By Luisa Maria Jacinta C. Jocson, Reporter

Islamic insurance products can help address the low insurance penetration rate in the Philippines, a market which remains largely untapped, analysts said.

“There is still a great opportunity to increase the insurance penetration in the country per se since this is still relatively lower compared to other Asian countries amid improved financial literacy and still huge potential for increased financial inclusion, especially in the countryside, including in Mindanao,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Insurance Commission (IC) estimated the Philippine insurance penetration rate at 1.68% of gross domestic product (GDP) at the end of the third quarter. This refers to premium volume as a share of GDP or the effective share of the insurance sector in the national economy.

According to the Bangko Sentral ng Pilipinas Financial Inclusion Survey, fewer Filipinos had savings and insurance in 2021. The share of adults with insurance declined to 17% in 2021 from 23% in 2019.

The survey also found that only 2% of respondents were able to correctly answer all six basic financial literacy questions while 69% correctly answered at least half of the questions.

A bill seeking to include financial literacy in the senior high school curriculum is currently pending at the House of Representatives committee on Basic Education and Culture. If passed into law, the curriculum will include the basics of personal financial management, budgeting, saving, investing, credit and debit, insurance and taxes.

“There is potential to tap the Islamic markets with compliant products in terms of different products locally and in the international market, including Sukuk and other financial or insurance products,” Mr. Ricafort added.

Sun Life Philippines Chief Distribution Officer Al D. Quitangon said that the insurance firm is studying the potential of offering takaful insurance products.

“Are we open to it? If there is the proper time and opportunity and regulatory approvals. We do have assessments going on. We do feasibility studies,” he said.

He highlighted the need to study the regulations governing these products since they are new to the market.

“Not just as a company, I think as an industry, it’s an ongoing review of what we can offer the market that Filipinos would need in the future. And of course, for our Muslim brothers, we also have to cater to their own needs and hopefully when the right time and the right approvals happen, then we’ll have our own surprises,” Mr. Quitangon added.

Insurance Commissioner Reynaldo A. Regalado has said some insurance companies offer products that are takaful-compliant.

Takaful is an Islamic form of insurance consisting of pooled money that payouts are taken from.

The IC is currently studying how takaful insurance can be processed and regulated.  It will then conduct a pilot test of these products.

Last week, the IC and Budget department signed a memorandum of understanding on takaful insurance. Details of the memorandum have yet to be released.