Life insurers see double-digit growth in premiums on strong economy, demographics

LIFE INSURERS expect insurance premiums to sustain double-digit growth this year on the back of solid macroeconomic fundamentals, as wealth grows and insurance users seek more protection from risk.

“The stock markets are quite heated and some areas of some markets. In particular in the Philippines, the macrofundamentals are very sound, I would expect double-digit growth,” newly seated Philippine Life Insurance Association ( PLIA) President Olaf Kliesow said at a media roundtable on Tuesday when asked for his outlook.

“I think there is a big opportunity in the Philippines for further supporting customer needs, about half of the population that is still not familiar with insurance. There is still room to grow,” he added.

He said that although the insurance industry took a hit from lower estate taxes and a doubling in documentary stamp tax (DST) for insurance policies under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion Act, the development is a net positive, because income tax rates have fallen.

“I look at the tax reform more from a positive point of view. If you look at it from an insurance angle you might say that there are some aspects that are more on the difficult side, like the estate tax, the DST. But overall, lowering the income tax should lead to more money in the pocket and more available assets. That means also lower income classes can start accumulating wealth and protecting themselves,” Mr. Kliesow said.

“I think the impact is positive with a very bullish equity market a big part of the equities market in investing in unit linked products. I would expect to see strong growth this year,” he added.

Under the tax reform program, estate taxes were reduced to a single 6% rate from the old tax schedule with varying rates; DST was doubled for policies or other instruments.

Mr. Kliesow said that PLIA will push for insurance literacy this year to boost insurance penetration in the market.

“The goal of PLIA is really to support the growth of the industries and one main focus is of course financial literacy and awareness.”

Apart from macroeconomic factors, he said demographics also favor the Philippines “with a large population that is growing.” As a result, “I think it will make it a good year for the industry,” he added.

Mr. Kliesow said the risks that are always present in the market are natural calamities, but this year the specific risks stem from geopolitics or protectionism that may lead to trade frictions, though he added in the Philippines the impact of the latter two factors may be muted.

According to preliminary and unaudited data from the Insurance Commission, premiums totaled P259.646 billion in 2017, up 12% from a year earlier.

Life insurance firms accounted for P202.341 billion of the total, up 10.69%.

The P48.561 billion in non- life insurance premiums grew 16.7%. —