"Demystifying Life Insurance - the Insular Life Way"

I’m not much of a Tom Cruise fan, but one of my all-time favorite movies is “Jerry Maguire.” While some may be view it as a chick flick, the film also appeals to guys like me because the sub-plot revolves around sports and sports management. It ‘s also a movie that’s packed with immortal quotable quotes. Expressions like “Show me the money,” “Help me help you,” “You got me at hello,” and “You complete me,” are now part of our daily dose of clichés.

But for me, the one line that struck me in that movie was a question that the character of Renee Zelwegger, Dorothy Boyd, posed to Jerry Maguire when she decided to resign from a secure job at a big company to join Jerry in his one-man operation. The very first question she asked him was - “You do have medical, right?” It’s intriguing. Think about it out of all the possible questions she could have asked at that time (e.g. “How much is my pay?”, “When do I start?”, “Where do we hold office?”, “What’s the career path?”, “Will you offer stock options?”)  she asked about medical insurance. And this was again emphasized when Dorothy’s disapproving sister, Laurel, grilled her by asking  “Why did you do it? Does he have medical?”

Out of all the beautiful lines in “Jerry Maguire,” these were the ones that struck me because it made me realize just how important insurance coverage is to Americans. Insurance to them – be it medical, accident, life, or non-life – is so important that it often becomes a major political issue. President Barack Obama’s campaign promise, in fact, centered on insurance particularly health care. And it’s probably the reason why he won. Americans want protection, security, and peace of mind. And they won’t compromise on it.

We Pinoys on the other hand, seem to be afraid of the whole concept of insurance. We have this attitude that insurance is an expense – an expense that we don’t particularly like because we don’t get any immediate benefit. We just get a piece of paper - a policy - and that’s it. But what most of us don’t realize that insurance is one of the best gifts we can provide not only for ourselves – but for our loved ones. The whole concept of insurance- that is, the equitable transfer of the risk of a loss from one entity to another, in exchange for payment  is, to me, one of the best ideas that man has ever come up with. Apart from using utensils when we eat, the concept of insurance is the one thing that clearly differentiates us from animals. The transaction of insurance, if you think about it, is very cool – it involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the case of a large, possibly devastating loss. It’s an amazing concept. If you think about it, everyone should be jumping at this opportunity. And yet, we Pinoys are ambivalent about insurance.

I recently had lunch with a brother of an old school mate, Jesus “Jess” Hofilena, who happens to be the head of sales and marketing at Insular Life. I had a nice chat with him about insurance and I thought I’d take the opportunity to formally interview him. Here’s how the conversation went:

ROD NEPOMUCENO:  Jess, let’s talk about insurance in general - that is, the whole concept of setting aside something now in order to protect yourself in the future. While the insurance industry is huge, and the concept of insurance has been around for centuries, and almost everyone will agree that it is wise to in insurance - there still seems to be this pervasive feeling that people, particularly Filipinos,  need a lot of convincing for to get insurance. Why is that?

JESUS HOFILENA:   There are a number of reasons, Rod. Part of it is economic, because many Pinoys generally have less money to spare. But more than the economic side, there’s a social, cultural, psychological aspect to it as well. Culturally, we Pinoys have a strong concept of family. We have extended families. We are close to the nephew of the auntie of our cousin. So we have a network of support we rely on. And this concept of “my family’s got my back” is akin to the whole concept of insurance really. We Pinoys watch out for our family members. So we bear the risk of each other. Whenever a family member is in trouble, we pool our resources so that member is taken care of.   And ironically, that’s one of the hindrances of Pinoys in getting insurance. It’s this whole mindset that  “Hey, it’s ok – should I get into financial trouble - all my relatives will pool their resources to help me out. When my back is against the wall – I know my family will be there.” It is this expanded family culture that sometimes hinders people from tapping professional risk management. 

Then, beyond economics and culture, there’s also the aspect of education. Most Pinoys don’t understand insurance. As an industry, we have to address this better and in a more concerted manner. We at Insular are training our agents so that they can better explain insurance to customers – in a language they can understand. We have to demystify the concept of life insurance. 

RN:  How has insurance and investment  - particularly personal and family insurance  evolved over the years? 

JH:   Well, insurance has always been known to be a sales-driven type of industry. The whole idea was that we had a nice concept – a nice product – and then we would just push it to customers and convince them to buy, and thereafter, the agents get their commission. But lately, particularly in the US, insurance has also become a marketing-driven industry. Instead of just selling products, they evaluate the customer’s needs. They ask about their customers’ wants, needs, goals, and priorities in life  and they then try to see how life insurance can fulfill those wants, needs, goals, and priorities. Thereafter, they offer a life insurance product that’s tailor-fitted to a customer’s goals and resources– at that particular stage of his or her life.

The whole concept of life insurance is so pervasive in the US, that there’s even a non-stock non-profit organization called L.I.F.E. – which stands for Life Insurance is for For Everyone. It’s an advocacy group that promotes the need for, and the importance of, life insurance. The organization promotes the virtues and advantages of having life insurance – and that everyone should be covered.

RN: I know that with the Pinoys’ “bahala na si Batman” attitude, we tend to live for the now, and thus, insurance is normally not on top of the list of priorities. Percentage-wise, how many Pinoys have zero insurance and investment? 

JH: Well, let’s put it this way  insurance premiums paid as a ratio against GDP is only less than 1 percent. This is very low – not only compared to the US, but compared to our Asian neighbors. There’s very little allocation for insurance in an average Pinoy household. We really need to correct this.

RN: Does this concern you?  (the lower percentage of Pinoys insured)

Yes, because if a breadwinner, for example, is not being covered by life insurance, and something happens to that person, it can result to untold hardships for those he leaves behind. And this is another hindrance to Pinoys getting life insurance – the fact that we have to bring up the subject of death. We Pinoys think death is morbid – and we don’t like to talk about it – particularly our own death. But the fact is, whether you like it or not, death is inevitable. It will happen. It’s a reality that all of us must face head-on. However you think about death – it’s something you really ought to plan for. Because sooner or later – and we all hope it’s later – it will come.

RN:  I think generally, people know that insurance and investing for the future is important.  But most people make this the last priority - and tend to spend first what they think they need now, and what they want - before they set aside anything for the future.  Personally, that’s how I sometimes feel.  And I tend to set aside for other things first  e.g. home mortgage, utilities, clothes, iPad, iPhone  before I set aside for life insurance. Because the whole thinking is, I want to spend money- and enjoy the benefits now.   How do you convince people that they should set aside for insurance and investment first BEFORE they spend on their expenses?

JH: It’s funny because I think it’s all about re-aligning people’s attitudes and perceptions. For example, do you own a car?

RN: Yes.

JH: Does the car have a spare tire?

RN: Yes.

JH: If the car salesman told you – “Sir, you can buy this car for 1 Million – without the spare tire. But for an additional 3 thousand, you can get the car, and a spare tire – what would you do? 

RN: I will buy the spare tire – and leave the car.   Just kidding. Of course, I will buy the car WITH the spare tire. I don’t want to be driving around town without a spare tire.

JH: Exactly. No one in his right mind will buy a car without a spare tire. Because you want that peace of mind. You don’t want the thought of getting a flat tire without having a spare tire. And yet, here’s an amazing statistic. They made a study on car owners – and they found out that most car owners never ever use their spare tire during the course of their ownership of the car. And yet, no owner will scrimp on a spare tire. Why? They just don’t want to take the risk of getting a flat without one.

So Rod, let me ask you – don’t you think your life is more vital than a spare tire? I am sure that your family doesn’t consider you a spare tire. Your life is more valuable than that. And that goes for all breadwinners out there.

RN: Well, a spare tire and me have one thing in common – we both have a lot of hot air – but I get your point.

JH: And that’s the whole point of life insurance.   Most Pinoys equate life insurance as morbid  but like I said, like it or not - it will happen.   Life insurance is important in order to provide a financial resource for your family should something happen to you. And that can provide greater peace of mind than a spare tire.

RN: But what if I argue that I can have more money by simply setting aside money on my own – without having to give it to an insurance company?

JH: Ah, good question. You know, if you ask the average man on the street, “Is it a good idea to save money? - the man will say “yes, absolutely.”   But if you ask if they have saved enough - the answer is more often than not “No.”

Sure, some people argue that if they saved their money rather than set it aside for life insurance, they will have more money by age 60. Mathematically, they could be correct. But let’s apply a little social reality here: On their own, people can’t really set aside enough – it’s a fact. Because if they have easy access to the cash set aside– they will likely spend it. The tendency of us Pinoys is that when we get a windfall, we treat the whole barangay. Then we have to start saving again.   Insurance, on the other hand, is forced savings you set aside – then you forget about it – and it grows without you knowing it. Also you’re protecting yourself from price increases in the future. Will you have enough to cover the financial resources of your family in the future by merely saving? Probably not. How much is the interest rate on a savings account? Less than 1 percent a year. How much is inflation? 3 to 5 percent? Maybe more. With life insurance, you can get much more than that, when the time comes.

RN:   Jess, I noticed you have this new program called Life Stage Marketing.   What makes this program unique? 

JH: Oh yes, our Life Stage Marketing campaign. You see, by and large, in the Philippines, we have not been able to equate insurance with life stages. Two years ago, when we were 2 years away from our 100th birthday (Insular Life’s anniversary, that is) – we evaluated our brand, that is, what we stand for, what our mission was, etc. You see, there’s a generation out there that knows what we stand for – and another generation – the younger generation that doesn’t. It’s like SM. I once asked my daughter what “SM” stood for. She said, “I know the “S” stands for Sy – I just don’t know what the “M” stands for.”   The new generation doesn’t know that SM stands for Shoemart. For Insular, it’s the same  some people know IL. Decades ago, when you said IL – it automatically meant Insular Life. Today, the young generation wouldn’t know what IL is.

So we refreshed our brand. We spelled out “Insular Life” in our logo - and we have the Philippine eagle – representing our Philippine heritage. Our new tagline – “Look ahead. Be assured.” We are far-sighted guardians. The whole concept of a “guardian” is appropriate to what we do and what we stand for. We work with you as a partner, a primo, a big brother to help you in your various life stages. And that’s where the Life Stage Marketing was derived.

We needed to create this program because we realized that people in different stages of their lives have a different take on life insurance. The relevance of insurance is different in each life stage. Life insurance, traditionally is about protection. But at a certain stage in life, the concept of “forced savings” for your family in the future is relevant.   And in another stage in your life, you’re more interested in long-term investment and retirement and health security.   So when we talk to customers – we need to take note of what stage in life they are in. Are they single working individuals?   Are they married? Do they have kids? Are they empty-nesters? Are they about to retire? Based on their stage in life, we would then recommend the right life insurance product for them. We don’t immediately tell them what we offer. We ask them where they are in life, what they need depending on their lifestyle, their needs, their priorities, etc.

One needs to have the right priorities for one’s insurance purchases. I meet some people who scoff at spending for life insurance because they only want to use their money to receive high returns – they go right away for the top-of-the pyramid investing –high risk, high return. But financial experts always advocate that investing must be a diversified activity according to the right priorities. Begin with no or low risk but low return foundation assets before moving up to riskier instruments. Life insurance starts at the bottom of your financial pyramid – Sure, it won’t offer high ROI, but you have a solid foundation to protect you or your family from risk of financial loss. Life insurance is the first ‘investment’ you should therefore do – it’s like building a house – you start with a solid foundation – so that everything you build above it will not topple because it is secured by a large and sufficient base.

Risk Protection is the first and foremost requirement as you begin the journey through your life stages. You see, you can have such lofty plans for your life. You have a loving spouse, two kids – and all your life’s dreams are plotted out – you have a strategy for success. Unfortunately, the guy driving behind you doesn’t – and he ploughs into you – and instantly all your plans crash. We’re not being morbid – we’re just being realistic. Things like these do happen. So set aside funding for protection first. After that, if you have additional resources you don’t feel too guilty spending for other things – including higher risk investments.

Be assured we invest your insurance premiums safely and prudently so that we will always be ready to pay out – should something happen to you – which can happen anytime.

RN: I see. Last question  a number of years ago, the pre-need industry took a major hit - particularly those relating to educational plans.  Obviously, that was a huge issue - and the people’s trust on insurance and investment in general was affected.  What happened there, what things were done to correct to system, and how can the public be assured that something like that will not happen again. 

JH: Ah, there’s a big difference between pre-need companies and insurance companies. For one thing, pre-need companies then were regulated by the SEC – not the Insurance Commission. Financial monitoring standards and actuarial processes differed and, unlike the insurance sector, there is an actual law - the Insurance Code - that protects the interests of policyholders. But I guess the reason why there is a such a seemingly strong correlation between insurance and pre-need companies is because pre-need companies were bundling life insurance coverages with their products. That’s why most people can’t tell the difference between pre-need companies and insurance companies. But they - insurance and pre-need are completely different industries.

Insurance companies are monitored very strictly by the Insurance Commission. The commission regularly checks on their actuarial soundness, their capitalization, liquidity. So those who have life insurance can be assured that they are well protected.

RN: Thanks Jess – appreciate the time. Hope we can chat again soon.

JH: You can be ASSURED of that.

RN: Haha, nice one!

*     *     *

Thanks for your letters, folks! You may email me at rodhnepo@yahoo.com