Single pay insurance premium slows

MANILA, Philippines - Total premium income of the country’s life insurance industry is seen to grow at a slower pace this year, as sale of single premium or single pay insurance products in the first three months weakened.

In the first quarter of 2014, total premiums fell nearly 31 percent, or from P44.6 billion last year to P30.8 billion.

AXA Philippines chief executive officer Rien Hermans pointed out that the strong performance in 2013 was a result, among others, in the surprise entry of migrating investments from the special deposit account (SDA).

Hermans explained that premiums went down 30 percent as a result of the 75-percent surge last year. Single premiums went up from P12 billion in first quarter of 2013 to around P30 billion, but down some P14 billion this year.

“So compared to 2012, we have a 21-percent increase, or more or less 10 percent per annum,” the AXA Philippines chief executive said.

Total premium income are thus estimated to end the year weaker than 2013 but still better than 2012.

Life insurers forecast premiums to range between P135 to P150 billion this year.

That is lower than the P171 billion last year, but better than the P120.3 billion in 2012.

Hermans estimates that single premiums will close the year at a worse case volume of P65 billion, a far cry from the P107 billion in 2013.

He said that quick and large increases are usually happening in markets that develop bancassurance and mainly focus on single premium. But these increases do not lead to a sustainable higher market volume.

“After reaching a peak, more normal levels of 30 to 60 percent of the peak volume can be sustained,” he added.

Philippine American Life and General Insurance Co. (Philam Life) president and chief executive officer Rex Mendoza that single premiums, which constitute majority of the industry’s premium income would likewise slip this year.

“The unprecedented expansion of single premiums was driven by strong positive investment appetite last year, including wider investment options,” Mendoza said.

But the more cautious investment sentiment brought about by the aftermath of Yolanda, and other poor economic indicators, including the 5.7-percent growth rate of the country’s economy in the first quarter, will weigh heavily against strong sale this year.

However, insurers are optimistic that steady sale of regular premiums would neutralize if not offset the poor performance of single premiums.

“Philam Life’s regular premium base is strong, we were still able to grow the business under the challenging conditions. Across the industry, agency did better, and will do better, than bancassurance because of this phenomenon,” Mendoza added.

Bancassurance is the main distribution arm of single premiums. The sale agency force of most insurers prefer to market regular pay life products, whether these are variable unit linked (VUL) investment laced products or pure protection products.

Sun Life Financial president and chief executive officer Riza Mantaring likewise said that insurers rely more on regular pay insurance products would perform better than those dependent on single premiums.

Mantaring said that single pay sales were very strong due to the strong market conditions last year. This year, buyers have become more cautious due to market volatility, and this has caused a huge drop in single pay sales as seen from the first quarter results.

“Regular premium sales continue to grow strongly however, and this is probably a better indicator of the long-term health of the industry,” she added.