Life gross premiums up 81% in H1

MANILA, Philippines - The country’s life insurance industry has recorded a whopping P95.5 billion in gross premium income in the first six months of 2013, for an 81.21-percent growth increase from the P52.7 billion in the same period in 2012.

That is more than the entire gross premium income of P87 billion recorded in 2011. Last year, gross premium income reached P120 billion.

Insurance Commission (IC) Commissioner Emmanuel F. Dooc said that hitting this year’s premium income target of P150 billion, which is 25 percent higher than the previous year, could be a walk in the park.

“If the proposed amendments to the insurance code is signed into law, this will spur further faster and stronger growth of both life and non-life industry,” Dooc said. The existing 1994 Insurance Code imposed several limitations for both the types of insurance products and the investment instruments that the industry could tap to expand reserves.

In turn, the proposed amendments would open the floodgates for new products and it would likewise allow more flexibility in the type of investment instruments for the insurer, including investments outside the Philippine capital markets.

Meanwhile, most insurers admitted that majority or nearly 80-percent of their sales in the first semester were variable or unit linked (VULs) products. VULs are life insurance products that are laced with an investment instrument, such as mutual funds.

Another popular insurance product is the single premium. It is a one-time pay policy, which are either traditional protection products or VULs.

Other insurers, such as Pioneer Life have practically stopped selling pure protection products, opting to offer the more popular VULs.

Some of the major insurers introduced VULs that are invested in either US dollar-denominated equity or fixed income instruments domiciled in the Philippines.

Or the increasingly popular fund-of-funds, or investment instruments domiciled in the region but accepts investments from the Philippine life insurers in the form of a separate fund.

Insurers believe that the pace experienced in the first semester can be sustained if not accelerated despite the prevailing low interest rates.

“The uncompetitive interest rate of the special deposit accounts (SDA) will only see the exodus of investors to better options such as mutual funds, unit investment trust funds (UITFs), retail treasury bonds (RTBs), the equity or stock market, insurance and property,” the commissioner said.

Meanwhile, the Philippine Life Insurance Association (PLIA) called on government to reappoint Dooc as commissioner with a fixed six-year term similar to what is accorded the governor of the Bangko Sentral ng Pilipinas (BSP). PLIA is the trade organization of the country’s life insurance industry.

PLIA president Esther C. Tan said that aside from the positive gains achieved during the three-year term of Dooc, “he currently has another legislative initiative being worked out in the 16th Congress that will require mandatory earthquake insurance coverage.”

Tan added that Dooc was likewise seeking steps to support crop insurance to a wider section of the agriculture sector.

“The departure of Dooc will put an undue impediment to the prevailing momentum that the industry now enjoys,” PLIA said in a letter to Finance Secretary Cesar V. Purisima dated Aug.13.

Steps are being undertaken likewise to strengthen the country’s insurance industry in preparation for the Asean integration starting 2015. Already, the proposed amendments to the Insurance Code were one of the steps in that direction.

The IC commissioner tendered his resignation stating that it was proper that he step down from office, and allow the President to appoint a commissioner under the new Code.

The outdated Insurance Code would have a facelift with the elevation into law of the proposed amendments, which awaits the signature of Aquino.

Dooc said he tendered his resignation out of delicadeza, since he was one of the staunch advocates of the proposed amendments.