total premiums paid, with a maximum coverage of 200,000 yuan. "Since I do not have a bank account in Hong Kong, to save on cross-border transfer fees, I have to go to Hong Kong to pay the premium every month, which is quite troublesome." In addition, purchasing a policy in Hong Kong incurs significant losses if one opts for early termination. Mr. Xiong mentioned that a friend who also purchased the same insurance had to cancel the policy due to inconvenience in making payments after moving to Beijing, and ended up receiving only a little over 1,000 yuan back, losing more than 20,000 yuan in premiums paid over two years.
The risk of exchange rate fluctuations should not be underestimated either. When purchasing insurance in Hong Kong, claims or payouts are made in Hong Kong dollars, which are directly linked to the US dollar. If the Hong Kong dollar depreciates significantly against the renminbi, investors may experience a reduction in cash value and incur investment losses.
Due to differences in medical assessment standards between Hong Kong and the mainland, there are risks associated with claims for critical illness insurance. If there are discrepancies in assessment, mainland policyholders must go to Hong Kong to negotiate or even pursue legal action, hiring a Hong Kong lawyer. Legal fees in Hong Kong are exorbitant, and even if the policyholder wins the case, the litigation costs can be substantial. Furthermore, if the claim dispute is difficult to resolve, it may lead to challenges in receiving compensation, or even result in no compensation at all.
Do Your Homework and Beware of Traps
Due to the booming sales of insurance policies in Hong Kong, one must be cautious of certain traps when purchasing. The first rule is not to believe the promotional claims of some institutions that say "Hong Kong insurance is sold in the mainland." Hong Kong law stipulates that all insurance contracts must be signed locally in Hong Kong, and all insurance companies have very strict entry document reviews and witness requirements for non-Hong Kong residents. Some company sales personnel sell and sign policies in the mainland and use forged entry records to make the policies effective; such policies are considered "underground policies," invalid and not protected by law.
The rapid development of the market has brought about a mix of good and bad, and misleading information is spreading among mainland customers buying insurance in Hong Kong. The most obvious case is the Hong Kong 101 linked insurance. The 101 linked insurance is a long-term insurance product requiring 25 years of premium payments, but some agents mislead it as a short-term payment product that only requires payments for 3 years or even 18 months. The reality is that after 3 years of payments, the policy's returns cannot cover the premiums. Industry insiders describe it as "basically a scam," and it has been discontinued under intervention from relevant authorities.
Insurance professionals suggest that if you want to purchase insurance in Hong Kong, you should first find a responsible and professional insurance consultant for detailed advice; second, follow the operational procedures of Hong Kong insurance companies to understand the differences compared to mainland insurance companies before and after purchasing, such as payment methods, currency differences, terminology, claims scope, and limitations, to avoid regrets. Mr. Xiong reminds that Hong Kong insurance contracts are available in both Chinese and English, but the Chinese expressions differ from those in the mainland, so it is essential to read the contract carefully to avoid future troubles and losses.
