On March 30, 2025, the Insurance Authority (IA) announced new illustration rate caps for participating policies, setting limits of 6% for Hong Kong dollar-denominated policies and 6.5% for others, effective July 1, 2025. This initiative aims to protect policyholders by preventing overly optimistic return projections and ensuring fair treatment, as competition among insurers has led to aggressive marketing of high expected returns without addressing associated risks. The IA clarified that these caps apply only to internal rate of returns in benefit illustrations at the point of sale and do not limit actual policy returns, which can still exceed these caps. The industry has shown positive responses, preparing for compliance, while the IA emphasizes the importance of public education regarding non-guaranteed returns. Overall, the measures intend to enhance policyholder protection and promote sustainable market growth.
Resources: https://www.ia.org.hk/en/infocenter/speeches_articles/20250330.html
