Kim Chiu and others on savings, mutualization, secret nest egg and money issues

I have learnt to seek my happiness in limiting my desires, rather than attempting to satisfy them. — John Stuart Mill

You have succeeded in life when all you really want is only what you really need.  — Vernon Howard

He that has a penny in his purse, is worth a penny: Have and you shall be esteemed. — Petronius

At a recent three-hour private breakfast with regents, officers and some members of the Anvil Business Club of which this writer is chairman, Jollibee president Ernesto “Ato” Tanmantiong said during this period of global crisis, business people “should go back to basics.” Indeed whether professionals, homemakers, students, executives or entrepreneurs, we should go back to basics, promote savings, efficiency and hard work.

I believe one of the best ways to support economic development is promoting a national culture of savings in the Philippines through life insurance, bank deposits and others. Saving money is also one sure path to create wealth and family security. Through this partnership of The Philippine STAR and the largest homegrown life insurance giant Insular Life, we pass on readers’ questions on life insurance and other personal finance issues to Insular Life officials for their advices.

Some readers asked questions on their Social Security System (SSS) membership, and I texted them to SSS chairman Romulo Neri, thanks for his assistance! Thanks for many readers’ letters; all will be answered while some will be randomly selected for publication. Today, we are privileged to have Insular Life leaders led by the highly-respected chairman & CEO Vicente R. Ayllon himself answering your questions.

Question 1: How do life insurers like Insular Life invest trust funds?

I am Leo T. Lagon of the Unica Hija apparel business, 44 years old with three children and I’ve been reading your column for years. How do life insurance firms like Insular Life invest their trust funds? If the public knows where insurance premiums are invested, it would strengthen public confidence in life insurance companies.

Answer:

Our investments are made within the strict regulation of the Insurance Commission and are diversified across various financial instruments. Close to 60 percent are in fixed-income securities, risk-free government bonds, term loans to prime corporations and short-term investments. Recently we extended a total of P1.25 billion in term loans to top corporations in the telecom industry, energy and property development.

Insular Life also has strategic equity investments that regularly pay cash dividends, and invests in listed equities for long-term growth and capital appreciation. Our investments in prime real estate like the Insular Life Corporate Centre in Filinvest, Alabang, the Insular Life Makati building along Ayala Avenue and some other properties located in the Makati Business District and key provincial cities have over the past several years continued to bring in substantial lease income for the company.

Aside from these investment strategies, Insular Life has more than adequate reserves for policyholder liabilities and sufficient liquidity to meet maturing insurance obligations. Last year, the company’s net income amounted to P2.1 billion despite difficult economic conditions. Conservative and fundamentally sound investment policies, firm underwriting guidelines and strong actuarial basis have always been the basic foundation of Insular Life’s sound management practice. This should assure our publics that Insular Life will remain to be the strong, stable and formidable institution they have depended for almost 100 years. — Vicente R. Ayllon, Chairman of the Board and CEO

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Question 2: What is a mutual company? Does it make a life insurer better?

My classmates and I enjoy your STAR columns, and we are fascinated by your recent series about saving money and insuring. I have read before that Insular Life is a mutual company, can you explain its meaning? Does being a mutual firm make it more credible or more well-managed? Just curious. More power to you and our favorite newspaper The Philippine STAR. — Ma. Kathryn M. Deveras, Cagayan de Oro City

Answer:

Ms. Deveras, yes, Insular Life is a mutual life insurance company, organized in accordance with the provisions of the Insurance Code. As such mutual company, it is a non-stock corporation composed of members. This is in contrast to a stock company that is composed of stockholders owning shares of stock in the corporation. The members of the corporation are its policyholders based also on the provisions of the Insurance Code and the corporation’s amended by-laws.

The most compelling virtue of a mutual company is the fact that the mutual company’s members and policyholders, like in the case of Insular Life, are the same parties thus having the same interests. For mutual life insurance companies, like Insular Life, the interests of the policyholders-members are always foremost. As there are no stockholders to speak of in a mutual life insurance company, Insular Life focuses all its attention on safeguarding the interests of its policyholders-members as its primary stakeholder. The Company is able to manage its financial operations more in accord with the long-term interests of its policyholders-members.

We assure you that Insular Life, with its ranking as the third largest life insurance company in an industry that is dominated by the global insurance giants and its almost 100 years of dependable excellent service to the Filipino people, will always be there to provide the best quality products and services to its members. — Mayo Jose B. Ongsingco, President & COO

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Question 3: Am I too young for life insurance?

I save half of all my earnings because it’s not certain whether I will still be a celebrity in the future so saving money is really important. Life insurance as a concept seems too far from my needs now, because I am too young. I never think about it, because I don’t like to think about death. — Kim Chiu, 19, self-supporting ABS-CBN 2 actress, born in Leyte and grew up in Cebu in the care of her grandmother

Answer:

Hi, Kim! Thanks for your very candid comment. Before anything else, allow me to congratulate you for your foresight. Saving at least half of what you earn today for your future financial needs is indeed a good idea given that there is no certainty you will earn as well over the long haul. Time and time again, it has been said that “there are no guarantees in life and the future is uncertain.” This adage applies not just to celebrities like you but to everyone. Because we face real risks on a daily basis, we need to seek financial protection, and investing in life insurance is the most cost-effective way to do this. You might be thinking of life insurance along the lines of “death benefits.” But there are more uses for life insurance other than financial indemnity upon death of the insured. You may need to get cover for accidents or disability or perhaps secure long-term guaranteed returns for your savings. Are you diversifying your assets? Do you have a financial plan? If you answered “no” to any of the 2 questions I raised, it may be good to see an Insular Life financial adviser. Our financial adviser will walk you through a plan meant to address your varying financial and protection needs. Just call us at 582-1818 loc 1850 and we will be happy to help you. — Amelita F. Tamayo, Vice President & Head, Marketing & Agency Services Division

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Question 4: Why do most life insurers not like to cover senior citizens?

How can life insurance firms help senior citizens like me, who are no longer young and who might have various ailments, to avail of life insurance protection? I believe in life insurance, but I know most insurers refuse or do not like to insure senior citizens of a certain age? — Rex Drilon, 63, chief operating officer of Ortigas & Company

Answer:

The reason insurers are generally unable to offer life insurance to persons beyond a certain advanced age is primarily because the premiums will already be too prohibitive given the much greater mortality risk. Life insurance works best when it is acquired earlier when the person’s life expectancy is still quite long. As with all financial instruments, sufficient time is required to accumulate the desired fund needed for the future. Another factor that affects the Philippine insurance industry from developing more products for seniors is the very low level of insurance penetration in our country. This means that the risks cannot be spread yet as widely as possible to make it feasible to market a greater variety of products. It is for this reason that we are pursuing vigorously the advocacy of making Filipinos more financially literate and appreciative of the need for risk management. We hope we can offer more coverage and financial benefits such as retirement annuities or long-term medical care funds in the future when there is a sufficient mass of insured Filipinos. — Jesus Alfonso G. Hofileña, Executive Vice President & Head, Sales & Marketing Group.

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Question 5: Is a savings nest egg by housewife okay? What best life insurance with endowment?

My husband is a top executive in a multinational firm, I’m a housewife and a part-time realty broker. My husband is good, but I want to ask what your opinion is on my habit of secretly setting aside my own personal savings or nest egg from my incomes and from excess cash in family allowances? I believe that wives should also have our own savings for independence, for security just in case any problems (God forbid) might happen to the marriage. Second question, what life insurance policy with endowment can I buy that will give me returns, and can I keep this secret from my husband, too? — Jane, 35, Ayala Alabang, Muntinlupa

Answer:

Jane, thank you for your very important questions. I have consistently advocated that everyone should develop and maintain a sound savings discipline. I honestly believe one reason why persons become financially distressed at some point in their lives is because of failure to plan ahead for their future economic needs. Today’s cost of living should only make us more aware of the certainty of even higher costs tomorrow. Therefore everyone should habitually save for those inevitable expenses. Life is also uncertain. We are all exposed to risks that can change our lifestyle in an instant, and this is why we must be protected especially against financial ruin due, for example, to the sudden loss of the family’s income. Housewives are more conscious and concerned of this danger because of their and their children’s economic dependence on the breadwinner. In my view, therefore, you are just being wise as well as practical. Should you decide to apply for a policy, you need not get the consent of anyone; you may do so entirely on your own. As for endowment policies, Insular Life has a number of different products for your consideration. Please allow us to personally consult with you so we can make the best recommendation for your particular needs and circumstances. Do call us at 582-1818 loc 1850 and so we can determine the best product for your needs. — Jesus Alfonso G. Hofileña

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For more inquiries, or if you want to schedule a Wealth Management Forum for your group, call Insular Life’s Brand Marketing Department at 582-1818 loc 1850 and 5124 or email brand@.insular.com.ph or visit website: www.insularlife.com.ph.

Thanks for your letters, all will be answered even if not all can be published due to space limitations. Questions or comments welcome at willsoonflourish@gmail.com or at my Facebook account.