PHL insurance sector seen to sustain growth

THE PHILIPPINE insurance sector could post double-digit growth until next year as positive economic prospects could help drive spending and as the industry’s penetration rate remains low, the top official of East West Ageas Life Insurance Corp. (EastWest Ageas) said.

EastWest Ageas President and Chief Executive Officer Sjoerd Smeets said he expects the insurance market to grow around 11% this year despite declining interest rates and the weak performance of the stock market.

“But I still believe that next year will have a growth probably in the double digits. GDP (gross domestic product) growth in the Philippines still is expected to be around 6% next year, and you normally see the insurance market outpacing that a bit because the insurance sector in the Philippines is still under-benefited versus other Asian countries,” he said at an event on Tuesday.

“The total insurance spend [versus] GDP is something like 1.7%. And in mature markets, that’s close to 5%. So, that growth will still kick in. And with more Filipinos having higher earnings potential, we definitely expect the life insurance market to still grow.”

The sector recorded higher premiums in the first semester, according to data from the Insurance Commission (IC). Total premiums paid for life and nonlife insurance products grew by 12.98% to P242.842 billion at end-June from P214.941 billion in the same period last year.

As a result, insurance penetration, or the ratio of insurance premiums to the GDP, rose to 1.79% from 1.71% a year prior.

Insurance density, or the average spending of each individual on insurance, also increased by 12.07% to P2,137.32.

Life insurers saw a 12.01% increase in premiums collected to P195.05 billion in the period from P174.14 billion a year prior.

Philippine GDP growth averaged 5.4% in the first semester, slightly below the government’s 5.5 to 6.5% goal for the year.

Meanwhile, the Bangko Sentral ng Pilipinas has now cut benchmark interest rates by a total of 175 basis points since it kicked off its easing cycle in August 2024. It is expected to deliver further reductions until next year to help stimulate the economy as a widening corruption scandal involving state flood control and infrastructure projects is expected to affect both public and private investments.

These domestic governance concerns, along with worries over trade policies and the pace of monetary easing in developed countries, have caused Philippine stocks to decline in recent months. On Tuesday, the Philippine Stock Exchange index closed at 5,867.04, down by 10.14% or 661.75 points from its end-2024 finish of 6,528.79.

Mr. Smeets said financial literacy remains a challenge in the Philippines, contributing to low insurance penetration.

“I think the education system needs to be improved to make sure that young people start to learn to deal with money and also the unexpected things in life,” he said. “If you just see people on the streets, there’s not a lot of consciousness of savings.”

“We sometimes live too much in the day to day… In the insurance sector, we’re doing quite a lot of things to also improve that consciousness. We’re trying to make more people aware about insurance — get them to be aware of the things that will happen if something happens.”

The insurer’s PURPLE Report released at the event reflected Filipinos’ lack of consciousness about savings.

The study, which it commissioned to NielsenIQ, showed that only two out of 10 Filipinos have enough emergency funds lasting over three months, with most only having P50,000 in savings.

“This leaves the average middle-class Pinoy without the buffers needed to recover from unexpected challenges,” the company said.

It also showed that long-term financial planning is an afterthought for most Filipinos as 30% of their salaries go to their household expenses, such as for food, rent, transportation, and mortgage, making it difficult for them to set aside savings.

“Despite growing awareness to prepare for emergencies, getting started is far from easy, as Filipinos still need to plan around their current day-to-day needs,” EastWest Ageas said.

“However, Filipinos still recognize it is important to stay prepared, as it can ease their worries about unexpected situations. In fact, 52% are concerned about the health of their loved ones, and 24% worry about critical illnesses and the large medical expenses tied to them.”

The study showed that some Filipinos aged 40 and above said they have more than three months’ worth of emergency funds, reflecting an improved financial stability they age.

“However, the journey towards financial preparedness is often hampered by economic pressures like inflation and income instability. To get through emergencies, Filipinos would often rely on their personal savings, receive support from their families and communities, and take out loans from informal channels,” the insurer said.

“While these highlight Filipinos’ innate resilience, resourcefulness, and generosity, they also show their vulnerability when emergencies arise. Thus, Filipinos need the extra support to help them get through these struggles without compromising their goals.”

EastWest Ageas booked a premium income of P4.97 billion and a net income of P225.49 million in 2024, based on IC data.

East West Ageas Marketing Officer Greg Martin said at the same event that they continue to grow their presence nationwide following their expansion into Davao and Cebu.

“We’ll be expanding in the Bulacan area and in the Quezon City area as well. How we do that, though, is in a very careful and very commercially orientated fashion.” — Aubrey Rose A. Inosante