Affordability a concern for insurance as inflation bites

MANILA, Philippines — The insurance sector expects inflation to remain a huge concern this year especially among the middle class segment.

In a briefing, AIA Philippines chief financial officer Gary Ogilvie said challenges remain even as the country emerges from the pandemic and the economy further opens up.

“I think inflation remains a concern as to exactly how that’s gonna play out,” Ogilvie said.

“So that is really going to affect affordability in the middle class market, which is probably where the long term growth is in terms of the insurance penetration rate,” he said.

While inflation continued to decelerate for three months now, the headline rate remains above the target band of the government.

As such, prices of commodities are on uptrend, effectively reducing the purchasing power of Filipinos for other goods and services.

Given this, Ogilvie noted that AIA’s focus for sales as of now would be more on the upper class, more affluent and with higher net worth.

“That is why we are very focused on some of these innovative funding opportunities, guaranteed products, but we continue to lay the ground for the middle market as they recover over time,” he said.

Last year, AIA Philippines recorded a net income of P6.3 billion. Its assets stood at P257.6 billion and net worth at P68 billion.

AIA Philippines CEO Kelvin Ang, for his part, emphasized that post-pandemic recovery has not been equal for all industries as some are rebounding faster than the others.

“But clearly, life insurance in terms of the demand side has improved a lot from what I’m seeing the past few years,” Ang said.

“And I think that trend will continue to improve even with the low penetration in the country,” he said.

While insurance coverage in the country has improved, this remains low when compared to other neigboring economies. As of now, insurance penetration remains at around two percent of GDP.

“There’s a lot of opportunity for growth because of that unmet demand,” Ogilvie said.

This year, AIA aims to stay on track with its business objectives, driven by the significant growth opportunities due to the huge protection gap, low insurance penetration rate, and financial insecurity created by the pandemic.

AIA targets to deliver a suite of products this year that will be driven by heightened awareness for protection and importance of health and wellness, coupled with preference for guaranteed benefits.