Hong Kong Virtual Insurance Development: A Data-Driven Analysis (2020-2025)

Since the launch of the first virtual insurer in Hong Kong in 2018, the virtual insurance sector has transformed the local insurance landscape. This article explores the development of virtual insurance over the past seven years, focusing on product types, features, policyholder demographics, digital services, profit margins, strategic approaches, outcomes, and global insights, supported by data analytics and tables.

Development Since the First Virtual Insurer

The journey began with Blue, transitioning to a virtual insurer in 2018 via acquisition, followed by the issuance of virtual licenses to Bowtie (2018), Avo (2019), OneDegree (2020), and ZA Insurance.

The Insurance Authority (IA) introduced the Fast Track initiative in 2017 to expedite digital insurer authorizations, fostering a competitive environment. By 2024, the sector saw 157 authorized insurers, with virtual insurers comprising a niche but rapidly growing segment, contributing to a 0.8% increase in total gross premiums to $542.1 billion in 2023.

Hong Kong Virtual Insurers

Product Types and Features

Virtual insurers offer innovative products tailored to underserved markets:

• Medical and Critical Illness Insurance: Dominant across all virtual insurers, with 100% offering these plans. Bowtie’s VHIS Standard and Flexi Plans use AI for personalized underwriting.

• Voluntary Health Insurance Scheme (VHIS): Adopted by 75% of virtual insurers (e.g., OneDegree, Bowtie), providing standardized coverage with flexible add-ons.

• E-Wallet and Travel Insurance: Avo offers customizable plans starting at $79 annually for e-wallets and $39 for travel, leveraging quick underwriting.

• Pet Insurance: OneDegree’s Pawfect Care covers veterinary expenses, a unique niche.

• Home Insurance: Launched by OneDegree in 2022, featuring an optional “Home Appliances Warranty” rider, with a 15-fold sales spike during the 2023 black rainstorm.

Virtual insurers product types

Key features include instant quotations, remote due diligence via AI, and minimal claim turnaround times, enhancing customer convenience.

Table 1: Product Distribution Among Virtual Insurers (2024)

Product Type	Percentage of Virtual Insurers
Medical/Critical Illness	100%
VHIS	75%
E-Wallet/Travel	25%
Pet Insurance	25%
Home Insurance	25%

Performance and Profit Margins of Virtual Insurance

Virtual insurers have shown improving profitability. OneDegree reported a 40% financial performance improvement in 2023, with gross written premiums exceeding HK$180 million (59% YoY growth).

The cost-to-income ratio improved by 82%, and revenue per employee rose 78%. However, profit margins remain modest, averaging 5-7% due to high initial tech investments, compared to 10-12% for traditional insurers.

Table 2: Financial Performance Metrics (2023)

Metric	OneDegree	Industry Average (Traditional)
Gross Written Premiums	HK$180M	HK$500M
Cost-to-Income Ratio	18%	25%
Revenue per Employee	HK$1.2M	HK$0.8M
Profit Margin	6%	11%

Strategies of Virtual Insurers

• Direct-to-Consumer (D2C): Bowtie eliminates commissions, reducing costs by 15-20% and passing savings to customers.

• Partnerships: OneDegree collaborates with global stablecoin issuers and Dubai Insurance Company, expanding into digital asset insurance.

• AI and Big Data: Avo and Bowtie use AI for risk assessment, achieving 90% accuracy in underwriting.

• Niche Market Focus: ZA targets youngsters with affordable critical illness plans, capturing a 30% market share in this segment.

Outcomes

• Premium Growth: Virtual insurer premiums grew 8x from HK$43 million in 2020 to HK$345 million in 2021, stabilizing at HK$500 million by 2024.

• Market Penetration: Digital channel penetration rose to 2% of life and health premiums by 2023, up from 1% in 2020.

• Customer Base: Multi-product policyholders at OneDegree increased 2.5x in 2023, reflecting cross-selling success.

• Regulatory Impact: The IA’s sandbox facilitated 13 pilot trials by 2020, enhancing innovation while ensuring solvency.

Policyholder Demographics and Digital Services

Policyholders are predominantly young adults (18-35) and underserved segments, with 35% preferring digital channels in 2021 (up from 28% in 2020). Digital services include:

• Online Platforms: 100% of virtual insurers offer self-service portals for policy purchases.

• Chatbots: 75% provide keyword-responsive chatbots, though effectiveness varies.

• Virtual Onboarding: 50% use video conferencing for non-face-to-face sales, approved via the IA’s Insurtech Sandbox.

• Claim Processing: AI-driven platforms reduce turnaround to under 48 hours for 80% of claims.

Data analytics reveals a 72% satisfaction rate among policyholders for digital services, driven by transparency and speed.

D2C Transformation Barriers

D2C Transformation Barriers

Customer willingness to purchase insurance online has grown steadily. A 2024 survey by the Hong Kong Federation of Insurers (HKFI) indicates that 58% of respondents are comfortable buying insurance online, up from 42% in 2021, driven by convenience and competitive pricing.

Young adults (18-35) show the highest adoption rate at 72%, with 65% citing trust in digital security as a key factor. However, barriers remain, with 28% expressing concerns over data privacy and 19% preferring human interaction for complex policies.

D2C transformation faces significant hurdles. Everbright Actuarial Consulting’s data analytics reveals a 35% cost reduction potential through D2C models, yet only 20% of virtual insurers have fully transitioned due to:

• Trust Deficit: 45% of customers still prefer agent advice, per a 2023 IA report.

• Regulatory Constraints: Compliance costs rose 15% in 2024 due to enhanced KYC (Know Your Customer) requirements.

• Technology Investment: Initial setup costs average HK$50 million, with a 3-year breakeven period, deterring smaller players.

• Customer Education: 30% of policyholders lack awareness of D2C benefits, necessitating marketing spends that erode margins by 5-7%.

Table 3: Customer Willingness and D2C Barriers (2024)

Metric	Percentage/Value
Willingness to Buy Online (Total)	58%
Willingness (18-35 Age Group)	72%
Trust in Digital Security	65%
Privacy Concerns	28%
Preference for Human Interaction	19%
Cost Reduction Potential (D2C)	35%
Full D2C Transition Rate	20%
Compliance Cost Increase	15%

Global Insights for Hong Kong Virtual Insurers

Globally, digital insurance markets like the UK (62.4 average platform score) and US (61.1) outperform Hong Kong (51.1), per Sia Partners’ 2023 report. Hong Kong trails Singapore (51.5) due to agent reliance but leads in user experience.

The global trend toward IoT and wearable devices (e.g., FitBits for health premiums) suggests Hong Kong virtual insurers could adopt usage-based models. Deloitte’s 2025 outlook emphasizes agility, with Hong Kong’s 6.3% CAGR (2024-2028) aligning with Asia-Pacific growth, driven by cross-border opportunities in the Greater Bay Area.

Conclusion

Hong Kong’s virtual insurance sector has evolved rapidly since 2018, leveraging technology to offer innovative products and services. Data analytics highlights robust growth and efficiency gains, though profitability lags traditional peers. Strategic diversification and global best practices could position virtual insurers as leaders in Asia’s digital insurance revolution. For tailored insurance strategies or policy evaluations, contact Everbright at info@ebactuary.com .