INSURANCE companies and mutual benefit associations (MBAs) in the Philippines have shown an improvement in terms of corporate governance for the year 2018, based on a regional scorecard tracking such entities in Southeast Asia, according to the Insurance Commission (IC).
Insurance Commissioner Dennis B. Funa announced that the based on the 2018 Asean Corporate Governance Scorecard (ACGS) Report, the local insurance industry posted an average score of 41.34 points, or higher than the 39.73 points it recorded in 2017.
“Based on the 2018 ACGS Report for Insurance Industry, the insurance industry recorded an average score of 41.34 points. This is a 1.61-point increase from the 2017 result,” Funa said.
Funa, however, noted that, while the Philippine insurance sector’s ACGS scores improved, its average score “is still considered low in comparison with the banking sector.” He urged the industry players to review their current governance practices including the utilization of technology.
For the 2018 assessment, the IC assessed 116 insurance companies and MBAs comprising 30 life-insurance companies, 56 nonlife-insurance companies, and 14 MBAs and 16 Micro-MBAs.
Of the 116 companies, Pru Life Insurance Corporation of UK (Pru Life UK) obtained the highest score of 105.19 points, followed by Insular Life Assurance Company Ltd. (Insular Life) with 104.53 points, while seven companies—five life-insurance companies, one nonlife-insurance company and one MBA—scored 80 points to 99.99 points.
“This shows that there is a continuous improvement in the performance of the life insurance, nonlife insurance and MBA sectors since the adoption of the ACGS in 2015. For four years, the insurance industry showed an average increase of 2.28 points,” Funa added.
The life-insurance sector continues to perform better compared with the other sectors with 56.98 average points for 2018, while the average scores for the nonlife insurance sector and MBA sector are 33.57 points and 40.28 points, respectively.
The top 5 life-insurance companies with governance scores ranging from 105.19 points to 86.92 points are: Pru Life UK, Insular Life, FWD Life Insurance Company, Sun Life of Canada (Philippines) Inc., and Philippine American Life & General Insurance Company.
The top 5 nonlife-insurance companies with governance scores ranging from 82.07 points to 59.29 points are: Pacific Cross Insurance Inc., National Reinsurance Corporation of the Philippines, MAA General Assurance Philippines, Inc., BPI/MS Insurance Corporation and Pacific Union Insurance Company.
The top 4 MBA companies with scores ranging from 80.60 points to 71.60 points are: CARD Mutual Benefit Association, Praxis Fides Mutual Benefit Association, Kasagana-Ka MBAI and Knights of Columbus Fraternal Association.
Out of the five core principles of corporate governance, the industry showed good performance in the area of equitable treatment of shareholders, with 8.76 points out of 15 maximum points in the 2018 assessment.
The 2018 ACGS report also pointed out that, while other areas need to be improved, disclosure of corporate governance-related documents should be given special attention, including Notice of Annual Stockholders/General Meeting, Minutes of Annual Stockholders/General Meeting and Annual Report with section on suitability.
“I would like to commend the insurance industry for the increase in the ACGS average score, which serves as a testament to the commitment of the insurance industry to improve its governance practices. While this is a notable accomplishment, the insurance industry’s average score it is still considered low in comparison with the banking sector. This should be taken as an opportunity for them to review their current governance practices for further improvement, including the utilization of technology, and a challenge to ensure that their corporate governance practices are on a par with regional standards,” Funa said.
The ACGS was developed based on international benchmarks such as the Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance, the International Corporate Governance Network (ICGN) Governance Principles, as well as industry-leading practices from Asean and the world.
In line with the ACGS report, the IC earlier issued Circular Letter 14-2013, mandating all insurance companies and MBAs to adopt the ACGS and enjoining covered companies to develop their company web sites and post their responses to the ACGS questionnaire with supporting documents.
The Institute of Corporate Directors (ICD), currently headed by its CEO Dr. Alfredo E. Pascual, was accredited by the IC to conduct the yearly assessment of the covered companies.