Demand for insurance
products seen steady

THE chief executive of AIA Philippines Life and General Insurance Co. Inc. sees continued demand for their insurance products despite rising consumer prices.

CEO Kelvin Ang said people will still see the need for protection regardless of the inflation situation in the country, adding that the Covid-19 pandemic increased the public’s awareness of the necessity of having insurance.

While Ang acknowledged that inflation may also pose a downside risk, he said this will be outweighed by its upside risk in terms of its impact on the insurance density in the country.

Last year, insurance density or the amount spent average amount spent by every Filipino for a year went up to P3,400 from P2,800 in the previous year.

In March this year, inflation averaged 4 percent, even higher than the 3 percent posted in February but slower than the 4.1 percent in March 2021. Average inflation for the first quarter this year reached 3.4 percent, still within the government’s target band of 2 to 4 percent.

According to Ang, lockdowns pose a “bigger risk” than inflation since this is when people lose their source of income.

“I think the needs for house, protection, savings, will continue to be there whether there is inflation or no inflation. In fact, during the inflation, people will say ‘maybe my cover is not enough. I have to increase it.’ so there would be demand for it, but inflation is certainly a problem but the bigger problem is not inflation, but whether we suffer another lockdown,” Ang told reporters on the sidelines of One AIA Philippines Media roundtable event.

Meanwhile, Ang said they also welcome the entry of the new player in the life insurance industry given that a lot of Filipinos still do not have insurance.

Insurance penetration—the ratio of total premiums generated over gross domestic product—rose to 1.93 percent last year from 1.71 percent in 2020, according to the Insurance Commission. Earlier this month, Insurance Commissioner Dennis B. Funa said a foreign conglomerate within Southeast Asia is set to enter the Philippine life insurance and non-life insurance market.

“As I’ve said, the insurance penetration in the country is presently [about] two percent. Just a lot of room for everyone because a lot of people don’t have insurance policies still, right? So I think there’s a lot of room for more players. We are welcoming,” Ang said. Ang also attributed the low insurance penetration rate in the country to the “very low” level of financial literacy in the country.

He also pointed out that the Philippines is “not alone” in facing the challenge of financial literacy and insurance penetration as other countries are also experiencing the same.

Nonetheless, he said they are doing their part to improve Filipinos’ financial literacy along with different government agencies, such as the Bangko Sentral ng Pilipinas and the Insurance Commission.

“It’s just the level of financial literacy in this country is very low. 75 percent don’t have that knowledge about how do they properly save and invest. So a lot to do there. If you want to improve [the] situation,” he said.

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