Insurance industry growth hampered anew

The country’s life insurance industry is strong, innovative and resilient despite the odds stacked against the industry that contributes more than 20 percent of the gross value added of the entire financial system.

The Insurance Commission (IC), regulator of the life, non-life and reinsurance industry is optimistic that it would record a 10-percent growth rate in terms of premium income. Premium income amounted to P46.9 billion in 2004.

"Broader distribution system, more competitive insurance products, and enhanced capability to monitor proper reporting could lead to a growth rate of about 10 percent," Insurance Commissioner Evangeline Escobillo said.

The commission wants 20 percent of the population to have one kind of life insurance, whether it is written by the private sector or the government pension funds. Conflicting reports indicate between 12 to 14 percent of the country’s population is covered by insurance.

But industry insists that it is a low five percent when it comes from private sector-issued policies.

While urging greater coverage for the Philippine population, the IC will soon enforce higher capital base requirements to ensure the ability of insurers to meet claims.

The private sector is a little more conservative with regards growth rates for 2006.

The Philippine Life Insurance Association (PLIA) was looking at a single digit growth rate this year due to poor economic conditions coupled with a stiff regulatory environment and unfair competition.

"If the country’s gross domestic product (GDP) grows by five percent this year, our projected 2006 premium growth is six percent, which will bring us premiums in the vicinity of P50 billion," Peter Coyuito, PLIA president and president of First Life Insurance.

Aside from poor economic conditions, Coyuito also cites stiff regulatory conditions, stifling tax environment, and undue competition from unlicensed foreign insurers.

"They are cornering the high-value market while depriving the national government of the much-needed revenues," the PLIA president said.

Former PLIA president Jose L. Cuisia Jr. echoes the association’s not-too-optimistic views forecasting a five-percent premium growth for the industry this year. He is also the president and chief executive officer of the Philippine American Life and General Insurance Corp.

Aside from the unfair tax enviroment, Cuisia also cites the negative impact of the gasping pre-need industry, poor investment conditions, and the unfair level playing field vis-a-vis the other financial institutions.

Insular Life Assurance Corp. president and chief operating officer Mayo Ongsingco sees a single-digit growth rate governed among others by high oil prices and low interest rates, and its spiral effect on the economy.

Insurers cited a study conducted by the University of Asia and the Pacific (UAP) citing the Philippines as having the most complicated tax environment in the region.

The country’s life insurance industry is slapped a five-percent premium tax, a documentary stamp tax (DST), taxes on interest income, taxes on notes, bonds, and bills, taxes on sale of shares, capital gains tax on sale of land and buildings,. taxes on rentals of property, local government taxes, and corporate income tax.

The Philippines is the only country that slaps a tax on premiums. That means a Filipino policy holder is penalized by government for investing in savings and buying long term protection.

Poor insurance growth results in lower investments to the country’s fledgling capital markets which has a direct impact on foreign indebtedness.

"This is an onerous burden to middle-aged to elderly buyers (of life insurance) who generally pay higher premiums and therefore higher premium taxes," the study said.

In other countries, life insurance policies are tax deductible to encourage the purchase of insurance.