The development of financial technology ("Fintech") is important in strengthening the role of Hong Kong as an international financial centre. Against this background, the Insurance Authority ("IA") has been closely monitoring the development and application of technology in the insurance industry ("Insurtech") and proactively assisting market participants to tackle Insurtech-related regulatory issues.
The IA has launched various initiatives to promote Insurtech development in Hong Kong. These include:
On international front, the IA has become a member of the Global Financial Innovation Network ("GFIN") which is an international network of financial regulators and related organisations committed to supporting financial innovation in the interests of consumers. The GFIN seeks to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. This includes a pilot for firms wishing to test innovative products, services or business models across more than one jurisdiction. It also aims to create a new framework for co-operation between financial services regulators on innovation related topics, sharing different experiences and approaches. For details, please refer to GFIN’s website.
The IA launched an Insurtech Sandbox on 29 September 2017 to facilitate a pilot run of innovative Insurtech applications by authorized insurers to be applied in their business operations. Riding on the experience we have, the IA has extended the scope of Sandbox to include licensed insurance broker companies.
Introduction and background
The IA observes that authorized insurers and licensed insurance broker companies may have initiatives in applying innovative technologies in their business operations but may be uncertain if those initiatives can meet the supervisory requirements of the IA. With a view to promoting technology development for the insurance industry in Hong Kong, the IA considers it necessary to adopt some flexibility in the supervisory requirements.
The IA would consider an Insurtech initiative to be a pilot run under the Sandbox to collect sufficient data to demonstrate to the IA that such Insurtech application can broadly meet relevant supervisory requirements arising from its codes and guidelines and other regulatory practices.
Who can apply for a pilot trial under the Sandbox?
The Sandbox is available to Insurtech and other technology initiatives intended to be launched in Hong Kong by authorized insurers and licensed insurance broker companies. The IA will work with the authorized insurers and licensed insurance broker companies and technology companies cooperating with them.
What are the principles of the Sandbox?
The following principles apply to the Sandbox:
There should be a clearly defined scope of the trial, including:
The IA will refine the above arrangements over time in light of implementation experience and industry development.
What are the benefits of the Sandbox?
The Sandbox would be beneficial to the insurance industry. Authorized insurers or licensed insurance broker companies testing new Insurtech initiatives under the Sandbox can gain real market data and information of user experience in a controlled environment before launching them into the market. At the same time, the Sandbox would provide inputs to the IA for refining its supervisory requirements, taking into account the latest technological applications by the insurance industry.
How to learn more about the Sandbox?
For enquiries, please write to the Insurtech Facilitation Team by emailing to [email protected].
The IA, the Hong Kong Monetary Authority ("HKMA") and the Securities and Futures Commission ("SFC") have launched their respective sandboxes. If a firm intends to conduct a pilot trial of a cross-sector Fintech product, it may apply to seek access to the sandbox it considers most relevant. The regulator will act as the primary point of contact and assist in liaising with the other regulators for the firm to access the sandboxes concurrently. Please click on the links to learn more about sandboxes operated by the HKMA and the SFC.
The IA launched a pilot scheme Fast Track on 29 September 2017 to expedite applications for new authorization to carry on insurance business in or from Hong Kong using solely digital distribution channels as a means to promote the development of Insurtech in Hong Kong.
What is the Fast Track about?
The Fast Track provides a dedicated queue (i.e. an expedited and streamlined process compared with other insurance licence applications) for new authorization applications from applicants which would own and operate solely digital distribution channels, without the use of any conventional channels involving agents, banks or brokers.
Who can apply under the Fast Track?
Insurers under the Fast Track must have an innovative and robust business model using digital distribution to bring benefits to the consumers in Hong Kong in product development, delivery, customer service and cost efficiency.
Insurers under the Fast Track would not be allowed to accept business from any channels other than its own proprietary digital distribution system.
How are policy holders' interests protected?
To ensure that the interests of policy holders would not be adversely affected, the following principles will be adopted for the Fast Track:
Is there a deadline for application under the Fast Track?
The Fast Track operates as a pilot scheme and there is no specific deadline of application under it. Nevertheless, the IA will closely monitor the operation of the Fast Track and may revise it in light of implementation experience and industry development.
How to learn more about the Fast Track?
For enquiries, please write to the Insurtech Facilitation Team by emailing to [email protected].
The IA has established the Insurtech Facilitation Team to enhance the communication with business involved in the development and application of Insurtech in Hong Kong, as well as to promote Hong Kong as an Insurtech hub in Asia.
The Team aims at facilitating the Insurtech community's understanding of the current regulatory regime, act as a platform for exchanging ideas of innovative Insurtech initiatives among key stakeholders, and provide advice on Insurtech-related topics as appropriate.
To promote a closer dialogue between the Insurtech Facilitation Team and the market participants and interested parties, a dedicated email account has been set up. If you have any Insurtech proposal or wish to better understand the regulatory landscape for the insurance sector in Hong Kong, please contact us by emailing to [email protected].
The Future Task Force ("FTF") of the Insurance Industry has been set up to explore the future of the insurance sector and draw up recommendations. Out of the three working groups under the FTF, the “Embracing Fintech in Hong Kong” working group focuses on promoting the application of Fintech in the insurance industry. Click here for more details.