Next era of ‘Buy Term, Invest the Rest’ set to transform life insurance in Hong Kong

The rise of ‘buy term, invest the rest’ (BTIR), catalysed by the rise of low-cost, user-friendly D2C virtual insurers and wealthtechs, is set to change the way life insurance is bought in Hong Kong over the coming decade. That is according to a new market study from Quinlan & Associates.

When it comes to insurance penetration and density, Hong Kong is one of the world’s most mature markets, with life insurance representing an HKD 374 billion premium pool in 2024, comprising 59% of total gross written premiums. And within the life segment, three in every four life policies purchased in Hong Kong are whole life plans.

“However, despite their benefits, whole life insurance policies carry notable risks and limitations, setting the stage ripe for disruption,” said Benjamin Quinlan, CEO of Quinlan & Associates and author of the report. Risks range from modest returns and potential conflicts of interest to poor fulfilment ratios and heavily discounted surrender values.

“Coupled with their high premiums, leading to affordability constraints, a multi-trillion-dollar protection gap continues to hang over the local population,” said Quinlan.

Buy term, invest the rest

According to the report, the ‘buy term, invest the rest’ movement can offer a compelling alternative to the current status quo.

BTIR is an alternative approach to whole life insurance, wherein the insured separates the mortality protection and capital investment parts into two independent steps.

In the case of whole life insurance, the insurer takes charge of both capital growth as well as mortality protection responsibilities for an insured but invests according to their own investment strategy and/or asset and liability management requirements.

In the case of BTIR, the insured opts for term life insurance, which can offer the same death benefit coverage at a significantly lower premium, and invests the surplus amount left over (the difference between the whole life and term life premium) based on their own financial risk profile and goals.

Quinlan: “BTIR represents a bespoke approach to capital growth and mortality protection that uses dedicated financial instruments for customers’ investment and insurance needs instead of a single, blended one.”

BTIR 2.0

The authors contest that the emergence of two trends – low-cost direct-to-customer (D2C) insurance and wealthtech players – is further tipping the balance of the scales in favour of a new era BTIR – dubbed BTIR 2.0.

According to Quinlan & Associates, a digitally enabled BTIR 2.0 strategy significantly outperforms not only whole life insurance by a factor of ~2.5-6.8x, but also the traditional BTIR 1.0 strategy by ~1.3x.

Traditional term life insurance premiums could be as much as ~22.0x cheaper than whole life insurance for the same sum assured, while digital D2C players further offer ~32% lower term insurance premiums than traditional players.

“If a BTIR 2.0 strategy is applied to Hong Kong’s entire whole life insurance market, then there is the potential to meet and even exceed the city’s mortality protection needs in 55 years,” stated Quinlan.

The analysis from Quinlan & Associates, a Hong Kong–based strategy consultancy specialising in financial services, was complemented by interviews with the founders of Bowtie, a virtual insurer, and Syfe, a digital investment platform with more than US$10 billion in assets under management.

Fred Ngan, Co‑Founder of Bowtie, said: “Virtual insurers now make it simple for consumers to purchase term life coverage online and invest the rest through digital wealthtech platforms. We expect BTIR strategies to gain strong momentum in Hong Kong in the coming years, offering a practical solution to the city’s growing protection gap.”

Dhruv Arora, Founder and CEO of Syfe, added: “For too long, investors have been limited to buying expensive and quite complex whole life policies. BTIR empowers them by making the process crystal clear: term insurance for protection, digital investing for growth.”

“Wealthtechs have perfected the ‘Invest the Rest’ component – at Syfe, for example, we offer an intuitive user journey and considerably lower fees than traditional managers for hundreds of thousands of users in Asia-Pacific. This efficiency is the engine that drives the exponential difference in returns, providing much needed control and liquidity which are lacking in whole life, and effectively making the case for BTIR financially.”