Read the latest edition of AIR and MEIR as an Interactive e-book

Jun 2024

From perilous cyclones to pervasive iPhones - a market to be tapped

Source: Asia Insurance Review | May 2018

Philippines Nat CAT Regulation People

The insurance market in the Philippines is seeing a growth spurt. Asia Insurance Review speaks with the insurance commissioner, Mr Dennis Funa, on the challenges facing the industry as well as the tremendous growth opportunity it faces. 
By Anoop Khanna 
“The year 2017 was very productive for Philippines insurance and statistical indicators point to a positive trend in the short and medium term,” said Mr Dennis Funa.
   “For 2018, I look forward to the continued growth of the industry, banking on the previous year’s performance as we remain committed to our mandate of protecting the insuring public as well as nurturing the growth and stability of the insurance sector,” he said.
Contribution to the country’s economic progress
Expressing confidence that the industry would continue to contribute more and more to the growth of the Philippine economy, he said, “By opening new doors for growth and facilitating wider and accessible delivery channels for insurance products, we are enabling a suitable environment for inclusive economic progress.” 
Natural catastrophe risk 
The Philippines is one of the most natural disaster-prone countries and according to industry estimates suffers a loss of $3.5bn damages annually due to typhoons and earthquakes. 
   Mr Funa explained the role of the Insurance Commission (IC) in disaster risk financing initiative (DRFI) strategy for natural catastrophes of the department of finance of government of Philippines. He said, “This initiative, is aimed at three strategic objectives and functions at three levels; national level, local level and individual level.” 
   At the national level, the DRFI seeks to improve the financing of post-disaster emergency response, recovery, and reconstruction needs. One example is the assistance of the World Bank through the second catastrophe-deferred drawdown option loan facility.
   Second, at the local level, DRFI provides the local governments with funds for post disaster recovery and reconstruction efforts. This is done through the development of a catastrophe risk insurance facility for the local government units, pooling local governments’ calamity funds and improving the insurance of public infrastructure and assets.
   For individuals, which includes poor and vulnerable households, small and medium-sized enterprises are empowered to bring back their livelihoods quickly after a catastrophe.
   Continuous dialogues with the stakeholders are undertaken in addition to inter-governmental coordination which happens on an on-going basis to iron out the details for the attainment of the DRFI objectives.
Climate change risks and business continuity
Mr Funa also shared his views on the importance of managing weather-related risks for companies in the Philippines, especially among insurers. 
   He said, “As the regulator, we would like them to embed enterprise risk management in their systems and their planning processes.
   “All businesses, especially insurance businesses, should be aware of all the risks that may hinder their continued operations or cause losses. It is also essential that they prepare business continuity plans in case any of these risks occur.” 
   “It is ideal that all businesses seriously consider insuring their properties and business operations against weather-related risks,” he said.
   He expressed hope that the insurance market would realise that there is strong demand for more tailor-made insurance products for climate-related risks and that the market would respond to such moves positively.
Public private partnerships
Mr Funa said, “I can say that public-private partnerships, especially in times of disasters, are functioning very well. For the insurance industry, the IC has been very active in coordinating with the industry players in such times (of disaster events).”
   For the nationwide preparation and immediate response to disasters, the national disaster risk reduction and management council (NDRRMC), consisting of key member agencies, is charged with responsibility for implementation of the NDRRM framework and the national disaster response plan in close coordination with the private sector.
   “Philippine insurance industry members themselves are all willing to help in the efforts to expedite the claims processing for the affected policyholders,” he said.
   “When typhoon Haiyan struck in 2013, a claims action centre was established in Tacloban City to facilitate the insurance claims and it served as a receiving centre for all insurance companies who had policyholders in the area since even their offices were destroyed by the typhoon. The companies also extended material help to the victims of the typhoon under their CSR schemes.” 
Loss prevention 
As the economy grows, infrastructure development is also on a roll. To ensure risk reduction during catastrophic events so that the infrastructure is protected, the insurance industry should give due attention to implementation and enforcement of building codes and other loss prevention measures. 
   Emphasising loss prevention and risk reduction, Mr Funa said, “The department of public works and highways in 2017 reconstituted the national building code review committee to look into the possible improvements in the national building code of the Philippines and its rules and regulations.
   “With this review, it is expected that the building standards and codes should be updated, allowing for stronger and better structures that will better secure the life, health, property and welfare of Filipinos.” 
Smartphones, social media and insurance awareness
The Philippines is an active smartphone-user country and is the third largest and fastest growing mobile market in Southeast Asia. The insurance industry hopes to expand insurance coverage in the country via mobile phones.
   Mr Funa said, “Yes, the IC recognises these technological developments particularly the increase in the usage of internet, electronic devices and social media. As a matter of fact, we have amended the circular on the guidelines for electronic commerce of insurance products to provide further guidance on the use of mobile application for the distribution of insurance products.
   “With this, we expect heightened product awareness, improved efficiency in their delivery, and ultimately an increase in insurance market penetration.”
Cyber risk protection
Cyber risks are a threat to all businesses without limits of geography and demography. The Philippines insurance industry is also gearing up for the risks that increase as cyber technologies and activities grow.
   “As proof that the Philippines is not oblivious to the threat of cyber risk, the data privacy act is being actively implemented by the national privacy commission (NPC). Through the guidance and the issuance of rules and regulations of the NPC, all companies are required, under the penalty of the law, to safeguard their customers’ data and information properly,” he said.
   More than just complying to avoid possible sanctions, “these companies are going the extra mile to protect their customers – knowing that trust is a fundamental aspect of an insurer and insured’s relationship,” said Mr Funa.
Microinsurance and mutuals
Mutual benefit associations in the Philippines have consistently been a reliable distribution channel for microinsurance. Also, the IC has provided encouraging support to them to design appropriate micro-agricultural and micro-health products for their members.
   He said, “To enable an increase in the reach of new microinsurance products, the IC is keen to tap more types of businesses to serve as distribution channels. 
   “We have also put out a draft circular on the guidelines for the distribution channels, which aims to layout a streamlined process for the application and approval of those businesses that want to be a distribution channel for microinsurance.”
Consolidation and consumer protection 
The IC closely monitors the impact of the capital adequacy changes and the subsequent consolidation in the market. “The market consolidation that is happening in the Philippines currently is a positive outcome since only capable and financially strong companies are retained in the market and the interest of the insuring public is protected,” he said. 
IC is a participative regulator
Mr Funa said, “The commission is always open to dialogue on all issues, including feedback and suggestions from the industry, although changes to the code have to go through legislation.” 
Aspirations for the future
“I aspire to an ASEAN insurance market that would have the highest insurance penetration in the region so that the ASEAN people are financially prepared and protected in any adverse event,” he said.
   Mr Funa looks forward to an insurance environment where more people understand the value of insurance and “have the means to afford appropriate risk protection products to aid themselves should a negative event happen.”  A 
| Print
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.


Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.