MANILA, Philippines - The country’s strong economic fundamentals are working in favor of another banner year for the life insurance industry.
Premium income is expected to establish another record level of P200 billion in 2013 from the existing record of P120 billion in 2012. The conservative forecast points to a 20-percent growth in premium income for 2014.
In the first three quarters of last year, the life insurance sector already surpassed the net income registered for the whole of 2012.
Net income at the start of October 2013 already stood at P11.2 billion, higher than total earnings of P9.7 billion in 2012.
But Philippine American Life and General Insurance Co. (Philam Life) would rather emphasize on increasing the number of protection-oriented life insurance products sold or introduced to the market.
Philam Life president and chief executive officer Rex A. Mendoza said that its agency force would continue to concentrate on selling protection products.
“We were built for offering protection; that is our business and that is the reason for being,†Mendoza said. Total agency force was placed at over 6,500 last year.
He said that their bancassurance joint venture company would take care of the single premiums and variable unit linked (VUL) investment products, while our agency force would take care of marketing the traditional life insurance that puts emphasis in protection.
The Bank of the Philippine Islands (BPI) and Philam Life formed a joint venture bancassurance company called BPI Philam Life Assurance Corp. (BPI Philam).
In 2012, Philam Life and BPI Philam reported a combined total premium income of P26.6 billion.
Nearly half of products sold by Philam Life were VULs (worth over P6 billion) while BPI Philam sold over P10 billion in variables.
Traditional protection products through traditional payment mode offer greater coverage for the public. Premiums are paid in staggered periods making it easier for the insuring public to access one.
For the insurer, traditional products through traditional payment mode assure a steady stream of premium payments over a longer period of time.
However, the expected liberalization of the Bangko Sentral ng Pilipinas (BSP) regulations on the sale of investment-linked or VUL insurance products under the cross-selling or bancassurance environment favors strong growth for investment products.
In 2012, VULs accounted for more than half of the total premiums sold. And there is no stopping the public from seeking more opportunities with the limitations set on the special deposit accounts (SDA).
Without the SDAs, liquidity will be looking for outlets and one of the favorites are the single premiums. Single premiums are VULs which a one-time payment scheme that affords the public with both investment and insurance protection.
Single premiums are cheaper but offer limited protection albeit offers another investment instrument for the public.
Insurers can register stronger growth in a given year through single premiums but it does not have a strategic gain in terms of recurring business.