The Philippines’ insurance industry is one of the country’s budding sectors driven by financial inclusion efforts, digital innovations, and increasing consumer awareness. Tasked to strengthen and regulate these pre-need companies in the Philippines, the Insurance Commission (IC) has been implementing prudent and progressive regulatory and supervisory policies at par with international standards since its establishment in 1949.
The commission’s main goals collectively support the development, regulation, and consumer protection of the insurance industry. Among its objectives are to promote growth and financial stability of insurance, pre-need, and health maintenance organizations (HMOs); to professionalize insurance, pre-need, and HMO services, and develop insurance, pre-need, and HMO consciousness among the general populace; to establish a sound national insurance market; and to safeguard the rights and interest of the insuring public, pre-need and HMO customers.
To achieve these objectives, the IC continues to introduce strategic initiatives and reforms aimed at enhancing industry resilience, expanding market reach, and ensuring consumer welfare.
This year, the IC is looking to set standards for the computation of mutual benefit associations’ (MBA) policy reserves. The MBAs are organizations that provide security, protection, and meaningful financial solutions for their members; while policy reserves are the funds set aside by the insurance companies to pay future benefits and ensure that insurers have enough money to pay claims when they happen.
The valuation standards that the IC is expected to use will be in line with internationally accepted actuarial standards, as well as the principles of the financial reporting framework promoted by the Actuarial Society of the Philippines. The MBAs will be required to compute their required reserves using gross premium valuation.
“Every MBA supervised by the Insurance Commission shall value their policy reserves for Basic Life Insurance and Optional Life Insurance coverages at the end of each valuation period in accordance with this set of Valuation Standards,” the industry regulator said in a draft circular last December.
Similarly, the commission is planning to regulate the sale of insurance to overseas Filipino workers. This would ensure that Filipinos working outside the country receive adequate protection and benefits while working abroad, aligning with industry standards and consumer safeguards.
However, there are some roadblocks for the potential circular. Republic Act No. 10607, also known as the Amended Insurance Code, states that all licenses granted to companies and agents are only valid within the Philippines. Furthermore, IC Circular Letter No. 2020-109 also emphasizes that insurers are only permitted to cover individuals or risks located within the Philippines.
“We cannot remove that. We have to see how best we can have that implemented. There must be some way, even prior to entering a foreign country,” Insurance Commissioner Reynaldo A. Regalado was quoted as saying in a BusinessWorld report last August.
Another initiative that the IC is working on involves handing over the supervision and regulation of HMOs to another government agency under the Department of Finance. While the transfer of responsibilities is still being discussed with other concerned agencies, oversight from a financial regulatory body is required as HMOs are subject to anti-money laundering regulations.
To further strengthen the industry and make insurance more accessible to Filipinos, the IC has been actively pursuing initiatives aimed at increasing insurance penetration, as higher incomes could drive greater demand for protection products, potentially improving the country’s penetration rate.
Last year, insurance penetration, which measures premium volume as a percentage of gross domestic product and reflects the insurance sector’s contribution to the national economy, remained low at 1.67% for 2024, albeit higher than 1.61% a year prior.
One of the cited reasons for the country’s low insurance penetration is a lack of financial literacy and awareness. To address this, the IC hopes life insurance agents and underwriters can help in advocating financial literacy and prudence among Filipinos, “for the ultimate goal of financial inclusion for all.”
Recognizing the role financial literacy plays in improving insurance penetration and financial inclusion, policy makers filed House Bill No. 9162, or the Financial Literacy Education Bill, which aims to equip senior high school students with the knowledge, skills, and attitudes necessary for informed financial decision-making.
As the insurance industry slowly caters to more Filipinos, the collaboration between regulators, industry players, and policy makers has become critical in forming a financially secure and well-informed society. With the Insurance Commission at the helm of these efforts, initiatives such as regulatory reforms, financial literacy programs, and industry-wide collaboration are paving the way to a future where Filipinos are secure and confident about their finances. — Jomarc Angelo M. Corpuz
