THE INSURANCE industry will likely take a hit from rising unemployment as jobless policyholders direct their money to other needs instead of staying current on their premiums.
The industry is bracing for a wave of clients abandoning their policies after losing their jobs, Singapore Life (Singlife) Philippines President Rien Hermans in an interview last week.
In the Philippines, Mr. Hermans said many Filipinos buy insurance products as a way to save up for future needs such as education and retirement, or to build up investments through variable universal life insurance products.
“You can imagine that if you lose your job, you don’t have money coming in… so people may surrender their policies to get the money, so that will be a big challenge for insurance companies,” Mr. Hermans said.
The unemployment rate rose to 17.7% in April from 5.1% a year earlier, equivalent to 7.25 million out of work, compared with 2.27 million in April 2019.
He said another challenge is that insurance agents cannot hold meetings or attend events and conventions to sell products as mass gatherings are still banned, while clients are still wary of going out because of the virus.
However, he said companies like the fully-digital Singlife Philippines are in a more favorable position as clients are now becoming more open to the use of technology.
He added that the sector should be “okay” even with some uptick in claims given the nature of the business while investments should still provide some returns as insurers are required by law to hold safe investments like government bonds.
“Looking at the longer term, the challenge would be how quickly is the economy bouncing back,” he said.
“Driven by the demographics, young educated population, and the ambition to make the economy one of the fastest-growing in Asia, I think we will get back (to a growth trajectory) and that also means that people would want more insurance. They will put money away for their kids’ education or set up a business,” he added.
Singlife Philippines hopes to introduce its flagship insurance savings plan, known as “Singlife Account,” by early next year.
Its initial products will be launched this year through the mobile wallet firm GCASH.
It obtained its license from the Insurance Commission in February to become the first fully digital life insurance company in the country. Its target is 500,000 clients in the next five years. — Beatrice M. Laforga