PHL pre-need insurance industry: Reconciling past for brighter future

In Photo: Framed in a window are skyscrapers of Manila’s central business and commercial district that houses different insurance companies. The pre-need insurance industry is still surviving despite posting a net loss of P831.54 million in the first quarter as compared to a net income of P314.95 million in the first quarter of 2016.

Part Two

AT the moment, the Philippine pre-need insurance industry is still surviving, Philippine Federation of Pre-Need Plan Companies Inc. (Pre-Need Federation) President Elmer M. Lorica said.

Lorica told the BusinessMirror that the pre-need insurance industry is now starting to stabilize because of the significant interventions by the Insurance Commission (IC) and the industry as a whole.

These measures include the introduction of the Pre-need Code of 2009, or Republic Act 9829, and the shift of the market to life-plan products. The latter buffered the market because of its contingent-liability type of product and not as an investment-liability type product as pre-need plans are classified. The industry also credits the implementation of micro-pre-need products to cater to the low-income bracket of the market.

“The focus of the industry now is on the life-plan product, which is an answer to the basic need that is close to the heart of the Filipino, [which is getting education]. It will always be relevant,” said Lorica, who is also the president and COO of Eternal Plans Inc., a sister company of the BusinessMirror.

Based on latest data from the IC, there are currently 16 companies that fall under the pre-need classification and have a license to sell pre-need products. These companies are  AMA Plans Inc., Ayala Plans Inc., Caritas Financial Plans Inc., CityPlans Inc., Cosmopolitan Climbs Life  Plan Inc.;

Destiny Financial Plans Inc., Eternal Plans Inc., Financial Freedom Plans Inc., Himlayang Pilipino Plans Inc., Manulife Financial Plans Inc.;

Mercantile Care Plans Inc., PhilPlans First Inc., Saint Peter Life Plan Inc., Sunlife Financial Plans Inc., Transnational Plans Inc. and Trusteeship Plans Inc.

IC orders

UNDER Circular Letter 2015-27, issued by then-IC Commissioner Emmanuel F. Dooc, pre-need companies were required to become members of the Pre-Need Federation to help strengthen the industry and promote cooperation and discipline among the companies.

The membership in the Pre-Need Federation was made a requirement by the IC for issuing or renewing a certificate of authority to do business in the pre-need insurance industry .

Last year only 14 companies classified as pre-need insurance firms were licensed to operate in the country, the IC data showed.

As of the first quarter of this year, the pre-need insurance industry has recorded total assets amounting to P120.636 billion, expanding by 1.32 percent from the P119.065 billion recorded in the same period for 2016.

The industry’s investments in trust funds totaled P101.855 billion as of end-March, which posted a slight uptick of 0.48 percent compared to the P101.373 billion in 2016. In terms of liabilities, the pre-need insurance industry recorded P104.779 billion for the first quarter, which rose by 4.49 percent, from the P100.273 billion in 2016.

The pre-need insurance industry reserves totaled P97.591 billion in the first quarter, which has expanded by 4.01 percent from last year’s P93.826 billion.

Total premium income showed an improvement of 6.10 percent amounting to P4.090 billion this year, from the P3.855 billion recorded last year.

Worth, losses

MEANWHILE, the industry experienced a net loss in the first quarter of the year of P831.54 million as compared to the net income of P314.95 million in the first quarter of last year.

The industry’s total net worth also suffered a 15.6-percent decline in the first quarter to P15.857 billion, from the P18.792 billion the industry posted in the same period last year.

In terms of plans sold, the industry posted a total of 183,837 plans sold in the first quarter of this year, which rose by 0.6 percent from the 183,729 plans sold in the same period for 2016. Of the total, life plans took the biggest chunk, which totaled 180,148. Pension plans sold accounted for 3,511, and education plans were at 178.

Saint Peter Life Plan accounted for bulk of the life plans sold in the first quarter; accounting for 177,505 life plans sold. For pension plans, Caritas Financial Plans sold
a total of 1,766. Philplans First Inc. accounted for all education plans sold for the quarter of this year.

“The life-plan industry is recovering faster than education and pension,” Lorica said in an e-mail interview.

Growth, declines

AS of the quarter ending December 2016, the pre-need insurance industry posted total assets amounting to P120.085 billion. The figure reflects an increase of 2.62 percent, from the P117.017 billion recorded in the same period in 2015.

The industry’s investments in trust funds grew by 1.17 percent totaling P101.257 billion last year, compared to the P100.081 billion the industry posted in 2015.

The industry’s total liabilities as of end-December of last year grew by 4.13 percent to P104.122 billion, from the P99.996 billion in 2015. Its pre-need reserves accounted for P96.337 billion, expanding by 3.82 percent, from the P92.795 billion recorded as of end-December 2015.

Total net income of the industry totaled P2.072 billion, increasing by 26.53 percent, from the P1.637 billion in 2015.

Meanwhile, the pre-need insurance industry ’s total net worth declined by 6.21 percent to P15.963 billion, from the P17.021 billion in 2015.

The industry also suffered a total premium loss of 0.45 percent to P16.287 billion for 2016, from the P16.361 billion it recorded in 2015.

The number of plans sold by the industry reached 697,869 as of end-December 2016, growing by 0.53 percent, compared to the 694,163 in the same period for 2015.

Of the total, life plans sold by the industry as of end-December 2016 totaled 680,649, pension plans sold totaled 16,328 and education plans reached 892 for the year.

Saint Peter Life Plan still accounted for bulk of the life plans sold for 2016, which totaled 662,883. For pension plans, Caritas Financial Plans sold a total of 7,043. Philplans First accounted for all education plans sold for 2016.

Group plans

IN February 2017 the Pre-Need Federation expressed its hopes to grow the number of its members for this year, as well as the years to come.

Lorica said a number of insurance companies have expressed their intentions to enter the industry this year. He said such a move is welcome, as the association sees that the entry of new players will
help expand the growth of the pre-need insurance industry in the country. The Pre-Need Federation is also eyeing a number of proposals on how to further develop the industry. One of these proposals is the introduction of new pre-need products.

To be concluded

Image credits: Faye Pablo


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