Local Insurance Industry Now Heads to Period of Solid Growth
MANILA, Philippines - There are signs that the Philippines insurance industry may be heading towards a period of solid growth, with both the state and the private sector stepping up efforts to encourage the public to embrace insurance as a way of life. It will be some time, however, before the domestic market will be able to rival that of most of its neighbors.
Data compiled by Sun Life Financial Philippines, one of the country's leading policy writers, shows that insurance penetration levels in the local market remain low - at around 14% - and well below that of regional markets.
At the end of last year, the Philippines was ranked the third-smallest insurance market in the East Asian region in terms of insurance premiums, ahead of only Macau and Brunei Darussalam, with the life insurance segment valued at under $2bn.
According to Commissioner Emmanuel Dooc, head of the Insurance Commission, the state agency charged with regulating the industry - one of the key reasons that current penetration rates are so low is the public's lack of confidence in the sector.
Dooc said it was understandable that many people had doubts about insurance companies, given that in previous years there had been instances of insurance and pre-need companies going bankrupt. This meant that they failed to meet their responsibilities to their clients, undermining confidence in the industry, he said.
To counter this, both the government and the industry are working to overcome the negative perception many Filipinos, especially low-income earners, have of insurance services. The commission has further tightened regulations governing the sector, making entrance into the market far more stringent, Dooc explained. "Only duly licensed firms, with strong financial capitalization, are allowed to engage in the insurance business," he said.
The Insurance Commission has also been promoting microinsurance as an option to those in lower-income groups as a way of building financial security. These policies, which are increasingly being made available through licensed agencies in rural areas as well as in large cities, offer limited payouts but boast low premiums. Premiums for a standard microinsurance policy can range from around P30-P600 ($0.4-8.8) a month, with life, health and property policies being the main focus. …