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Life Insurance in the Philippines, Key Trends and Opportunities to 2016

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The low penetration of life insurance in the Philippines, at 1.09% of the country’s GDP in 2011, provides opportunities for life insurance companies to capitalize on. Due to the adverse impact of the global economic crisis, Philippine life insurance written premium value fell dramatically from 2007 to 2009. However, the market started recovering post 2009 and is expected to grow at a healthy rate over the forecast period. The life insurance segment is expected to be driven by the increasing popularity of unit linked life insurance products, the country’s growing economy, increasing annual disposable income levels and the expanding middle-class population. Although the demand for whole life insurance products declined, the demand for unit linked products (considered as a sub-category of the individual life category) surged during the review period.

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									Life Insurance in Philippines, Key
Trends and Opportunities to 2016
Market Intelligence Report

Reference code: IS0041MR

Published: March 2012

www.timetric.com




Timetric

John Carpenter House

7 Carmelite Street

London EC4Y 0BS

United Kingdom

Tel: +44 (0)20 7936 6400

Fax: +44 (0)20 7336 6813




                             www.timetric.com
 EXECUTIVE SUMMARY



1 Executive Summary

      The Philippines contains one of the fastest-growing and most promising life insurance segments in the
      Southeast Asian region. The low penetration of life insurance in the Philippines, at 1.09% of the country’s
      GDP in 2011, provides opportunities for life insurance companies to capitalize on. Due to the adverse
      impact of the global economic crisis, the Philippine life insurance written premium value fell dramatically
      from PHP95.0 billion in 2007 to PHP71.5 billion in 2008. However, the life insurance segment showed
      signs of recovery by recording a positive annual growth rate of 2.3% in 2009, which increased to 17.5% in
      2010. Overall, the Philippine life insurance segment in the country recorded a compound annual growth
      rate (CAGR) of -1.1% during the review period (2007–2011). The Philippine life insurance segment was
      dominated by individual life and term life insurance products during the review period, which accounted for
      shares of 35.5% and 34.9% respectively of the total life insurance written premium in 2011. Meanwhile,
      individual pension insurance products accounted for a share of 23.9% and group life insurance products
      accounted for a share of 17.9%. The segment is expected to expand over the forecast period, due to the
      country’s growing economy, increasing annual disposable income level and the expanding middle-class
      population. Although the demand for whole life insurance products declined, the demand for unit linked
      products (considered as a sub-category of individual life category) surged during the review period. The
      rising popularity of unit linked life insurance products will drive the Philippine life insurance market over the
      forecast period.

      Rising consumer awareness about the benefits of insurance

      The Philippine life insurance segment is considered to be an emerging business, and its low penetration
      rate provides space for further growth, which is not shared by the life insurance segments of other Asian
      countries. With the rising consumer awareness about the benefits of insurance and the high frequency of
      natural disasters in the Philippines, the demand for life insurance products such as individual term life and
      group life insurance is expected to increase significantly. The market for unit linked life insurance products
      will experience high growth at the expense of traditional life insurance products such as pension, whole life
      and endowment. Unit linked, term life and group life insurance products will drive the growth of the
      Philippine life insurance segment over the forecast period. As a result, the life insurance segment is
      projected to increase in written premium value from PHP90.9 billion (US$2.1 billion) in 2011 to PHP122.6
      billion (US$2.8 billion) in 2016, at a CAGR of 6.2% during the forecast period.

      Insurance agencies expected to continue being the dominant life insurance distribution channel

      Although life insurers have traditionally relied on their large network of insurance agencies to sell life
      insurance products in the Philippines, the bancassurance distribution channel has become more popular
      during the review period. The main reason for bancassurance’s popularity is its low cost and access to a
      large customer base through the extensive bank branches across the country. In addition, the country’s
      expanding middle-class population has created an increase in the percentage of the population with
      access to formal banking channels, which will drive the growth of bancassurance over the forecast period.
      Agencies is still expected to remain the dominant distribution channel through the forecast period, although
      its share of the total life insurance written premiums is expected to fall from 69.8% in 2011 to 63.7% in
      2016. Meanwhile, the share of bancassurance is expected to increase from 17.4% in 2011 to 23.6% in
      2016.

      Reducing taxes on life insurance premiums will drive the growth

      The insurance regulation was recently amended in order to reduce taxes on life insurance premiums from
      5% to 2% during the review period. In addition, there have been changes to the documentary stamp taxes
      which affect the life insurance segment. The newly imposed documentary stamp tax reduced the previous


Life Insurance in Philippines, Key Trends and Opportunities to 2016                                                       Page 2

© Timetric. This product is licensed and is not to be photocopied                                        Published: March 2012
 EXECUTIVE SUMMARY



      rate of premium taxes, which will enable the cost of life insurance for policyholders to reduce. These
      favorable tax changes will support the sale of life insurance in the Philippines over the forecast period.




Life Insurance in Philippines, Key Trends and Opportunities to 2016                                                  Page 3

© Timetric. This product is licensed and is not to be photocopied                                      Published: March 2012
 TABLE OF CONTENTS



TABLE OF CONTENTS

1      Executive Summary .............................................................................................................. 2
2      Introduction ......................................................................................................................... 14
    2.1 What is this Report About? ..............................................................................................................14
    2.2 Definitions .......................................................................................................................................14
    2.3 Methodology ...................................................................................................................................16
3      Philippines Insurance Industry Attractiveness................................................................. 18
    3.1 Insurance Industry Size, 2007–2016 ...............................................................................................20
    3.2 Key Industry Trends and Drivers .....................................................................................................24
        3.2.1     Business drivers ....................................................................................................................................... 24
        3.2.2     Consumer drivers ..................................................................................................................................... 25
    3.3 Recent Market Developments .........................................................................................................26
4      Life Insurance Market Outlook ........................................................................................... 29
    4.1 Life Insurance Growth Prospects by Category ................................................................................30
        4.1.1     Individual life insurance category ............................................................................................................. 55
        4.1.2     Individual pension category ...................................................................................................................... 59
        4.1.1     Individual endowment insurance category ............................................................................................... 63
        4.1.2     Individual unit-linked sub-category ........................................................................................................... 67
        4.1.3     Individual term life insurance category ..................................................................................................... 71
        4.1.4     Individual others insurance category ........................................................................................................ 75
        4.1.5     Group life insurance category ................................................................................................................... 79
    4.2 Life Insurance Growth Prospects by Customer Segments...............................................................83
        4.2.1     Individual segment .................................................................................................................................... 83
        4.2.2     Individual single premium category .......................................................................................................... 83
        4.2.1     Individual non-single-premium policies ..................................................................................................... 87
        4.2.2     Group customer group .............................................................................................................................. 91
        4.2.3     Group single-premium policies ................................................................................................................. 91
        4.2.4     Group non-single-premium policies .......................................................................................................... 95
5      Analysis by Distribution Channel ...................................................................................... 99
    5.1 Direct Marketing Channel ..............................................................................................................101
    5.2 Bancassurance Channel ...............................................................................................................109
    5.3 Agencies Channel .........................................................................................................................117
    5.4 Other Distribution Channel ............................................................................................................125
6      Regulatory Policies ........................................................................................................... 133
7      Porter’s Five Forces Analysis – Filipino Life Insurance Market .................................... 134
    7.1 Bargaining Power of Supplier: Medium .........................................................................................134
    7.2 Bargaining Power of Buyer: Medium .............................................................................................135
    7.3 Barriers to Entry: Low ....................................................................................................................135
    7.4 Intensity of Rivalry: Medium to High ..............................................................................................135


Life Insurance in Philippines, Key Trends and Opportunities to 2016                                                                                                 Page 4

© Timetric. This product is licensed and is not to be photocopied                                                                                Published: March 2012
 TABLE OF CONTENTS



    7.5 Threat of Substitutes: Low .............................................................................................................135
8      Reinsurance Growth Dynamics and Challenges ............................................................ 136
    8.1 Reinsurance market size, 2007–2016 ...........................................................................................137
    8.2 Reinsurance Market Size by Insurance Segment, 2007–2016 ......................................................141
9      Competitive Landscape and Strategic Insights .............................................................. 146
    9.1 Overview .......................................................................................................................................146
    9.2 Leading Companies in the Philippine Life Insurance Segment ......................................................146
    9.3 The Philippine American Life and General Insurance Company – Company Overview .................148
       9.3.1      The Philippine American Life and General Insurance Company – key facts ......................................... 148
       9.3.2      The Philippine American Life and General Insurance Company – main products ................................. 148
       9.3.3      The Philippine American Life and General Insurance Company – main competitors ............................ 148
       9.3.4      The Philippine American Life and General Insurance Company – key employees ............................... 149
    9.4 Sun Life Financial Philippines – Company Overview .....................................................................150
       9.4.1      Sun Life Financial Philippines – key facts .............................................................................................. 150
       9.4.2      Sun Life Financial Philippines – main products ...................................................................................... 150
       9.4.3      Sun Life Financial Philippines – main competitors ................................................................................. 150
       9.4.4      Sun Life Financial Philippines – key employees .................................................................................... 151
    9.5 Phil. Axa – Company Overview .....................................................................................................152
       9.5.1      Phil. Axa – key facts ............................................................................................................................... 152
       9.5.2      Phil. Axa – main products ....................................................................................................................... 152
       9.5.3      Phil. Axa – main competitors .................................................................................................................. 152
       9.5.4      Phil. Axa – key employees...................................................................................................................... 153
    9.6 Pru Life UK – Company Overview .................................................................................................154
       9.6.1      Pru Life UK – key facts ........................................................................................................................... 154
       9.6.2      Pru Life UK – main products ................................................................................................................... 154
       9.6.3      Pru Life UK – main competitors ..................................................................................
								
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