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okay so for banking and financial institutions our next topic is private insurance companies so i have here an article from oxford business group about the philippines revises insurance sector regulations so we'll be discussing this first and then in the next video our videos we'll be discussing ra number 10607 which is essentially the current regulation or current law that is being imposed on insurance companies okay so i'm not sure if i can do only one video on that one because it's a very lengthy document 98 pages but anyway before going through that lengthy discussion we'll have first this one a revision of the insurance act or regulation so this is an old article i think this was written around 2015 or 2016 but today is already 2015 but essentially uh this was created a few years after the passage of r8 and 607 okay so they saw some improvements or some developments in the insurance industry all right so in a way um i think early 1900s 1930s around that time there are already insurance companies and then of course over the years there are changes and then there are certain needs that have come up so there are developments that have that happened and so currently uh the regulations that are currently implemented would have reflected already the uh resolutions that have been used to resolve those issues previously right okay so let's go over this uh article first okay while still relatively small in comparison to many of its asean peers the philippine insurance sector has shown strong growth in recent years averaging 10 expansion between 2008 and 2014 the signs are that with the country's continued economic growth and abortion in middle class the sector's expansion will continue to be impressive while moves on the logistics side partly aimed at bringing the country into line with the other assad markets are also facilitating wider take up and awareness so um i think later on we'll be reading some uh information right and then one of the uh things that they noted is that the current generation you know the millennials and then i think michelin c are they already working but essentially the current uh working generation especially especially the young adults are uh what do we call this they are more financially aware of their situations and they are more you know financially literate and such that they do understand the need to have financial independence or to achieve financial freedom and so they do understand the importance of you know personal finance savings set management uh retirement fund investments and of course insurance right and so there are a lot of people you know young people although they do know that you know they're still young um probably in the health side you know health insurance although they probably feel that are still young i'm still healthy i probably won't need any health insurance out of the moment but still uh it's better to start early because you know premium wise uh as long as there's you know lesser risk that you're going to uh i think all this experience a certain uh contingency like you know getting an illness being diagnosed by with a certain disease so the lesser the risk of that happening to you you know since you're still a young person then the premium that you're going to pay to the insurance company is actually much lower compared to older people all right the higher the risk that you know there's a higher the possibility that you're going to probably get hospitalized or probably you know have going to develop illnesses in a few years so the higher the risk the higher the probability of that happening then the higher amount of premium we are also going to pay to insurance companies but of course there are different insurance companies so it's possible that you know this company is only uh collecting or asking for this much and then another company is asking for more and then another company is probably asking for a lower amount of premium okay so there are those factors to consider and so uh there are probably you know young people many young people who are also getting uh insurances for you know we have life insurance so in case you die so your family would uh get something from the insurance to help them in their inner financial needs if especially if you are the one supporting them financially while you're still living okay that's a certain that's just one type of insurance right and then you have your health insurance again in case you get say in case you get hospitalized then the insurance company would be paying for your hospital bills right and then of course there is you know the younger you are the lower the possibility of that happening but other factors you consider for genetics uh lifestyle things like that right and then um we also have there we also have you know uh home insurance fire calamity or what they call this auto insurance for accidents with your vehicles and then we have pre-need insurances for education uh things like that right okay so essentially the most common is of course the life insurance and then the health insurance okay and then uh just to let you know with regards to health insurance um it's better to get an insurance before a certain disease or a certain illness manifest in your you know in your body and your with regards to your health you know during checkup because a bad checkup before they approve uh health insurances especially if you're a little a bit older uh they do require uh check up medical checkup you know just to ensure that you're still healthy and that you know be there essentially they're assessing how much of a risk you have for contracting diseases or illnesses in a few years down the road right and so uh they do some do require that you know for certain individuals for me when i took one well since i'm still young i think for most young people they do not require medical checkups but for again older uh people they do okay so what happens is that if your medical check up shows that you already have an existing illness then most likely than that essentially it's almost a guarantee that they're not going to accept you as a client they're not going to approve your application for health insurance because there's already a disease they already have an illness so you know it's pretty much 100 sure that you're going to claim benefits right so why would they accept you if they're just going to spend more money than you know the premium that you're going to pay okay right so again that's also one reason why older people pay much higher premium compared to younger ones right because there's a higher possibility of contracting illnesses higher possibility of you dying through accidents or natural causes right okay and so um it's much better to start with your health insurance life insurance when you are younger okay because once you already have that existing health insurance okay as long as you renew that every year uh regardless of for example the following year you you're already registered to an insurance right you already have uh an insurance company handling your uh you know already accepted you as a client so let's say for this particular year uh you contracted the disease and illness and then you started you know aiming for benefits and that's a possibility that they would you know continue that the following year and sale as long as you're being treated or getting treated in the hospital right because you know you've already paid how many years with them and in a way it's a show of not really loyalty or but it's there is something there you know that as long as you're already an existing customer they cannot decline or suddenly reject your you know renewal or the application but if you're a new applicant for a health insurance and they suddenly find out that i already have an existing medical condition so they can reject your application so in that case you have to shoulder uh your hospital bills right your hospital fees so that's going to be more costly okay compared to having insurance because having insurers essentially you know states that they would have to pay for a poor either a portion of your hospital bills if not all of it right so just a bit of a background with regards to life insurance and health insurance you know especially health insurance very much important okay so over the years a lot of people have seen and have understood the importance of insurance right a lot of people refuse to get an insurance because again you know they're still young i'm a very careful person but of course accidents do happen and uh things conditions that we are not aware of it could be there so you know again insurance is a protection against a certain risk or a possibility of a bad situation so to protect you from that financially in a way for the insurance company to somehow cover the expenses that you're going to have when you uh when that particular situation occurs so it's a good way it's a some uh you know it's a protection it's a financial protection right so over the years a lot of people uh have helped the insurance industry to grow and to develop because more and more people are getting insurance as their insurer they have applied to insurance claims right and then um let's continue on with this article uh the year ahead also possess challenges particularly in the non-life insurance sector where smaller companies are likely to find new capital requirements on a ruse with many predicting a wave of consolidation okay so there are changes they are also be as a financial institution and and financial institutions so they are also being required you know there are always financial requirements right minimum required capital for them to be able to operate as an insurance company so uh again there was uh the revision on the law uh in 2013. so there were some changes right this i'm sorry yet this shake up will likely leave the market stronger and more able to cope with future obstacles and because the changes uh did address certain concerns okay excuse me um this includes the challenge posed by nature as the country is highly prone to catastrophic natural disasters such as typhoons you know um however will 2014 2015 were relatively good years with few major events impacting the country much to the benefit of insurers and the relief of inhabitants right but you know we had 20 20 and we have a health situation we have the pandemic so probably a lot of health insurance companies health insurance policies have been used to cover you know especially uh the current situation if you've been diagnosed or if you've been found out to have uh cov19 then uh you would need a lot of money for that and health insurance says insurance companies they did some adjusting because you know before 2020 we did not know about this pandemic we do not know about this virus and so the coverage of health insurance companies do not include uh covet 19 right and so it took a while for them to include that and then i think there are also other insurance companies that started offering it to their uh other customers which who do not have health insurance today for myself i only have life insurance i did not have a health insurance but the company did offer i was trying to offer me health insurance but anyway things like that right and then we're going to see i'll probably uh do a research as well and link an article in the description of this video about uh the situation or how the industry coped with the pandemic in the last year 2020 and how they're still continuing this 2021 right okay so market structures i'm so sorry about the dog i'm not sure what his issue is okay um the main regulatory body is the insurance commission which is under the department of finance right a department of finance is of course a government agency so insurance commission is essentially a government agency as well headed by the insurance commissioner so currently occupied i'm not sure if he still is and the insurance commission supervises and regulates both life and long life insurers as well as mutual benefit associations health maintenance organizations free heat lines and charitable trust the isc also has a task of issuing licenses to agents and writers brokers issuaries and adjusters to ensure that these people who are offering insurance policies insurance products do know what they're doing okay so in a way they are being regulated as well they're being monitored or being licensed right so that you know they do know uh it's a sure thing that they are knowledgeable on the insurance and of course the services that they are offering okay uh key to the sector is the insurance and surety association of the philippines oh sorry the philippine insurers and reinsurers association which dates back to 1954 and was expanded in the 1990s by a merger with insurance and surety association of refugees so the current organization existing is pira philippine insurers and rangers association uh it encompasses all the non-life insurance firms in the country and represents their collective interest to the ic and other market stakeholders right okay the legal framework for the iec and for deciders provided by the insurance code currently it's this one are a number 10607 uh it was first issued in 1974 for several amendments met on uh pd presidential degrees metabolism and the force metal are ace right the recent one is r8n607 this has had a major impact on the sector for several reasons first it includes the legal recognition of bank assurance so allowing banks to cross sell products already counter okay so uh previously again banks are banks they are they do offer a wide range of services but before they are not allowed to offer insurance and investing activities right but nowadays commercial and universal banks are allowed to offer even insurance and investing uh services okay so and in a way it's like a partnership made by banks with insurance companies so for example you have bpi and then filament they did a venture or some sort of partnership so they have bpi filam and then other banks or in a way something something like that as well but other uh what they call this insurance companies out there or you have your manual life you have your son live so going back to the bank so they are now allowed to cross out products over the counter so when you visit a bank they have a certain counter or a certain portion which uh which is offering uh insurance services right and so when uh depositors of that particular bank visit the banks and while they are waiting uh while they are waiting to transact with the over the counter so they we these clients would be able to you know look around and see oh they have this counter for insurance and then they also have of course brochures and something to read information about it so sometimes uh there would be a clients who would be interested and would come to them to talk and discuss about these insurance products so in a way you know it's some sort of cross-selling over-the-counter and uh sometimes especially vip clients or those that uh different banks have different terms for them so you have your valued client you have your prestige okay so those types especially those types of customers they are being offered all the available financial services that the company has to offer okay hey so where were we again uh while previously banking cycle regulations had allowed banks only to sell insurance uh products sold big companies in which the bank herself had at least five percent in equity if this was before the new regulations allow banks to sell products from any insurance firm provided that the company fulfills all the requirements at work by the iec insurance commission and the country's central bank vsp persons engaged in selling these products must also be licensed by the ise so for the uh you know monitoring and supervision capitalization hi so there are as a financial institution again being monitored by the bsp and on the other hand is you have your insurance commission in particular for insurance companies so they also have the minimum required capitalization to ensure that they are able to properly operate right so um minimum paid up capital 5 million so there are increases in 2013 uh r810 607 set lower limits the new limits required existing domestic insurance firms to reach at l
ast 250 million by the end of june 2013 550 million by the end of 2016 900 million by the end of 2019 and then 1.3 billion by the end of 2022 so by next year this is their uh minimum capital requirements of the 61 non-life insurers in the market in 2016 only four met this 2022 figure new insurers as well as local branches of firms foreign firms must start with at least one billion say that's a lot of money because hello they are insurance companies okay so there are other information there i'm going to link this uh what they call this this article in the this description of the video as well say we have um higher standards of course because they're dealing with the public and it involves money so they have to be regulated provides new and stricter reporting standards for insurance companies along with definitions of microinsurance and variable contracts illustrating the growing diversity of the philippine philippines market insurers are also allowed to invest more in financial instruments so there are no combinations of financial services right so you have this uh what they always hybrid instruments right so it's an investment product but it also has an insurance uh nature okay so you are investing but you are also insured kind of they're they're combining all these services together which is essentially more attractive but of course it's kind of expensive as well compared to you know pure investment and pure insurance all right uh huh these may reach up to 25 percent of their admitted assets and obligations issues are guaranteed by banks local or foreign insurers pertain to insurance companies right and then uh of course they do have funds coming in from the premium payments of all the insured uh clients so this ensured what they call is sorry the insurance premiums that they have pulled together to use as funds of course they use it to pay out you know premiums claims by their clients and then there there's a certain part of it they that they do invest because they have to earn money right so aside from earning money from the premiums they still have to earn money as well from the you know excess funds the unused funds so that you know it could they would get more uh income from that behave because essentially contingencies insurance they're dealing with uncertainties uh given the situation in 2020 they would probably have made use of all the earnings that their companies have made through their investments in the prior years right so they are allowed to invest in financial instruments as well right for their unused or a certain portion of their funds okay uh modifications were also made in the methods uh reserve evaluation the insurance commissioner's term of office okay these are these are about the management right new regulations are aimed at securing a more stable and robust sector with greater security for the insured as well this will likely mean a visible reduction in the number of smaller players through consolidation oh okay so essentially what they're saying is that you know these small insurance companies are probably not going to last long especially there's the uh capital requirements right because it's increasing over the years so uh huh okay uh this will uh there are around 79 live companies at the moment and then with these new capital requirements the number might fall by half so this is back in 2016 all right to set up a foreign insurer mass in addition to meeting the capital requirements also leave a statutory deposit of 1 billion with the insurance commission appoint a general agent who is a resident of the philippines possesses additional funds of at least 100 million before being licensed to open a branch office a code of ethics and bill of rights for customers is also in the workshop we'll see if there's currently one because again this is 2016. it's already 20 uh 2021. all right so we have the market numbers here uh quarter of 2015. it's actually they're just showing us the numbers uh the growth from 2014 to 2015 you know given the new regulations being imposed to insurance companies so they have these figures 172 billion how is this combined premium revenues none like non-life and life segments of the insurance industry okay 172 billion and then combined net income is 20 billion from 12.3 billion the previous year 2014. this again this is our for 2014 2015 right okay and then total investments to that 952 billion that's a lot of money from 799 the previous year hey the industry saw growth of 10.1 percent okay from 2014 to 2015 again okay so there are other figures here if you're interested you can read them on your own sweet time so on the rise i think this is the conclusion oh not yet okay so there is also plenty of room for growth especially from the younger generation the millennial market in the philippines is usually the country's demographics there are more financially responsible and aware than previous generations however barriers still exist to successfully resonating with millennials ranging from affordability to lack of trust okay so those are the two things that they need to work on k and other figures again penetration rate is steadily increasing but still low overall penetration rates so get 1.09 okay this would bring in line with existing assigned averages the sector consisted of some 101 firms in 2013 70 in the non-life and then 26 in live four in four composite companies and one re-insurer okay so in 2015 philippine life insurance association which represents all life insurers in the country had 30 members i suggest seeing a growing life segment so from 26 to 30 right and then we have this at the nash sorry the solar insurer national reinsurance corporation of the philippines uh fnatic essentially this is the insurance company of all the insurance companies okay so you have your the people the individuals and of course businesses also get uh insurance you know for the buildings fire calamity accident so both individuals and companies do apply for insurance products right and then these insurance companies they also take up insurance from the national reinsurance corporation of the philippines so it's the sole reinsurer in the philippines and they are also listed in the philippines staff exchange okay their portfolio in 2014 consisted of fire insurance 50 that's a lot 23 percent live 21 casualty and others 6 marine and aviation so you know cruise ships ships and airplanes and then you have percent overseas business probably international ones several other firms also possess reinsurance licenses such as lochte and philippines insurance jordan lloyd thompson again not interested in doing this uh non-live play players uh what are they so we have these are the fewers for them 122 increase from 1.6 billion to 3.6 wow that's a lot total net premiums written from 23.6 billion to 26.9 billion total investments from 60.8 billion to 65.5 billion total assets from 100 i'm sorry 167.9 billion [Music] that's a current okay net worth of the non-life sector also rose by 13.33 you know from 63 to 71 billion okay so essentially these are your statistics and figures increases in uh the non-line players okay none live so we have uh this uh bpi ms insurance okay i'm not going to read this part a total of 69 non-life insurers were registered with the ic in 2014 a group whose number has declined in recent years from some 84 to 76 seventy thousand sixty-nine and on seven right the total industry-wide npw for 2014 to the 31 billion okay good enough lines of business so in terms of non-life segments i think my example say that car and physical insurance fire are the largest product lines that was most recent isis statistics show far with some 32 percent of all gross written premiums a motor taking 31.4 casualty is the third largest segment of that year other key lines are marine yeah surety ship so a surety ship so for example a building or you have uh contracted someone to do something for you and you know money has been exchanged but this other person suddenly run away with your money or did not complete what has been agreed upon in the contract like for example building uh building something right so in that case surety ship the insurance company would uh you know would pay you back for the money that has been lost because of the uh non-performance of the contract okay so that's what shortageship is okay okay and then we have the final line of business was life for professional reinsurers okay and then these proportions have stayed relatively constant over the years although far only overtook motor in 2012. in terms of net premiums motor was by far the largest segment 53.16 followed by casualty 18.5 fire 14.2 marine 6.6 six point sixty four live for insurers zero point nine percent okay and then you have your auto segment uh motor current issue in mother is set of the compulsory third party liabilities ctpl insurance so i think this is being uh required by the lpo uh single administration countering problems in the sector such as fake ctbl issuers and their cutting of theribs and tax leaks okay these uh sector bodies disagree with this proposal arguing that it will lead to the creation of non-effective monopoly uh in ctpl depriving non-life insurers of a major income stream yes that is correct okay while also making many of those working in this line of business we've done that but i say sorry caution against the idea in late 2015 with the possibility that legal challenges will be made against its rain 2016 lpo move comes after an earlier attempt to set up ctpl pool and idea tried in other markets as a way of dealing with a chronic issue in mother insurance because you know we have a high rate of insurer oh sorry accidents involving motor motorists all right law margins reputation for false claims make it unattractive too many the pool was unsuccessful and was an attempt by the government security insurance systems is to take on the role of central administrator so it failed according to them so the issue does looks like it remained a key topic in the nan live segment okay the fire segment includes a number of allied perils so included gen and earthquakes typhoons plots and other extended coverage so 2013 was a particularly bad year for loss ratios the country was hit by a super typhoon haiyan okay the impact and the insurance sector was not as massive as it might have been in a more developed market as most of the areas impacted were low-income and very under-insured okay of an estimated 14 billion dollars cost to the economy only around two billion dollars was likely covered by insurance for 2014 non-live personal accident and health care were only around 0.5 percent of gdp okay against an average of 1.5 for the asia-pacific economic operation okay so again uh ratios percentages compared with the other countries or with average in the countries in asia pacific okay non-live firms underwriting fire and allied burials are required to secure catastrophe for insurance cover of at least five percent of their aggregate net retain insured values in this segment zero there are being insured by the reinsurer right the rate is ongoing over the creation of uk's catastrophe insurance pool okay mandatory for homeowners or owners of small and medium-sized enterprises backed by pira and ic world bank and international finance corporation but we'll check on this what happened and then another area where micro insurance initiatives have recently had big impact is catastrophic insurance uh it targets low income earners and keep me uh keep premiums and fees low essentially there are a lot of you know insurance product services that are you know very low i think g cash or glue uh less than one thousand i think for life insurance was it it's something like that and then you have your pre-need so this is not live sorry uh in addition to non-life and life a further segment is pre-need so this is a product line different from life insurance and that we need policies are open-ended with insurer guaranteeing payment of a future needed example is a funeral so you know you don't know if you're going to need it in the short term or in the long term when are you going to die educational fees you know if you have children whenever whenever you're going to college illness or disability are you going to have an accident or are you going to have an illness are you going to get sick my cat is in the background okay [Music] several company collapses prior to the ic assuming regulatory oversight of the pre-lead segment in 2009 damaged the industry's reputation in the 2000s with a growth of life insurance also affecting the market uh there was in a particular pre-need insurance room for college degrees right uh college education i think there were several companies that failed and that a lot of people who paid were unable to use the insurance or the pre-need because you know a mismanagement or something okay um maximum sum of guaranteed benefits cannot be more than it is so it's actually again another thing it's because of that particular happening back in the day i i think i was still in elementary when that news broke out and in a way it did affect the whole industry in such that many people are now reluctant to trust these companies you know because you know this particular type of insurance was a failure they were unable to provide with their promise and the kids of the people who gave them money who paid the premium are already going to college and yet they are unable to uh pay for anything okay that got is [Music] okay so i'm going to get this here so essentially what happened back then is that because of that a lot of people uh lost their trust in the insurance industry or in the insurance center all right so it took a while before the public trusted in insurance companies again and of course there's this new regulation for insurance companies they're being regulated more strictly and so in a way it probably helped to encourage more people to avail insurances and of course the current newly working group the millennials of them probably haven't been affected by that controversy back then but probably their parents were the you once were victimized back then or who lost their money or their you know expectation that the college education of their children would be supplied by those cleaning companies all right so outlook for the conclusion both life and non-life are likely to see continued growth with the penetration rate advancing towards its goal of three percent um i think because of the pandemic a lot of people would also see the importance of having health insurance so probably this fight the large amount of claims uh they would probably also you know see an increase in revenues or premium payments okay so the other information i would alright so that's it for this video and then next we're going to discuss r810 607 all right so that's it for this one thanks and bye
