Breathing new life: Development of market conditions gives a boost to the segment

The Philippine life insurance sector has seen major growth in recent years, in market size, penetration rates and product range. New channels are also opening – there has been a surge in bancassurance, for example – and more market entrants are expected as the country moves towards fuller integration into the ASEAN Economic Community.

Underpinning all this is the continued economic growth of the Philippines, with the particular sectors driving this, such as business process outsourcing (BPO), also providing a lucrative platform for expansion in the life sector. As firms grow, demand for employee benefits rises, with demand for health insurance packages particularly strong.

Bodies & Numbers

As with the rest of the sector, the main regulator for life insurance is the Insurance Commission (IC) currently headed by Insurance Commissioner Emmanuel F Dooc. On the industry side, the Philippines Life Insurance Association (PLIA) represents all the licensed life insurers in the country, promoting the sector and its interests. As of November 2015, it had 30 members.

The sector is also one of the most liberal markets in ASEAN, in terms of regulation and barriers to entry. A recent survey by Milliman ranked the country second only to Singapore in terms of regulation, at 58 out of 100 to Singapore’s 70. Among the 10 ASEAN member states, the country also came second in product development, third in distribution and fourth in sophistication of capital regime. It also came first in terms of talent mobility and foreign ownership – something evident in the prevalence of Filipino expatriates in other countries’ insurance firms, of foreign workers in Philippines-based outfits, as well as in the large number of foreign names among the sector’s insurers.

Market Layout

Indeed, in terms of market share, Sun Life of Canada (Philippines) had the largest reported total premium income in 2014, at P30.7bn ($681.5m), up from P29.6bn ($657.1m) in 2013. Second in rank was Philippine AXA Life Insurance, which recorded total premiums of P18.35bn ($407.4m) in 2014, up from P18.2bn ($404.1m) the year before. Just behind, in third place, was Philippine American Life and General Insurance (PhilAm Life), with P18.3bn ($406.26m) in total premiums for 2014. In fourth place came Pru Life Insurance, with P15.4bn ($341.9m), while BPI Philam Life Assurance came fifth, with P14.4bn ($319.7m).


Many of the top life insurers are thus Filipino subsidiaries of foreign outfits or joint ventures (JVs). The largest Filipino-owned life insurer is Insular Life, which ended 2014 with P11.9bn ($264.2m) in total premiums, a 6% growth on 2013. Among the foreign firms, Philippine AXA is a JV between Metropolitan Bank and Trust and AXA of France, while BPI Philam is a JV bancassurance project between Philam and the Bank of the Philippine Islands. Indeed, several other bancassurance firms are strong performers in the rankings. Sunlife Grepa Financial, which has an agreement with the Rizal Commercial Banking Corporation, had premium income of P7bn ($155.4m) in 2014, while Manulife Chinabank Life Assurance had total premium income of P4.9bn ($108.8m). This reflects the history of bancassurance regulation in the Philippines, which until 2013 had only allowed banks to distribute life insurance products from companies in which they had at least a 5% equity stake. 2015 also saw the launch of the Security Bank and FWD partnership as well as the announcement of a new JV between East West Bank and Ageas, underlining continued growth in the bancassurance segment.


The sector penetration rate stood around 1.5% in August 2015, according to Reuters, although IC Commissioner Dooc put the figure at 1.84% for the whole sector at the end of the first half of 2015. Either figure is still higher than the 0.5% registered for non-life, but still lower than an ASEAN benchmark of 3%. In terms of actual policy coverage, the most recent IC data in 2013 gave preliminary figures of around 32.5%. This was up on 24.4% the year before.


This low penetration rate, however, is widely attributed to several factors. First, there is the lack of availability of financial intermediaries in many parts of the country. Data from Bangko Sentral ng Pilipinas (BSP), the central bank, suggests that some 1630 cities and municipalities in the country did not have banking coverage in mid-2015, with insurance activity in such areas often limited to pre-need schemes distributed via micro-insurance operations based within local cooperatives, pawnshops and NGOs. Another factor is a lack of awareness of life insurance and its benefits. A 2012 survey by PhilAm Life, for example, showed that only 25% of Filipinos believed in the idea of securing their future through life insurance. This is an area on which PLIA has been concentrating, as have other major life insurance sector players.

Another factor is income levels and the cost of policies. Per capita income has been rising, from $2372 at current prices in 2011 to $2871 in 2014, with many Filipinos enjoying incomes far above the mean. Yet many citizens, particularly in rural areas, but also urban dwellers, continue to have low incomes and little savings. As a result, firms have been cutting prices, with some policies retailing for as little as P500 ($11.10) per month. Indeed, life insurance’s recent success is connected greatly to that of micro-insurance, a market segment that is particularly advanced in the Philippines and targets low-income earners. The average payment may not exceed 7.5% of the minimum wage of a non-agricultural worker in Metro Manila, calculated on a daily basis, according to IC regulations.


In terms of popularity, while traditional policies are a mainstay, variable life insurance products continue to dominate. The IC results for the third quarter of 2015, the latest available, showed that total premiums in life expanded 33.2% year-on-year, from P109.25bn ($2.43bn) in the third quarter of 2014 to P145.5bn ($3.23bn). Of the 2015 third-quarter total, variable products accounted for P104.9bn ($2.33bn), or 72%, compared to P71.6bn ($1.6bn), or 65.5% in the same period a year earlier. Variable product growth was a remarkable 46.6% between the two periods, while traditional products grew 7.7%. For some companies, variable universal life (VUL) products account for even more of their business. The Philippine branch of Sun Life of Canada, for example, reported in July 2015 that VULs constituted 95% of their protection business, with only 5% being traditional policies.

VULs, hybrids between mutual funds and traditional life insurance policies, are favoured in particular, because, being linked to stocks and bonds, they offer higher returns in a buoyant capital market. The Philippines Stock Exchange (PSE) has shown strong growth recently, starting to rise in early 2011, when it crossed the 4000-point mark, then hitting 7000 points two years later. In this period, sales of new variable products also took off, rising from 26.86% of all life products sold in 2011 to 52.7% in 2013. The PSE then reached an all-time high in April 2015 of 8100 points, though it has since fallen, ending 2015 at around 6720 points. A relatively low interest rate environment has also benefitted VULs, making such products highly competitive against other options.


Another area that is gaining increasing attention is health insurance. The latest IC figures for 2013 show accident and health taking 23.3% of all policies sold, by value, that year – almost as many as traditional life insurance policies, which took 23.4%. Partly this has come via the success of the BPO industry, whose employees, notorious for high churn rates, are increasingly being enticed to stay with more elaborate benefit packages. These usually now include either health insurance or health maintenance organisation (HMO) coverage.

In late 2015 President Benigno Aquino transferred responsibility for HMOs from the Department of Health (DoH) to the IC via executive order. Concerns were raised that while this might boost the competence of the sector’s overseers, the medical expertise that the DoH can bring to bear would be lost. The debate looks set to continue as the Philippine government presses ahead with its plans to launch universal health coverage in 2016.