I did the test on UE 4.27 and it was working fine there…
I also tested this on 5.4 (preview). And guess what it works! So I assume EG are aware about this bug.
Here’s the actor with HISM:
Here’s packed level actor:
However at least in peview PLA does not update properly when you changing materials on actors inside PLA.
So If someone will find this thread and you working on 5.3 and you can’t switch to 5.4 - probably there’s a fix somewhere on Epic Games Git Hub which you can implement as a custom engine version…