Insurance premiums to rise next year

Things do not look bright for the insurance industry as various external influences may increase the premiums for both life and non-life policies.

The economic slowdown is seen as the biggest influence for the increase in life insurance premiums, while the non-life premiums are seen to increase due to the hardening of reinsurance premiums aside from the burdened economy.

Insurers explained that the hardening of reinsurance premiums was mainly caused by the Sept. 11 disaster and the subsequent series of international events.

Treaties are renegotiated annually and already talks of an increase in reinsurance premiums are causing anxiety among Philippine non-life insurers.

"Reinsurance rates hardened after the Sept. 11 incident, especially on the non-life sector. The hardening of the reinsurance premiums will definitely affect the non-life insurance premiums next year as we are reinsuring a significant part of the risk in this sector," said Ramon Abejuelar, president of the Philippine Life Insurance Association (PLIA). "The indications are there that the rates will be significantly higher next year, especially for the properties sector."

For Philippine risks in terms of the life sector, nothing significantly is happening to force a major reevaluating the risk profile.

Abejuelar said that the economic crunch remains the single biggest influence on life premium rates. Rates may not change but new policies or threats of delinquency are high.

Year 2002 projections depend on how long the international crisis will last. During a crisis situation, people will defer buying insurance because it is an "investment" that can be postponed, it is something that it is not of immediate concern.

Locally, other influences on the premium rate changes are talks of coup rumors and the persistent Mindanao problem.

The forecast growth for the life industry this year has been scaled down to eight to 10 percent for an optimistic 12 to 14.

In 2000, the industry grew by 16 percent in terms of gross premiums. Life insurance tapped P26.041- billion in terms of premiums last year compared to the P22.423-billion in 1999.

Insurance executives said that the reduction in the Filipinos disposable income was the main culprit in the drop in first-year premiums and a number of delayed premium payments for existing policies.

The non-life insurance sector registered near flat growth in 2000 in terms of gross premiums after two consecutive years of negative growth. It contracted by 2.07 percent in 1999 and 7.47 percent the year before.

Gross premiums last year reached P21.424 billion, 16.24 percent better than the P18.43 billion in 1999 despite the poor performance of the economy in the same period.

Incidentally, the life insurance sector’s premium income grew over 16 percent, or from P22.423 bill ion in the whole of 1999 to P26.041 billion last year.

The top five non-life insurers accounted for one-third of the total gross premiums of the sector or P7.059 billion while the top 10’s total premiums were P10.78 billion, nearly half of the total last year.

The top five non-life firms are Malayan Insurance Co. Inc., Prudential Guarantee and Assurance Inc., Pioneer Insurance and Surety Corp., FGU Insurance Corp., and Philam Insurance Co. Inc.

The next six are Federal Phoenix Assurance Co. Inc., UCPB General Insurance Co., Inc., Standard Insurance Co. Inc., Philippine Charter Insurance Corp., and FEB Mitsui Marine (formerly known as Makati Insurance Co.).

Malayan Insurance was the only insurer that registered gross premiums over P2 billion, or exactly P2.007 billion. It grew 7.61 percent last year from the P1.865 billion in 1999.

In contrast, FGU Insurance experienced a nine-percent contraction in premiums from P1.027 billion in 1999 to P1.011 billion last year.

Insular General Insurance Co. Inc. registered a 41.15-percent decrease in gross premiums last year. From premiums worth P411.265 million in 1999, it slipped dramatically to P241.998 million last year.

Of the total number of non-life insurance companies, 104 are local firms, four are foreign-controlled, and six are the direct branches of foreign-based insurers. – Ted Torres