UK insurer Standard Life is reviewing its product range in Hong Kong, which comprises mainly investment-linked assurance schemes (Ilas), as part of new rules imposed on Ilas due to take effect in January.
The review may lead to a reduction or consolidation of funds and fewer relationships with managers.
The regulatory changes have prompted the firm to redesign its products to make them more transparent and easily understood by clients. It has taken this opportunity to also review the underlying funds and fund managers, said Alan Armitage, chief executive for Asia and emerging markets at Standard Life.
The insurer presently has 25 asset managers and 291 funds on its platform, covering various markets and asset classes including alternative investments.
Its managers include Aberdeen, AllianceBernstein, Barings, BlackRock, Fidelity, First State, Pictet, Pimco, Schroders, Standard Life Investments, Threadneedle and Value Partners.
“It used to be the case that the more fund houses and funds you have on your platform, the more marketable a [Ilas] product was,” said Armitage. But as in more mature markets such as the UK, the trend in Asia is towards streamlining the number of funds and managers on the platform, as having too many can be confusing and bewildering to customers.
“We would be advocating this approach for more targeted solutions, with a lesser number of funds rather than hundreds on the platform,” he added.
Armitage declined to say how many funds or fund managers would be offered as this would depend on how products will be repackaged.
Standard Life is also reviewing its distribution channels and considering retail banks. It presently sells products through brokers and independent financial advisers.
The collapse of Lehman Brothers in 2008 has driven retail banks to shy away from selling Ilas to retail investors because of the more complicated structure of the product. As of end 2013, Ilas sales in Hong Kong declined by 8.6% year on year, according to Hong Kong’s Office of the Commissioner of Insurance.
Ilas had also been the object of complaints by customers in Hong Kong. Since the start of 2013, 77 of the 194 complaints against insurance sales were related to Ilas, according to the Hong Kong Monetary Authority.
The new regulatory regime starting in January will ban upfront commissions for the sale of Ilas.
“The main part [of the regulatory changes] is around underwriting of investment-linked assurance schemes,” said Armitage. "When we underwrite a product, the onus is on the provider to satisfy themselves that a product is suitable for customers’ needs regardless of the channel it is sold through."
He said the new regulatory regime calls for insurers “to provide simple and straightforward products to explain to customers, in which case banks may see an opportunity to re-engage with that market.”
The insurer targets the more affluent segment of the market; hence its conversations with retail banks tended to be on whether the bank customers have more sophisticated needs. “If they do, there is an opportunity for our product,” Armitage said.
Meanwhile, Standard Life has been increasing its focus on China. In late October announced an agreement with mainland bank ICBC for the two firms to look at jointly developing savings and investment services.
ICBC already works closely with Standard Life’s joint venture in China, Heng An Standard Life, in which the insurer has a 50% stake.
Standard Life, which has been expanding regional headcount, also operates wholly owned companies in Hong Kong and Singapore and has a JV in India, HDFC Standard Life.