Life insurance industry sees 20% growth in premiums

The life insurance industry is forecasting another 20 percent growth in premiums this year, equaling the growth in 2006.

Total premium income in 2006 reached P56.4 billion, or 20.23 percent higher than the P46.9 billion recorded in 2005.

According to the Philippine Life Insurance Association (PLIA), growth will come mainly from variable or unit-linked (VUL) products which are basically life products laced with investment instruments.

“We expect the VUL segment to grow by at least a hundred percent this year,” Emilio S. de Quiros, PLIA president, said. “But we are concerned that the traditional life products will be left behind.”

Last year, traditional life insurance products grew less than 10 percent after shrinking eight percent in 2005.

Also in 2006, new business recorded a growth rate of 40 percent to P19.83 billion.

Of the new business premium income, variable products accounted for P11.12 billion or 56 percent of total, while traditional life products amounted to P8.71 billion or 43.92 percent of total new business.

Insurers, however, expressed concern that the recent decrease in interest rates may force them to reprice their products.

The Bangko Sentral ng Pilipinas (BSP) last Thursday cut its key rates by 25 basis points to 5.75 percent. This development, they said, could lead into possibly lower earnings in investments, which are critical in building the reserves for future claims of the insuring public.

Interest rates have been dropping in the past years, forcing insurers to increase the price of their premiums.

“That is a condition that we must to do to ensure the health of our reserves,” De Quiros said. “It will not make insurers richer, it will make the reserve more secure.”

Insurance companies have limited options in making investments, with the bulk in fixed income instruments. These, in turn, are generally government securities earning between three to five percent.

“It is a good thing that the equities market is bullish, offsetting poor fixed income earnings,” Mayo Ongsingco, president and chief operating officer of Insular Life Assurance Co. and PLIA director, pointed out.