Following is the full text of the speech by the Secretary for Financial Services, Mr Rafael Hui, at the annual dinner of the Insurance Institute of Hong Kong tonight (Tuesday):

"Insurance Education and Human Resources Development in the Financial Services Sector as We Move into the Next Century"

Good evening, Mr President, Ladies and Gentlemen,

It is my pleasure to join you this evening and to address you on this annual function.

I cannot claim any expertise in insurance education at all, but since as I am invited to speak on this subject, I will try to share my views with you.

Over the past year, like all economies in the region, Hong Kong has been under acute stress by a series of economic upheavals. Amidst the volatility, the Government remains steadfastly committed to maintaining and enhancing Hong Kong's status as a premier international financial centre. Much has been said since the financial turmoil about the various lessons to be drawn from the experience. One important lesson that we have learnt is perhaps the need to be always on the alert in sharpening our competitiveness, whether in prosperous times or not so prosperous times. Indeed, the remarkable economic success that we enjoyed until the latter part of 1997 may have somewhat blinded us from that very need and there was a real danger that we might have taken prosperity too much for granted. And when we remind ourselves that we need to enhance our competitiveness, we need to rethink on what exactly is our edge. It is true that our economy has undergone a very efficient process of price adjustment from properties, equities to wages. Key factors affecting the cost of doing business such as interest rates have also stabilised. But there is always a limit in cutting costs - Hong Kong has not built its success purely on being cheap - and how cheap is cheap anyway. For a service-oriented economy like ours, quality and professional standards matter also, if not more so. And this brings me to the issue that I would like to talk about tonight. In order for us to be more competitive, Hong Kong needs a top-quality workforce more than anything else.

In fact, the Chief Executive has underlined in his Policy Address last October the importance of a workforce with the ability to adapt to the challenges and opportunities ahead in maintaining Hong Kong as a leading international financial centre. In order to provide a focused and co-ordinated input to human resources planning for the financial services sector, the Financial Secretary established a Steering Committee last year to oversee a study into the need for and feasibility of setting up a Financial Services Institute to co-ordinate training for the financial services sector. Response to this initiative has been very encouraging. The Steering Committee is chaired by Dr Edgar Cheng and supported by representatives of industry organisations, financial market regulators, academia, vocational and training bodies and relevant government bureaux.

As a first step, the Steering Committee has commissioned a consultancy study to look into the present and future demand for and supply of human resources development opportunities in the financial services sector in Hong Kong. The study is the first of its kind. In the past six months, the consultants have collected, by way of interviews, surveys and workshops, data and views of a representative sample of insurance companies, banks, securities firms, fund managers, tertiary institutions, professional associations and training providers. 

Insurance industry is one of the key industries covered in the consultancy study. During this process, the insurance industry has been very helpful to our consultants. I must thank Mr Ma for sparing his valuable time to talk to our consultants, and also all the insurance institutions and persons who have taken part in our study by meeting our consultants, completing the questionnaires and attending the workshops.

With the joint effort and contribution from the industry and other relevant parties, the consultants have identified key factors driving the future changes and developments in the financial services, including the insurance industry. These factors include the potential development of the Mainland market, the broadening of traditional distribution channels, the changing customer demand for more sophisticated services, the use of information technology, and the mergers and reorganisations of corporates. 

For the insurance industry in particular, these factors together with the introduction of the Mandatory Provident Fund, and the initiative taken by the Government to promote captive and reinsurance businesses in Hong Kong, have important implications for human resources and skills in the future for the industry. The industry needs people who have the ability to upgrade product development, transform operations and work across traditional business lines; people with in-depth product and risk knowledge to provide financial planning and advisory services; people with strong financial analytical skills, sound understanding of financial matters and specialist knowledge of MPF schemes. 

However, the consultants have found that there are at present deficiencies in meeting the human resources development needs in the financial services sector generally. The problems, which are common to all industries in the sector, are mainly due to an unclear articulation of training needs of the industry and a lack of formal links between the industry and the training providers. They also point out the need to strengthen the coordination and communication between the users and the suppliers of training courses.

The consultants have just completed and submitted its final report to the Steering Committee. Consideration is now being given to establishing an on-going mechanism to encourage and facilitate cooperative and coordinated efforts among all players in the financial services sector, including the insurance industry, to meet the human resources needs of all stakeholders. That mechanism may take the form of an advisory body to serve as a forum for all stakeholders to coordinate the long term planning of human resources development. There may not be a need to set up yet another physical financial services institute for the delivery of training programmes to avoid duplication with existing resources. The Steering Committee will finalise its recommendations for submission to the Chief Executive this summer.

Given the tremendous growth of our insurance industry, it is absolutely essential that our insurance practitioners are able to deliver efficient and professional financial services that compare favorably with those in other major international financial centres. As a body established to promote insurance studies and professionalism among the practitioners of the insurance industry, the Insurance Institute, I believe, would share the Government's vision to upgrade the quality of the local workforce.

Educational institutions, professional bodies and employers have all contributed, to varying extents, towards meeting the needs of human resources development of the insurance industry. The Government has also taken concrete steps to promote degree-level insurance education by encouraging universities to launch degree programmes on insurance and risk management. I must mention that the Insurance Institute of Hong Kong also has provided valuable contributions rightful share of contribution in insurance education. In the past decade, the Institute has been zealously pursuing different measures towards the development of a local insurance qualification in Hong Kong in order to enhance the status of Hong Kong as an international insurance centre. The launch of the Hong Kong Diploma in Insurance Studies since 1989, with the support of the Chartered Insurance Institute and the Australian Insurance Institute, marked an important first step in the development of a local insurance qualification in Hong Kong.

I know that the latest development in the Institute's pursuit of developing a local insurance qualification is to explore the possibility of establishing a more structured Hong Kong based qualification that will be recognized locally and internationally. This is not an easy job and but is definitely a worthwhile undertaking. The many people who have been involved with the development of this proposal should be commended. I also expect the Institute to contribute towards the work of the new mechanism (which I have referred to earlier) to be established to co-ordinate human resources development in the financial services sector.

So much have been said about the development of insurance education and a local professional qualification. We have not overlooked the need to promote the professionalism of the insurance intermediaries.

The number of insurance intermediaries has rapidly increased in the past few years. Insurance products are increasingly complex and sophisticated. There is certainly a need to assure the public of the quality of these intermediaries both in terms of the insurance knowledge they should have and the standard of service they provide.

Currently, all agents are required to be registered with the Insurance Agents Registration Board upon appointment by their insurer principals. Agents need not sit for any independent qualifying examination before registration although many agents, particularly those in life insurance, have to go through in-house training programmes arranged by their principals.

Insurance intermediaries in many parts of the world, including Mainland China, Singapore, Taiwan, the United Kingdom and the USA are required to pass a qualifying examination before they can be licensed. The Government has decided that our insurance intermediaries should be subject to a similar requirement in order to bring Hong Kong more in line with international practice and to enhance the status of the profession, and hence, the industry. The Financial Secretary has announced in his Budget Speech earlier this month that the Government will proceed with the implementation of a Quality Assurance Scheme for insurance intermediaries. Under the Scheme, insurance agents and brokers are to be properly trained and qualified through publicly held examinations before they can be registered or authorized. They will also be required to attend continuing professional development programmes in order to maintain the registration or authorization.

A timetable has been worked out for the implementation of the Scheme. The first public examination is scheduled to be held in the third quarter of 1999, mainly to match the implementation of the Mandatory Provident Fund Scheme under which agents and brokers wishing to sell MPF products will be required to pass the relevant qualifying examinations before they can do so. The Quality Assurance Scheme will be fully implemented in early 2000. A Steering Committee, comprising the representatives of the insurance industry and the related professional bodies and chaired by the Commissioner of Insurance, has been formed. This Committee will formulate detailed plans for the implementation of the Scheme, including the development of a qualifying examination system and the continuing professional development programmes.

We will soon enter the next millennium. Competition will only grow keener because of global market integration and the widespread application of information technology. Last year, we went through the painful experience of the worst financial turmoil ever in the history of Hong Kong. There are however signs that the financial chaos is now gradually being brought under control. We know that something must be done to revitalize our economic strength and to regain our competitiveness. I have confidence that our direction, which is to go for upgrading of quality must be correct. And, I believe also that the Insurance Institute of Hong Kong will continue to join the Government in the constant persuit of maintaining our competitive edge amongst the leading financial centres of the world.