Innovations, technology secure PHL insurance industry’s future

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MORE Filipinos are expected to be more open to investing in insurance products this year, especially when insurance companies are creating products that are tailor-fit to their consumers’ specific needs, according to the Insurance Commission (IC).

The IC pointed out it expects the general public to be more open to investing in insurance products, especially now that innovations in product development, as well as the use of digital technology, are being incorporated more and more by insurance companies.

“Innovation, particularly in product development and use of digital technology, are expected this year. Technology or insurance technology, what we call ‘Insurtech,’ is changing the industry almost imperceptibly.”—Insurance Commissioner Dennis B. Funa

“Innovation, particularly in product development and use of digital technology, are expected this year. Technology or insurance technology, what we call ‘Insurtech,’ is changing the industry almost imperceptibly,” Insurance Commissioner Dennis B. Funa told the BusinessMirror. “It is not happening in one big crash, but in small steps everywhere.”

Funa explained that another trend that the IC has observed in the local insurance industry in terms of product innovations over the recent years is the proliferation of insurance products geared toward the promotion of a healthy lifestyle.

“With the increasing trend in living a healthy lifestyle, there is a visible proliferation of community spaces, which help consumers achieve peak fitness,” he added. “And insurance companies took notice of this increasing trend.”

Ranking

IN November last year, the Philippine American Life and General Insurance Co. (PhilamLife) reported that the Philippines’s ranking in its fourth Healthy Living Index Survey has inched up by five notches to the 66th spot. The country was on 61st place in the PhilamLife index in 2016.

The index is a composite score of satisfaction with a person’s health and frequency of practicing healthy behavior. The survey was Asia Pacific-wide, with 11,000 participants coming from 16 markets and is done every two years.

A reported 750 survey participants for the Philippines were tapped for face-to-face interviews, with 350 respondents from Metro Manila, 200 from Cebu City and 200 from Davao City.

In terms of Filipinos’ satisfaction on health, the index posted a decline: 84 percent in 2018 from 89 percent in 2016. This led to an increase in the allotment of time for exercise, which settled at 3.7 hours per week in 2018, compared to the 2.1 hours per week reported in 2016.

Gyms

DESPITE Filipinos adopting more healthy behaviors this year, the index pointed out that only 46 percent continue with their diet regimen after starting and that only 47 percent continue to go to gyms.

Since more Filipinos are striving to maintain a healthier lifestyle, Funa expects insurance companies will continue this year to enhance their offerings geared toward the improvement of one’s overall well-being.

“Hence, we are expecting to see insurance companies to constantly innovate their products that will incorporate the needs of individuals, particularly on the improvement of one’s overall health,” he said.

For instance, companies like BPI-Philam Life Assurance Corp. offer insurance products with various additional benefits under its BPI-Philam Wellness Series “powered by Philam Vitality.” This range of products under the series incorporates add-ons that are geared toward making the policy holder healthier, an example of which is free gym memberships, among others.

Security

FILIPINO entrepreneur Alessandra Javier offers another reason for maintaining an insurance coverage: security.

Javier said she invests her savings on an insurance policy to ensure she feels secure in terms of her future. She currently has a life insurance policy with an investment feature.

“I like thinking ahead, and it [the insurance policy] gives me a sense of security,” Javier told the BusinessMirror in an interview.

She recommends that for those buying an insurance policy for the first time, face-to-face interaction is important. This, according to Javier, allows clients like her to sift through the policy thoroughly.

She, however, was quick to add that providing an online channel in terms of payment for the insurance policy is also a must, making it convenient for policy holders.

Javier explained that the first thing she looks at when purchasing an insurance policy is the value for money. The insurance company’s reputation is the second-most important, while additional benefits come third, she said.

“The policy alone needs to be fit for me before I decide to purchase an insurance policy,” Javier said. “I guess what I’m saying is freebies are great, but it’s not enough to sway me to get insurance.”

Health

IN 2017, Sun Life of Canada (Philippines) Inc. (Sun Life) reported a 6.9-percent prevalence in diabetes for the Philippines under its 2017 Asia Diabetes Awareness Study, which calls for Filipinos to keep take care of their well-being

Sun Life launched the five-market regional study on the public’s understanding and perception toward diabetes. The study took into account respondents totaling 2,119 in Asia, with the Philippines having a 408 share of the sample size.

With its new purpose of promoting health and wellness among Filipinos, Sun Life has called on citizens to keep their health in check and learn more about the debilitating disease, especially since the Philippines is considered to be a hot spot for diabetes.

Of the 6 million Filipinos diagnosed as diabetic, a majority were found to be ill-informed as 53 percent think the illness is curable. The study also revealed that 21 percent believe diabetes could be acquired from others or communicable.

On average, Filipinos estimate that 52 percent of the country’s adult population currently has diabetes and that those with diabetes will live 33 years less than those without.

The survey also pointed out that an estimated P4,000 a month is being spent on medicines by Filipinos for diabetes, which is a huge financial burden.

Sun Life Chief Marketing Officer Mylene D. Lopa has said that the diabetes study was the first of its kind in the Philippines. Lopa added the company has taken on diabetes prevention as an advocacy to better help create more awareness for prevention and management among Filipinos.

“We are living in an era of advanced technology and where individuals are focused on maintaining a healthy lifestyle,” Funa said. “Thus, we are expecting that product innovation and utilization of technology will be welcomed by the general public.”

Driver

PHILIPPINE Life Insurance Association (PLIA) General Manager George C. Mina told the BusinessMirror that the life insurance industry in the country also sees innovation as a driver to help attract more Filipinos to invest in insurance products. Mina also pointed out that changes that enable faster and better customer experience would be a positive move.

“Changes that make the customer experience better and faster would be positive,” Mina said. “It will show that a very traditional industry like life insurance could embrace disruptions to cope with the changing consumer behavior and competition demands.”

According to the PLIA, innovations in the life insurance industry are applied more toward the way the products are offered and sold rather than in their features. The organization believes that online policy maintenance mechanisms can help policy holders have better control of their insurance products.

“The use of enabling technologies would make reaching customers easier and faster, and communicating value proposition of products via online would complement the agent’s role,” Mina said, adding that “intelligent underwriting systems would simplify and expedite the application process.”

Density

THE IC reported in December last year that the country’s insurance density has increased by 16.12 percent to reach P2,053.58 per capita as of end-September. This was previously at P1,768.49 in the same period for 2017.

Insurance penetration as of the third quarter of 2018 also saw an increase by 0.12 percentage points to 1.76 percent, from 1.64 percent during the same period in 2017.

The IC said that insurance density is defined as the ratio of premiums to the total population, while insurance penetration is measured as the ratio of premiums to the country’s gross domestic product (GDP).

Funa underscored the importance of innovating insurance products to adapt to technological advancements as a driver of growth for the industry, as it is seen to help increase the number of individuals being covered by some form of insurance.

“With these innovations, we are expecting to see an increase in the number of individuals with some form of insurance coverage, be it life or nonlife insurance. Our people today rely on technology in going about their everyday lives, thus, it is crucial that they have access to insurance products and services at their own convenient time,” he added.

Mobile

FUNA said he expects more insurance players to forge partnerships with innovators this year to further develop their products, urging the local industry to go beyond web sites.

“Insofar as regular insurance products are concerned, we are expecting that insurance companies will forge more partnership with innovators in developing new and improving existing products and integrating therein new technologies,” Funa said.

Philippine Insurers and Reinsurers Association (Pira) Chairman Allan R. Santos earlier pointed out that tapping alternative channels in terms of selling insurance products will widen the reach of distribution, specifically the use of mobile phones.

“In 2018, the IC issued a circular that enhances the framework for insurers to use mobile-phone applications to sell their products,” Santos said. “This regulation will also allow insureds to pay their premiums through phone credits, a big convenience for clients covered by microinsurance or other simpler insurance products with small premiums.”

Under IC Circular Letter 2018-07, issued in January last year, an enhanced framework for the use of mobile phones as an alternative distribution channel for insurance products was promulgated, to enable insurance companies to adapt to technological trends in terms of marketing products and services.

It states that insurance companies may use mobile applications in the distribution of their insurance products provided that the use thereof had been previously approved by the IC.

Technology

THE mobile applications that are allowed to be used for the distribution of insurance products may either be pre-installed in a mobile device, or an item in a subscriber identity module, or SIM, menu of a mobile network carrier, or those that are downloadable by the public through major digital platforms, such as Apple Store, Google Play and Microsoft Windows Marketplace.

“This could be an emerging opportunity, particularly in the Philippine market where more than half of its population access the Internet through a mobile device,” Santos, who is also president and CEO of the National Reinsurance Corp. of the Philippines, added.

According to Funa, the new regulation provides a flexible framework as to the mode of payment of insurance products marketed and sold through mobile phones in addition to the usual payment using a credit or debit card or through accredited online payment systems.

“Beyond web sites, there are some companies employing digital or electronic application, and there are some whose clients can already complete purchase of their insurance policies online. Policy holders of certain insurers can also file their claims, pay their premiums and ask their queries online,” Funa explained. “Thus, the use of technology may be integrated in the overall process of procurement of insurance products until the payment or satisfaction of insurance claim.”

Microinsurance

THE insurance commissioner also pointed out that microinsurance is in itself an innovation. Funa further explained that the integration of two or more microinsurance products that are underwritten by two or more insurance providers under one policy contract was established to encourage microinsurance providers to innovate and design products and services tailor-fitted to the needs of their clientele.

“The bundling of insurance products, that is having a life and nonlife insurance protection in a single policy, is applicable to microinsurance products,” Funa said.

Microinsurance products are affordable insurance products that aim to protect low-income earners from contingent events in exchange for premium payments.

In October last year, the IC reported that the number of Filipinos covered by microinsurance grew to 36.55 million for the first six months of 2018, increasing by 28.59 percent, compared to the 28.42 million reported in the same period for 2017.

Broken down, the mutual benefit association (MBA) sector covered 21.45 million individuals as of end-June 2018, the life insurance sector with 11.45 million lives covered, and the nonlife insurance sector covering 3.65 million.

According to the IC, there are a total of 42 companies actively engaged in providing microinsurance products in the country, composed of 22 MBAs, 11 life insurance companies and nine nonlife insurance companies.

Earlier, PhilamLife and Allianz PNB Life Insurance Inc. both announced their respective plans in venturing into the microinsurance business.

“Technology has led to greater collaboration between some life and nonlife companies to make the financial-risk protection more inclusive for the insured Filipinos,” Funa said. “Thus, it cannot be denied that the evolution of technology has helped our regulated entities to spread their reach.”

Bundling

THE PLIA also pointed out that cross-industry bundling of insurance products are becoming more and more rampant nowadays, enabling customers to enjoy a wider range of benefits.

“Cross-industry bundling of products into packages also enable consumers to enjoy a wider range of benefits without having to buy the products separately across industries,” Mina said.

He explained that riders bundled into the insurance policy expands, which makes the insurance coverage go beyond merely providing a death benefit, etc. The method addresses multiple coverage needs on health, accident, disability, among others, which makes the product more meaningful and responsive to the needs of the consumers.

For instance, FWD Life Insurance Corp. (FWD Philippines) also rolled out in September last year its “Set for Tomorrow” customizable insurance product line. This product enables consumers to customize their insurance plan according to their budget capacities, among others.

The variants under the FWD product include the following: the “Short Term Cover,” which entails a life insurance coverage of five to 10 years; the “Income Protector,” which provides coverage should the family’s breadwinner dies; and, the “Estate Protector,” which provides life insurance coverage until 120 years old.

This goes to show that insurance companies are, indeed, putting their clients’ needs first, as well as adapting to the changes that are being presented by technological advancements in the global arena, according to FWD.

Challenges

BUT with changes also come challenges with the insurance industry not being immune to some risk being imposed by innovation.

Pira Executive Director Michael F. Rellosa said the organization sees the lack of insurance consciousness among Filipinos as the biggest challenge for the insurance industry.

“For Pira, it is the lack of insurance consciousness among Filipinos. In other countries like Japan, insurance is bought by people. Here in our country, insurance is sold to people,” Rellosa said. “Filipinos see insurance as an expense; sometimes, even as a useless expense. And that is our biggest challenge.”

He further explained that only 2 out of 10 Filipinos have some form of insurance, with one policy being bought because the person recognizes the importance of insurance. However, Rellosa said Filipinos are only buying because it is a requirement for car registration or a loan.

“This is truly unfortunate for a country that experiences earthquake almost every day, visited by 15 to 20 typhoons every year, and where fire and motor vehicle accidents happen regularly,” he added.

Types

THROUGH the eyes of an insurer, Rellosa classified the Philippines as having three types of people, namely: the dangerously uninsured, the reluctantly underinsured, and the happily insured.

The dangerously uninsured are Filipinos comprising more than 80 percent of the total population, he said. Rellosa added that these people rely on luck or God for protection as they think that insurance is just a racket.

The second type, he said, are Filipinos who buy insurance because it’s compulsory or mandatory, buying only the minimum and nothing more.

The third type, the happily insured, are the people who buy insurance because they know they need it, because they know that being uninsured and being underinsured is more costly, according to Rellosa.

He said to turn those in the first two types into happily insured individuals, insurance companies will need to pour in more effort into educating the public about insurance.

“And that is what Pira is working on: by partnering with educational institutions and engaging Filipinos through social media,” Rellosa said. “Pira hopes that through these efforts, Filipinos will become aware of the risks they face and realize that insurance is a tool for them to manage those risks.”

Privacy

WHEN asked why a lot of people still haven’t purchased some form of insurance, Javier said he believes it may be because Filipinos don’t have the funds for it.

“I think they just don’t have the extra money for it,” he explained. “As for me, I really wanted to invest since I learned early on that I shouldn’t put all my eggs in one basket.”

As for the IC, it sees the lack of data privacy as a challenge in terms of innovating businesses, pointing out that trying something new can always be either a hit or miss.

“Probably the biggest challenge in going digital is keeping data secured,” Funa said. “If governments of the First World countries and the biggest Internet communities, such as Yahoo!, Facebook, e-Bay, among others, have had their securities breached, how can we keep hackers away from our own servers?”

Nonetheless, Funa emphasized that local insurance players should not be discouraged by this conundrum as insurance companies will just have to understand how to use the specific technology for keeping data safe.

“This challenge should not stop us from accepting that technology has come to invade our systems,” he added. “Technology is here, and it is good, and we just need to know how to use it and protect it from malicious entities.”

Santos explained that the effectivity of the implementing rules and regulations (IRR) of the country’s Data Privacy Act or Republic Act 10173, strengthened the push for businesses to take a more aggressive stance in line with protecting the personal information of their clients.

“This new regulation could spur greater demand for cyber-insurance policies and encourage local insurers to innovate and develop more of these products,” Santos said.

Outlook

IN 2018, Moody’s Investors Service revealed that its outlook for 2019 for the life and property and casualty insurance industry in the Asia Pacific (Aspac) region remains stable, fueled by the strong capital levels in the insurance industry, as well as the improving product mixes.

The report said it sees long-term life-insurance demand within the countries in the remaining strong. The strong demand, Moody’s said, is backed by a growing middle class, as well as a significant protection gap.

However, these countries will see a slowdown in life premium growth early on as insurers would still adjust their product mixes in line with keeping up with regulatory requirements, the report said.

It also said that insurers should be more adept with incorporating technology in their respective business models, as technological advancements are seen to gradually reshape how the insurance industry works.

Image Credits: Wutthichai Luemuang | Dreamstime.com, Insurance Commission

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Rea Cu

Rea Cu is a graduate of Assumption College-Makati with a Bachelor's degree in Communications. She majored in Advertising and is currently the finance reporter of the BusinessMirror.
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