Insurance industry poised to grow up to 30%

The Philippine insurance industry is poised to grow by about 20 to 30 percent this year in terms of total premiums on the back of a strong economy and Filipinos’ rising disposable incomes.

In the first half of the year alone, the industry already grew 50 percent in terms of total premiums, Sun Life of Canada (Philippines) Inc. president and chief executive Rizalina G. Mantaring said.

Even if growth slows down in the second half, this will be offset by the strong performance of the local insurance industry from January to June this year, she said.

“The second half of the year might be a little slower in terms of growth. The second half of last year was already strong, and so [hitting] that same growth might be harder to attain given increased volatility in the markets. When the market’s volatile, people tend to stay on the sidelines to see how it turns out,” Mantaring said on the sidelines of The Legacies of Women Forum held Monday.

She said the rising disposable incomes and increasing financial literacy of Filipinos helped spur the industry’s growth.

“We’re seeing more awareness. People are also looking for higher returns, or higher yields. To be able to prepare for future needs, you have to make sure your money’s earning more than the inflation,” she said.

If the industry sustains this pace, Mantaring said there is a possibility that the penetration rate—or the proportion of the population that has insurance—may double to almost 3 percent of the country’s GDP within five years.

Mantaring said the insurance penetration rate in the Philippines is still one of the lowest in the region at 1.25 percent, an improvement from the 0.7 percent rate about five years ago.

“If you look at where we can potentially grow, just look at Thailand and Malaysia. They’re at around 3 percent penetration rate, and they’re roughly close to our economy. We’re already at 1.25 percent. Easily, we can double the size of the industry given the rising awareness. Right now, the number of Filipinos insured would be about 20 million, but the amount of coverage as a percentage of GDP–or the insurance penetration rate–remains low. A lot of people are actually underinsured,” she said.

Mantaring said the Asean economic integration may pose some challenges to the industry.

“One challenge is that we don’t know [the regulations yet]. It’s hard to prepare if you don’t know what the regulation will be, but the other one that we can see is we need to strengthen in order to prepare. Another challenge is that the other capital markets are far more developed and the products they are able to [provide] are something we cannot provide here,” Mantaring said.

She also said the industry is the most heavily taxed in the region.

“What happens is that when taxes are high, products become more expensive and less affordable … For us to be competitive, [we should have] tax equalization,” she said.