While it may not be the most reported industry in the Philippines, the domestic insurance industry has actually been silently contributing its fair share to the economy with a promise to grow even bigger amid untapped opportunities and the new insurance code.
During the University of Santo Tomas business leadership CEO Series (UST CEO Series), the Philippine Prudential Life Insurance Co. president and chief executive officer, Gregorio Mercado, indicated that the country’s insurance industry is very promising, given the numerous untapped opportunities to expand and improve.
“There are a lot of opportunities here [in the Philippines],” Mercado told The Manila Times, pointing out that there’s still a huge market to cater to since a lot of Filipinos still don’t invest in life insurance.
According to him, compared with other countries, the Philippines only has more than 20 percent of its population availing of insurance services.
However, Mercado noted that even though the number of Filipinos getting insurance is still not much, the industry itself is robust and growing given the present economic fundamentals.
“The [Philippine life insurance industry] it is very robust right now. The growth has been tremendous, it’s almost about 40 percent compared to last year and the main driver would be the investment products, because a lot of the investors can’t find good investments nowadays and so they find these variable link products to be a good investment,” Mercado said.
“There’s also a lot of growth also in the traditional business such as this. There’s a lot of disposable income now. We have growing middle market,” he added.
New insurance code for secured investment
In the previous month, President Benigno Aquino 3rd signed a new law that aims to firm up the country’s insurance industry, requiring life and nonlife insurance companies to have P1 billion in paid-up capital.
Specifically, an existing insurance firm must have a net worth of P250 million by June 30, 2013; P550 million by December 31, 2016; P900 million by December 31, 2019; and P1.3 billion by December 31, 2022.
During the forum, Mercado said that this law would help the insurance industry grow even bigger, in a sense that it would create a safer investment environment for both consumers and companies.
Merger with other companies
Because of the increase in capital requirements, Mercado said that the possibility of mergers among insurance firms, including Philippine Prudential, is really huge, specifying that this would be a good strategy to comply with the new insurance code.
“We are in talks with groups, foreign and local [for investment infusion]. The investors we are talking to can take care of the capital requirements, just depends on who will give us the best offer,” Mercado said.
Mercado spoke before the UST CEO Series business forum on Wednesday night. The series is being conducted by the UST Graduate School, and is facilitated by Prof. Tommy Tiu.
Launched by Lilian Sison, the UST CEO Series aims to address the need of closing the gap between the academe and business sector.