Asean integration realigning insurance standards

MANILA, Philippines - The Asean economic integration starting 2015 will force government regulators to harmonize the way it measures the performance of the country’s insurance industry.

The integration among others requires the harmonize and align of regulations, tariffs, and other measures that creates a level playing field for all 10-member nations to do business within the Asean.

This is particularly true in the way the Insurance Commission (IC) evaluates the performance of the Philippine life insurance industry in terms of premium income.

The recent IC 2013 performance report of the life insurance industry used gross premium income as the basis for rating individual insurers.

That includes single premiums, first year premiums (FYPs), and renewal business.

However, the international standard only take into account 10 percent of the single premiums as part of the total premium income.

Single premiums or single pay are policies that are one-time pay life insurance policies that are predominantly an investment instrument laced with a smaller protection portion.

Insular Life Assurance Corp. president and chief operating officer Mayo Ongsingco said the international practice only “weighs” or includes 10 percent of single premiums in total premium income.

That means not only counting the smaller premium on the insurance portion, but also investments, which is actually the majority portion of single premiums.

“This could overstate or distort modal premium payments,” Ongsingco said.

Foreign insurers operating in the Philippines are already reporting their premiums based on weighted total premiums.

In last year’s IC report on premium income, gross premium income reached P170.2 billion, composed of both weighted and not weighted premiums.

This has prompted First Life Financial chief executive officer Peter Coyuito to state that the country is not realistically reporting its annual performance. 

“We should adopt the international standard, and the regulators must institutionalized it,” Coyuito said.

Several insurers prefer to report gross premiums since it blots their numbers and their over-all standings in the industry.

As a compromise, the chief executives suggest that the regulator releases an annual report outlining the weighted and gross positions, aside the usual FYP, single and renewal premiums in its annual reports.

Pru Life UK chief executive officer Antonio Manuel G. de Rosas admitted that the over-all ranking of the country’s life insurance industry will not dramatically change with the adopting of international standards of measuring premiums.

“But it will paint the real picture of the state of the Philippine life insurance industry in terms of premiums instead of a blotted one,” De Rosas added.

Most life insurers with foreign principals or partners are forced to make two reports.

One report is “weighted” following internal as well as international standards, and another following the gross premium format.