IC sees 25% expansion in gross premiums this year

MANILA, Philippines - The Insurance Commission (IC) is forecasting a minimum 25-percent expansion in gross premium income of the country’s life insurance industry this year.

IC Commissioner Emmanuel Dooc said that from P120 billion in 2012, gross premium income is forecast to grow by at least P150 billion based on the performance in the first three months of 2013.

Total gross premium income ballooned to P44.3 billion in the first quarter of 2013, or 73 percent higher than the previous year’s P25.6 billion in the same period last year.

“If the trend continues, it (premiums) will hit not less than P150 billion this year,” Dooc said.

However, the gap between traditional protection products versus investment-laced variable or unit linked (VUL) products has shrunk further.

Last year, traditional products accounted for 60 percent of total premiums with VULs accounting for the remaining 40 percent.

In the first quarter of 2013, the share of VUL increased to 45 percent as more and more investors are looking for options to park their cash that migrated from the special deposit accounts (SDA).

The Bangko Sentral ng Pilipinas (BSP) initiated several cuts in the interest rates on SDAs, which reportedly hit the P2-trillion level, to just two percent.

Investors have since migrated to the stock market, unit investment trust funds (UITFs) of the banking system, mutual funds, and life insurance.

Also favoring the banking system and the insurance industry, is the relaxation of regulations allowing all banks to practice bancassurance, as long as the bank fulfills certain requirements including being ranked a minimum CAMELS 3.

That will allow more commercial, thrift and rural banks to sell insurance products, which in turn, will result in higher fee-based income.

It will likewise allow more life insurers to sell their products through bancassurance, or the practice of selling insurance through the branch and client network of banks.

“But all the products will still go through strict IC review before they are allowed to sell through banks,” the IC said.

Presently, only life insurers with a five-percent equity stake in a bank or have formed a joint venture a bank, can sell their products through the banks.

In fact, two of the leading insurers in the top 10 are actually joint venture companies between a bank and an insurer.

The rest of the leading insurers have likewise formed alliances, brokerage arrangements and equity holdings with banks, which have contributed significantly to the sale of their policies.