Instead of relying on tied agents, Zurich Insurance (Hong Kong), an arm of the Zurich-based Zurich Insurance Group, will look to independent financial advisers and other distribution channels in Hong Kong to market its products to retail investors, beginning on 1 Jan 2014.
Individuals holding products sold by tied agents will not be affected by the change.
Zurich said it took the decision following "an extensive review" of its distribution strategy. In a statement, it added that it was a "strategic business decision", that had taken into account "the needs of all parties – our customers, intermediaries and Zurich".
"Despite our focus on growing the tied agency channel for many years, it has not achieved a sustainable scale," a company spokesperson said, explaining the thinking behind the revamping of the Zurich distribution strategy.
“At the same time, both our own and external independent analysis show that independent financial advisers have been gaining market share in recent years, and we expect this trend to continue, underpinned by factors like rising wealth and a wider product range catering to an aging population,” the spokesperson added.
"As a result, Zurich’s life business in Hong Kong will now focus all its sales efforts in the independent distribution segment, through IFAs.
"We believe IFA distribution can provide the broadest and most appropriate solutions for our targeted customers to fulfill their protection, wealth management and retirement needs."
‘Highly consolidated’ market
The Hong Kong market is described by Zurich as highly consolidated, with around 75% of the agency market controlled by five insurers. This, the spokesman noted, is impacting the way insurance products are being distributed, and contributing to the growing share of the market handled by IFAs.
Zurich does not disclose figures relating to its distribution channel mix, but told International Adviser that it has a "dominant position" in the IFA space, which it also said is its main distribution channel.
With the anticipated growth in IFA market, Zurich believes its decision to move away from tied agency distribution will help the company to build a sustainable business for the future, as it sees IFAs as best able to provide the "broadest and most appropriate solutions" for their clients’ protection, wealth management and retirement needs.
"Zurich will continue to offer to our Hong Kong customers high quality general insurance products through multi-tied agents, brokers and direct channels," the Zurich spokesman said.
Zurich said its decision to discontinue the use of tied agents in Hong Kong would not affect the way it sold its products in any other markets, as it was based on factors specific to that market.
"Zurich continues to believe that tied agents are an effective way to deliver for our customers in other markets in Asia, due to different market conditions and stages of development," the Zurich spokesman said.
