Changes in spending habits amid the community lockdowns last year have boosted the premium income of life insurance companies, the government regulator said on Tuesday (April 20).
In a statement, Insurance Commissioner Dennis B. Funa said that life insurance industry’s premium income rose by 5.9 percent to P247.72 billion in January to December last year from P233.92 billion a year earlier.
Funa attributed the increase to households new spending habits during the pandemic.
“It has been observed by the financial sector leaders that generally the savings of the middle-class sector grew due to restraints in consumer spending because of the pandemic,” Funa said.
In 2020, variable life insurance premiums went up by 7.7 percent to P183.24 billion from P170.13 billion, while single premiums and renewal premiums both grew by 19.72 percent and 13.58 percent, respectively.
Premiums earned by traditional life policies also improved by 1.09 percent to P64.48 billion from P63.78 billion in 2019, while renewal premiums increased year-on-year by 13.72 percent.
Meanwhile, the industry’s aggregate paid-up capital also saw an upward trend last year, increasing by 7.66 percent from the previous year’s P23.48 billion to P25.28 billion.
Despite the favorable financial performance, Funa, however, noted that the life insurance industry’s operations were affected by the pandemic.
He cited that the aggregate benefits paid by the industry in 2020 contracted by 10 percent from P77.11 billion to P69.36 billion.
“It is highly likely that this contraction is due to the various difficulties encountered in the processing, filing, and pay-out of claims as an effect of certain community quarantine restrictions,” Funa said.
Likewise, the life industry’s total New Business Annual Premium Equivalent (NBAPE) decreased by 20 percent to P46.16 billion from P57.56 billion in 2019.
“It is also highly likely that this decrease may be attributable to the restrictions on face-to-face selling of insurance products due to said community quarantine measures,” Funa said.
“The industry grappled with the on-and-off quarantine and lock-down measures, and the fact that we were unable to continuously offer insurance agents’ examinations greatly hampered the production of insurance companies,” he further explained.
A life insurer’s NBAPE is computed by obtaining the sum of the value of first year premiums from products newly sold in a specific year (or the initial annualized premium) and ten percent (10%) of single premiums written.
It is an international standard that the Insurance Commission has adopted to more accurately measure the life insurance industry’s sales performance.