Over the last few years, the economy of the Philippines has been striking a reasonably effective balance: the country’s GDP growth rate has been steady, and inflation has been kept relatively in check. According to recent data released by the World Bank, the country’s poverty rate gradually fell between 2006 and 2015, largely thanks to firm economic fundamentals providing the necessary foundations for more job opportunities outside of agriculture. However, since the beginning of 2018, the tides have turned.
As more people are lifted out of poverty, financially protecting them for the future becomes very important
GDP grew by 6.1 percent in the third quarter of 2018 – an impressive rate by international standards, but still a three-year low for the country. Inflation, meanwhile, accelerated to 6.7 percent by October 2018 – its fastest rate since 2009 and well above the target set by the country’s central bank. Recently, inflation in Manila’s metropolitan area appears to have plateaued at 6.1 percent.
These are all challenges that can be overcome, and the government is taking measures to address them. In 2018, the government signed in a rice tariff bill, lifting the quota on rice imports and reducing inflationary pressures. There is also the benefit of the Philippines’ strong local market and healthy domestic consumption, which is weathering the price hikes on goods and services that have been caused by the ongoing trade war between the US and China. Despite the country’s gross international currency reserves reaching a nine-year low and muted expectations regarding the growth of the important local IT business process market, better days are expected soon.
For the average person in the Philippines, these changing economic tides can hit hard. While it can be reasonably straightforward to lift people out of poverty when the economy is good, helping them stay above the poverty line when times are more challenging can be difficult. It requires more expansive measures.
Mrassociates spoke to Surendra Menon, President and CEO of BPI-Philam, to find out more about the challenges and the opportunities that exist across the country’s life insurance sector.
BPI-Philam is one of the Philippines’ leading bancassurance firms, and has made significant progress in repositioning how life insurance is perceived in the country. The company is working towards helping the Philippines’ ongoing economic development by encouraging vulnerable people to make informed financial decisions to secure themselves against future shocks. Menon explained: “The World Bank released a report on Philippine poverty reduction and recommended measures that the government can employ to continue reducing and eventually eliminate poverty, one of which is managing risks and protecting the vulnerable.”
Menon also said that bancassurance plays an important role in both the Philippine economy and individual people’s lives. As more people are lifted out of poverty, financially protecting them for the future becomes very important. “On an individual level, citizens should take up insurance policies to secure themselves and their families financially,” he said. “Even when the worst happens, their hard-earned money will remain largely intact and accessible, and can be used to rebuild their lives.”
The World Bank’s recent report on poverty in the Philippines encompasses a number of poverty reduction methods, and suggests that government programmes should include effective disaster prevention measures such as early warning systems, improved access to personal banking and social assistance. Insurance is also mentioned as a useful poverty elimination tool, since it can help make sure that financial gains are not lost. “Insurance plays a larger, more long-term role in this area as it stabilises the financial standing of individuals and families,” Menon said.
Philippines’ GDP growth in Q3 2018
Number of BPI-Philam clients participating in the Philam Vitality programme
Bancassurance, the practice of selling insurance via bank branches, is a particularly powerful tool in the Philippines, he said. “Bancassurance widens the reach of the insurance industry in the country, and we are present in areas where more traditional channels of insurance cannot reach or have no presence.” BPI-Philam is partnered with the Bank of the Philippine Islands, allowing its products to be sold across the bank’s network of more than 900 branches. This has contributed to BPI-Philam’s current position as one of the country’s fastest-growing bancassurance providers.
“Our advocacy of making insurance accessible to all Filipinos is our driving force,” Menon said. “Coupled with the growing network of BPI branches, we are continuously expanding our sales force to match. We have also made it a goal to educate as many people as possible on the need for life insurance.”
This has proven to be a challenging task for BPI-Philam, with life insurance generating a certain amount of cynicism in the Philippines. “There is a stigma against life insurance in the country, particularly due to the way it was previously marketed and sent a ‘you die, we pay’ style of message,” Menon said. This has been the case not only in the Philippines, but in much of Asia. There is also a challenge in that many people, particularly those coming out of poverty, do not fully understand insurance products and what they are capable of. “Filipinos have long been plagued with misinformation on what insurance can do for their households and its importance in securing their future,” he said. “They often shy away, and are under the impression that only the rich can afford to protect themselves.”
However, with falling poverty rates, taking precautionary measures to ensure financial security is becoming more important for the average Filipino. “We are educating the Filipino people first about life insurance, since it leads them into making an informed decision when they decide to insure themselves and their loved ones,” Menon said. “Life and health insurance are crucial components of any complete financial portfolio.”
Alongside this educational role, BPI-Philam is developing world-class life insurance products. “Our products meet the highest regulatory standards. All our products are reviewed, scrutinised and approved by two governing bodies, the central bank and the Insurance Commission,” he said. Bancassurance also helps strengthen a policyholder’s relationship with their bank, helping make further inroads in terms of financial literacy and inclusion.
“Our bancassurance sales executives are empowered to provide customer service to anyone who needs it, whenever and wherever,” Menon said. “This makes it easier and more convenient for customers to manage their money, since there’s no need to go anywhere else when a premium is due. Customers just go to any branch of the Bank of the Philippine Islands or to our online banking portal, and pay their premiums there.” He added that there is a wider array of products for customers to choose from when visiting a bank. Between all of these measures and BPI-Philam’s long history in the sector, the company is working to help thousands of Filipinos navigate the insurance market.
Reaping the rewards
While financial literacy is important, it is by no means the only goal of BPI-Philam. The company is also focusing on communicating and developing the living benefits of its products. This includes dividend payments, policy loans, retirement funds, dismemberment and disablement benefits, hospital income benefits, and even critical and terminal illness benefits. Menon explained: “Our best one is Philam Vitality. We want to help people live healthier, longer, better lives, which is why our Wellness Series products are integrated with Philam Vitality. It is a science-based wellness programme that encourages our policyholders to make real changes for their health.”
The plan has three steps: ‘know your health’, ‘improve your health’ and ‘enjoy the rewards’. For the first step, policyholders are provided with a range of health assessments that determine their ‘vitality age’ – a measure of how healthy they are relative to their actual age. It also helps them understand in much more detail the various aspects of their health and what they can do to improve it. The next step, ‘improve your health’, offers customers discounts on services like gym memberships, workout gear, healthy food and even smoking cessation courses. “The third step is to enjoy the rewards: customers are rewarded for healthy lifestyle activity and choices, and the impact is measured for each individual,” he said. “Rewards range from an additional insurance coverage at no charge to movie tickets and even discounts on hotel accommodations and flights.”
The more active a policyholder is in their journey, the more they are rewarded with points to increase their level. The higher the level, the bigger the discounts. So far, the scheme has been very successful: “To date, we have over 27,000 clients actively participating in the programme, and we are very proud to say that this number is increasing every month.”
Doing it the right way
In addition to this programme, BPI-Philam is also fully committed to complying with its code of corporate governance. Menon said this commitment to the highest standards of corporate governance is rooted in the belief that a culture of integrity and transparency is essential to the consistent achievement of the company’s common goals. “Creating a sustainable culture where trust and accountability are as vital as skill and wisdom steers us towards achieving long-term value for shareholders and clients, and strengthens confidence in the institution.”
He said that, combined, all of these efforts are winning over customers, fostering financial literacy and helping reinforce gains made by poverty reduction. “Aside from our products being vetted by two governing bodies in the country, we have the combined strength of the Bank of the Philippine Islands, with over 160 years’ experience, and Philam Life, with over 70 years of insurance market leadership, behind us,” Menon said. As the Philippines continues its gradual – albeit occasionally uneven – economic ascent, BPI-Philam is working to make sure the benefits are felt for many years to come.