The country’s insurance penetration rate, defined as premium written as percent of local output growth or the gross domestic product (GDP), diminished further in 2023 to only 1.68 percent from 1.81 percent in 2023.
These are numbers quoted by Riza Mantaring, director at the insurer Sun Life Grepa, in a presentation assessing the state of the local insurance industry that she said continues to grow each year but remains awfully small compared to peers in the region such as Hong Kong, Singapore or even Indonesia.
The penetration rate is impacted by, among other factors, the high incidence of poverty among Filipinos at 22.4 percent or more than two citizens for every 10 as of latest data. This means the bulk of Filipinos have very little left of their income for protection against exigencies like health issues, property damage, even death.
Mantaring also noted that only 25 percent of Filipinos understand basic financial concepts like interest rates, inflation, the gross domestic product and the like and that one, for instance, can actually make money work to benefit people instead of people working merely to have money.
She said while poverty helps explain in part the low insurance penetration rate and why most Filipinos have precious few disposable income to buy themselves insurance, there is upside to this unfortunate turn of events.
According to Mantaring, the local insurance industry is poised for growth although at a level lower than the double-digit growth rates posted by neighbors in the region. She said disposable income among Filipinos, which helps determine the money left for things like investment or insurance after taking care of life’s necessities like food, clothing and shelter, should grow by five or six percent this year as percent of GDP.
To be sure, this rate is lower than peers across the ASEAN which have disposable income equal to 12 percent of GDP.
Indonesia and Vietnam used to have penetration rates lower than the Philippines but now the opposite is true, she said.
Mantaring said much could be said of the financial services sector that in 2023 proved a banner year for both the banks and their insurance colleagues as they reported strong growth and several of their members posting record profits.
She also said the economy has proven resilient and likely to round the year with growth averaging 5.5 percent to as high as 6.4 percent even as inflation, which is effectively a tax on income, seen moderating this year to 3.7 percent from last year’s 6.6 percent.
Mantaring also noted that periods of low growth in the Philippines of when the economy is in recession is followed soon after by 10 years of sustained expansion, which is something that businesses and households could plan or prepare for in the days ahead.
Giving Mantaring an added measure of optimism is the fact that the Philippine demographic is young, with the average Filipino only 24 years old, his productive years ahead of him in the distance.
With inflation easing, that could tell on insurance take up down the line as well as more Filipinos have many more reasons or outlets to deploy their disposable income, Mantaring said.
She expressed the optimism the insurance industry is ripe for transformation as the economy increasingly shifts to the digital sphere and the integration of industries.
“We have a strong digital market,” she notes of the shift to digital with the introduction of the e-money concept best exemplified by e-wallets May and GCash.
Aside from making the purchase of services and goods online possible, the giant telecommunication rivals both offer insurance services in their respective platforms.
Innovations like this help make the task of reducing financial uncertainty and make accidental losses more manageable for Filipinos, Mantaring said. – Jun Vallecera
