Insurers told to tap overseas workers
MANILA, Philippines - Filipinos working abroad offer a largely untapped market for Philippine-domiciled insurance companies in the face of a protracted financial market turmoil, an industry official said Wednesday.
Jose L. Cuisia, Jr., president and chief executive officer of the Philippine American Life and General Insurance Co. (Philamlife), said local insurers should establish alternative distribution channels to capture the overseas Filipino workers (OFWs) segment.
The eight million-strong OFWs, thanks to their money sent back home, have been largely credited for keeping the Philippine economy afloat as their remittances fuel consumption by their families.
Philippine insurance firms, however, has yet to take advantage of the savings of this segment, as the heavy taxes on insurance policies continue to weigh on the industry, Mr. Cuisia said.
"A significant market of middle class is not here in our land. That should challenge the imagination of companies to do business with our OFWs," Mr. Cuisia told CEOs gathered at a conference in Makati City.
"Unfortunately, our government has not been encouraging savings. The savings rate has been at 19%-20% for a long time and has gone up to 26% because OFWs are saving more. But we’re way below the 30%-36% average of our Asian neighbors," he noted.
"Why is that? It’s because the insurance industry is heavily taxed."
Still, insurance firms should consider distribution options such as telemarketing, direct and database marketing, as well as bancassurance, for their products to reach Filipinos abroad. Bancassurance, or the selling of insurance through banks, has "proven to be the most successful of all these alternative channels", Mr. Cuisia said.
Being "innovative," "reinventing" and "constantly challenging the business model" would be the way to survive in an increasingly difficult environment, he pointed out, citing how insurance companies in the past had coped with a low-yield regime by introducing policy plans with investment features, or the so-called unit-linked or variable insurance products.
"The prevailing low interest rate scenario [last year] resulted in lower business and in the re-pricing of traditional products. It made our customers consider other financial instruments or seek higher-yielding instruments," Mr. Cuisia said.
"If insurance companies did not perceive this shift in consumer confidence, our industry would have fallen," he added.
Variable insurance products grew 139% to P32.9 billion in 2007 from a year ago, overtaking traditional plans which expanded only by 9.6%.
With the reverse in the interest rate environment this year — as yields spiked to catch up with double-digit inflation — traditional plans are making a comeback, industry officials have said. — Maria Eloisa I. Calderon, BusinessWorld
Jose L. Cuisia, Jr., president and chief executive officer of the Philippine American Life and General Insurance Co. (Philamlife), said local insurers should establish alternative distribution channels to capture the overseas Filipino workers (OFWs) segment.
The eight million-strong OFWs, thanks to their money sent back home, have been largely credited for keeping the Philippine economy afloat as their remittances fuel consumption by their families.
Philippine insurance firms, however, has yet to take advantage of the savings of this segment, as the heavy taxes on insurance policies continue to weigh on the industry, Mr. Cuisia said.
"A significant market of middle class is not here in our land. That should challenge the imagination of companies to do business with our OFWs," Mr. Cuisia told CEOs gathered at a conference in Makati City.
"Unfortunately, our government has not been encouraging savings. The savings rate has been at 19%-20% for a long time and has gone up to 26% because OFWs are saving more. But we’re way below the 30%-36% average of our Asian neighbors," he noted.
"Why is that? It’s because the insurance industry is heavily taxed."
Still, insurance firms should consider distribution options such as telemarketing, direct and database marketing, as well as bancassurance, for their products to reach Filipinos abroad. Bancassurance, or the selling of insurance through banks, has "proven to be the most successful of all these alternative channels", Mr. Cuisia said.
Being "innovative," "reinventing" and "constantly challenging the business model" would be the way to survive in an increasingly difficult environment, he pointed out, citing how insurance companies in the past had coped with a low-yield regime by introducing policy plans with investment features, or the so-called unit-linked or variable insurance products.
"The prevailing low interest rate scenario [last year] resulted in lower business and in the re-pricing of traditional products. It made our customers consider other financial instruments or seek higher-yielding instruments," Mr. Cuisia said.
"If insurance companies did not perceive this shift in consumer confidence, our industry would have fallen," he added.
Variable insurance products grew 139% to P32.9 billion in 2007 from a year ago, overtaking traditional plans which expanded only by 9.6%.
With the reverse in the interest rate environment this year — as yields spiked to catch up with double-digit inflation — traditional plans are making a comeback, industry officials have said. — Maria Eloisa I. Calderon, BusinessWorld
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