Interview: Rahul Hora
In what ways will the implementation of minimum capital requirements of P900m ($16.7m) encourage further consolidation of the insurance sector?
RAHUL HORA: Increased capital will promote consolidation in the sector, especially in the general insurance (GI) segment. A lot of smaller GI companies are focused on their own group’s captive business, which constitutes a substantial share of their total business. The new minimum requirements might challenge the business model of these companies, as it may not be the best use of their capital. Therefore, small captive companies will need to decide whether infusing that much capital is the most appropriate decision. However, the regulation of the Insurance Commission will have a limited effect on both the life insurance sector and on companies whose principal strategy is identifying the growing businesses of potential clients. There are plenty of business opportunities in the Philippines, so it will not be challenging for them to increase their capital to a minimum of P900m ($16.7m). At the same time, the measure will put many small competitors – those who are unable or unwilling to infuse that much capital – out of business. This will present opportunities for larger players to absorb their market share, and will in turn lead to further consolidation of the insurance sector.
How has the Build, Build, Build (BBB) programme influenced demand for non-life insurance products?
HORA: BBB has had both a direct and indirect impact on the non-life sector. The direct impact is created by new projects that are in need of insurance coverage, while the indirect impact is generated by economic activity associated with improvement of the infrastructure network. For example, the demand for insurance products in the tourism sector may significantly increase if more travellers visit the country as a result of the ongoing upgrades to airport infrastructure.
Additionally, demand for new vehicles will boom as traffic conditions improve, providing increased opportunities for insurance companies in the automotive sector. The BBB initiative aims to carry out projects all over the country, which should help distribute economic activity across the different regions. If businesses flourish in other urban and rural areas, the insurance companies will have a new market.
What role is insurance technology (insurtech) playing in increasing the insurance penetration rate?
HORA: Insurtech is changing the whole industry. Not only is it widening product availability to new segments and clients, but it is changing the existing operation models. Most business is currently conducted through agents, like financial executives or retail agents, who use bank branches as a platform.
An insurance company depends on these agents for the entire sales cycle to be completed. This cycle includes creating awareness of a product, establishing a relationship with the client, providing information and required services, and arranging the policy. Technology has developed applications for each phase of the process. Insurance companies will not depend completely on agents, but they will also rely on technology. This will allow them to create a hybrid journey that combines technology and face-to-face services, improving the client’s experience. The first contact the client has with the product will be digital, then following a period of research, the client will approach an agent to alleviate their concerns and finalise the details of an individualised proposal. Technology will make this process both possible and financially viable. It will also increase the productivity of every agent because the customers approaching them will already have some knowledge of the specifics of products they are interested in.
Technology will allow insurers to generate awareness among potential customers through digital means. This will enable them to reach out – not only through the use of physical agents – to new markets where the unit value of the insurance policy for the company is smaller.
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