Pre-need providers will rely on micro pre-need products to improve their bottom line amid the challenges confronting the industry, an official of the Philippine Federation of Pre-Need Plan Cos. Inc. (Pre-Need Federation) said.
According to Pre-Need Federation President Elmer M. Lorica, a minimal decrease in the preneed industry’s net worth last year was reported by the Insurance Commission, (IC) but the industry is hopeful that it would be able to regain the confidence of consumers in pre-need products.
“There’s minimal growth according to the IC, but there is a decrease in net worth because you have to pay all the claims, but it might be negligible. We have to tackle the idea of really pushing the eroded confidence of the buying public; we have to revive the old confidence, we will be able to work it out,” Lorica told the BusinessMirror on the sidelines of the 17th Pre-Need Consciousness Week at the Edsa Shangri-La hotel in Mandaluyong City last Friday.
Lorica, who is also the president and COO of Eternal Plans Inc. (EPI), added that the pre-need industry can strengthen its growth for this year by including the sale of micro-pre-need products apart from selling life, pension and education plans.
“So far, I’ve known two [companies] that would like to go into [selling] micro,” he added.
Currently, only EPI was issued a license to sell micro-pre-need products by the IC.
“We are the only pre-need company with an approved micro-preneed product,” he said.
Under Circular Letter 2015-27, issued by former IC Commissioner Emmanuel F. Dooc, pre-need companies are mandated to enlist as members of the Pre-Need Federation to help strengthen the industry and promote cooperation and discipline among the members.
Membership in the Pre-Need Federation was made a requirement for the issuance or renewal of a certificate of authority to do business and issued only by the IC.
“We continue to face challenges and the challenges continue to evolve. Without a doubt pre-need products are very desirable, this has been proven during the industry’s initial years,” Insurance Commissioner Dennis B. Funa said.
Based on data from the IC, the pre-need industry reported a net loss of P831.54 million in the first quarter of 2017, reversing the P314.95-million profit providers registered in the same period of 2016.
The net premium income of the industry for the period rose by 6.1 percent amounting to P4.1 billion, from the P3.855 billion in the first quarter of 2016. Its total net worth for the period reached P15.8 billion, 15.2 percent lower than the P18.7 billion recorded in the same period of 2016.
Total assets amounted to P120.6 billion, a slight uptick of 1.3 percent from the P119 billion recorded during the first quarter of 2016.
The number of plans sold for the period rose by 0.06 percent totaling 183,837, from 183,729 a year ago. Broken down, 180,148 were life plans, 3,511 were pension plans and 178 were education plans.
“The bright spot of the pre-need industry is the memorial plans, it continues to be bright. But again, as what was stated earlier, the number of pre-need companies continues to go down,” Funa told the BusinessMirror.
Under the Pre-Need Code of the Philippines, new pre-need providers wanting to go into business in the country must have a minimum paid-up capital of P100 million.
“With this forum, I hope that we can come up with effective solutions to the current industry challenges. We need to send across the message that the Philippine pre-need industry has been reinvented, that sufficient regulatory measures are now in place in order to ensure delivery of contract obligations,” he said.
Last month the IC reported continued growth in microinsurance in September last year, when the industry expanded by 30 percent, primarily on the basis of premium sales generated from mutual benefit associations.
According to Funa, 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 a growth of 30.06 percent compared to only 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 only 26.33 million in the same period in 2016.
“We are going to push for that [micro-pre-need]. We are seeing that it can add to the good figures of the micro industry,” he added.
Microinsurance products are affordable insurance products that aim to protect low-income earners from contingent events in exchange for premium payments.