IC seeks policy reforms to drive industry growth

Insurance Commissioner Dennis B. Funa

The Insurance Commission (IC) is eyeing a number of reforms to further strengthen the country’s insurance industry, which include increased efforts on the sale of microinsurance products and a move to go digital to adapt to changing times.

Insurance Commissioner Dennis B. Funa told the BusinessMirror that one aspect of the insurance industry that is seen driving its growth this year is the introduction of microinsurance products.

He said the sale of micro-preneed products is something the IC is pushing to astimulate the growth of microinsurance in the country, in particular, and the preneed sector, in general.

“We are going to push for that [micro-preneed], we see that it can add to the good figures of the micro industry,” Funa said.

To enhance the growth of microinsurance in the country, the IC will launch a microinsurance-awareness campaign.

FINTQnologies Corp. (Fintq), PLDT’s financial-technology arm, is currently providing 1 million free microinsurance policies to unbanked and underserved Filipinos across the 42,000 barangays nationwide, in line with the government’s thrust of promoting inclusive growth in the country.

“We all need security and protection from uncertainties. With this affordable and accessible microinsurance policies under the KasamaKA microinsurance program, this will kick-start the massive nationwide financial-literacy campaign to educate millions of unbanked and
underserved Filipinos on the importance of being financially secured and insured,” said Lito Villanueva, Fintq managing director, and founder and lead convenor of KasamaKA.

The country’s insurance penetration grew to 1.64 percent in 2017, from 1.61 percent in 2016. Insurance-penetration rate is the ratio of premiums over GDP.

“We welcome KasamaKA as a national digital enabler toward achieving our goals to exponentially grow the country’s insurance-penetration rate to 4 percent by 2020, from 1.7 percent in 2017. This is a first-of-its-kind initiative in the country,” Funa said.

The IC earlier reported continued growth in microinsurance in September 2017, when the industry expanded by 30 percent, primarily on the basis of premium sales generated from mutual benefit associations (MBAs).

Funa said the continued growth of the microinsurance segment, as measured by premium and contributions, amounted to P5.17 billion in the first nine months of 2017, representing growth of 30.06 percent compared to P3.97 billion in the same period in 2016.

The number of individuals covered by microinsurance as of end-September last year increased by 21.66 percent to 32.03 million, from 26.33 million in the same period in 2016.

Forty-one entities are actively engaged in providing microinsurance products as of the third quarter of 2017, comprising of 21 MBAs, 11 life-insurance companies and nine nonlife-insurance companies.

In his speech during the IC’s 69th anniversary in January, Funa said the IC continuously seeks measures on how it can develop the insurance industry in the country, be it through improved service provisions or strengthened financial capacity for insurance providers.

“Rest assured that though we have already come a long way, we continue to seek ways of improving our services in order to ensure the continued financial strength of our licensed providers and the protection of policy and plan holders,” he added.

The insurance commissioner also pointed out that the agency recognizes the growth in the use of the Internet, electronic devices and social-media platforms, in which it tries to adjust policies accordingly for insurance companies to be able to adapt to the changes brought about by digital technology.

“The commission is keeping tabs with that growth and adjusting our policies accordingly,” he said.

In January this year, the IC issued an amending circular to the guidelines on electronic commerce of insurance products, providing further rules on the use of mobile application for the distribution of insurance products.

Circular Letter 2018-07 was issued in support of the framework supplements of the Guidelines on Electronic Commerce of Insurance Products issued by the IC in 2014. Under the circular letter, 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.

The commission had also acknowledged that local insurers have some of the highest capital requirements in the Association of Southeast Asian Nations and agreed to reevaluate the mandate for the industry to observe a progressively higher minimum base.

This developed as some nonlife players petitioned the IC for a reduction in minimum capital, saying the mandate has rendered some of the businesses unviable.

An amendment to the Insurance Code allowing for a reduction in the net-worth requirement is reportedly included in the IC’s planned reforms.

In a separate event, Maxicare President and CEO Christian S. Argos expressed support for the IC and its planned reforms for the entire insurance industry, including the preneed and health maintenance organization (HMOs) sector.

“We don’t want to be in the same situation as the other preneed companies before that became unsustainable, this is a key component of our membership coming in, and IC setting standards for capitalization, accreditation, valuation, financial reporting standards, will increase transparency for the industry and increase the sustainability of the program, that will also increase efficiency and decrease cost for everyone in the long run. A very positive development,” Argos told the BusinessMirror.

In February the IC said it will push for a new law to further regulate HMOs operating in the country. The agency said it is planning to submit to Congress a draft bill this year, which will further help set the guidelines for HMOs operating in the country. The proposed bill will include regulations on capitalization and how to settle disputes among stakeholders of the organization, among others.

Sun Life of Canada (Philippines) Inc. CEO and Country Head Rizalina G. Mantaring told the BusinessMirror that the IC is very open in terms of soliciting suggestions and proposals from insurance industry players.

“The IC has actually been very open to suggestions from the industry. Quite a number of reforms have been implemented over the past years. A few others would help boost the growth of the industry, such allowing ‘know-your-client’ or KYC sessions to be done via video calls,” Mantaring said.

She explained that allowing KYC measures over the video-call platform will help insurance companies reach a bigger population, as it would facilitate selling via other distribution channels, such as online and affinity marketing.

Dr. Olaf Kliesow, president and CEO of Allianz PNB Life Insurance Inc., also pointed out that barriers or restrictions on bancassurance partnerships should also be removed to enable an open architecture for the bancassurance operating environment in the country.

“Shift to a fully open architecture for the bancassurance operating environment by removing the existing requirement that the insurer and the bank should belong to the same financial conglomerate before any bancassurance partnership may be entered into. This barrier restricts new partnerships with existing banks, which do not fall under the same-financial-conglomerate definition and those that may be forged from the liberalized entry of foreign banks,” Kliesow told the BusinessMirror.

He explained that variable life insurance contributed 74 percent of total life-insurance premiums generated in 2017, most of which came from bancassurance sales.

“The opportunity loss from this existing barrier to further expand premium generation capacity from the bancassurance setup is huge,” he added.


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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.