New York Life Insurance has been in Hong Kong since 1988 and has built a specialized business selling individual life policies via its agency sales force. It is a mid-tier player, but sees a recent expansion into unit-linked investments as its ticket into Hong Kong's big leagues. Kendy Wong, deputy chief executive office and chief financial officer, discusses this strategy.
How do you view unit-linked products?
Wong: When it comes to unit-linked it is not easy to say it's everyone's product. It's a product where you need the client to understand the investment dynamic. It's a long- to medium-term product. Since last year we have six funds with Invesco, which are unit-linked.
What type of client buys unit-linked products?
Investors that like unit-linked are the more sophisticated investors but ones without the time to make all the investment decisions themselves. There is increasing influence from financial advisors, the insurance industry and banks about diversification of risk. The message is that you often can't be an expert in markets outside of your own, so it's best to get professionals to do it for you.
Will you be launching more unit-linked products?
Investment-linked products will be a main focus for us next year. When the market begins to come back clients want to see their money invested then, not a year after. So we will be launching products next year. Of course you have to have the qualified sales force to sell investment linked products, agents must pass an exam and 70% of our agents are qualified to sell these products.
You have recently launched a new savings product, could you tell us a bit about that?
The product we have just launched, called Investment Plus, is for existing holders of our basic life plan. It offers a guarantee of up to 4% on a five-year plan, of which 3% is guaranteed, and 5% on a 10-year plan, of which 4% is guaranteed. The plan is in US dollars and our New York office will manage the assets. Clients can either opt for a single premium or regular premiums. This is not like many guaranteed funds in that investors will not be penalised for switching out of the fund.
Do you see banks expanding into insurance as a threat?
Banks do have an advantage when it comes to selling investment products. The teller in the bank can see how much a customer has and can immediately offer them an investment product. Banks have the existing relationships and sometimes that helps. It's a simple switching process, from a bank deposit to one of the bank's investment products.
Our agents have to build that trust with a customer. However, if you have the right relationship, then our people have more time to really explain what unit-linked products are about and how they work. The real push there will be next year. What we really need to do now is make sure we have the right products and the sales force to sell it. We also sell through brokers and of course would like to partner with a bank.
Who do you see as your competition?
New York Life is a mutual company, we are owned by the policyholders, and that is quite unusual now in the market place. And we have an AA1 rating. If you then look at our improving range we can appeal to the high-end market as well as the mass market. Our competition is the insurance companies that sell mainly through an agency force and brokers. Not the banks. So we see our competitors are the likes of AIA, Manulife, AXA and Prudential.
How important will the unit-linked market be in your future growth?
We are looking to expand through the offering of unit-linked products, managed by third-party fund managers. We have been doing well with single premium products, but regular premium unit-linked will be important in our growth. Our aim is to be one of the big five by 2006.