Non-life insurers face stiff competition

MANILA, Philippines - Despite having recorded extraordinary growth in 2012, the country’s non-life insurance industry faces daunting challenges. 

Last year, gross premiums written (GPW) reached P56.8 billion, excluding professional reinsurers. 

It is 175-percent higher compared to the P32.3 billion in 2003. 

But Philippine Insurers and Reinsurers Association (PIRA) president Emmanuel R. Que said that the 80 non-life insurers are scrambling over a very small pie of P56 billion or about P1.4 billion in total premiums. 

“Our gross premiums are even less than that of Singapore which registers about $1.5 billion every year. Singapore has a total population of a little over four million while we have 92 plus million,” Que said a report. 

Singapore is served by an excess of 40 non-life insurance companies, while we have more than 80 companies fighting over the $1.4 billion in total premiums. 

The PIRA president lamented that due the stiff competition, many companies have resorted to breaching tariff rates, which are the minimum levels dictated by prudent underwriting. 

Unnamed non-life insurance executives admitted that a number of players have stopped practicing traditional underwriting. 

“They just follow the rates set forth by the competition,” they said.

PIRA officials said that that practice may be acceptable when there is no loss. But when a loss or a huge claim occurs, then the story changes altogether as their reserves are insufficient compared to the unrealistic pricing. 

“As professional risk managers, we cannot afford to take too much risks,” Que commented. 

Meanwhile, the PIRA president said that aside from stiff competition is double regulation. 

“We pride ourselves as a well-regulated industry which to some extent translates to being a very stable industry. But the fact is we are actually suffocating under doubly-regulation,” Que, who is also the executive vice president of Charter Ping An Insurance Corp., said. Charter Ping An is a member of the Metrobank Group. 

Aside from the Insurance Commission (IC), other government agencies and local government units (LGUs) have their own so-called accreditation requirements. 

In Makati, for example, there is an ordinance that no insurance company can issue comprehensive general liability insurance to business owners renewing their business license without first getting accreditation from city hall. The same is true for Quezon City and the Department of PublicWorks and Highway (DPWH). 

“This is double regulation is further reducing the size of our business. I hate to say this but to some extent it is also eating a sizable amount of our already very thin margins because we have to pay corresponding fees to these government agencies for accreditation. This is without mentioning the corruption that we all know exists in many of these government agencies,” he lamented. 

PIRA said that other concerns are unfair competition from the Government Security and insurance Service (GSIS), and the negative perception of the public on the non-life insurance industry.