OBJECTIVE
According to GlobalData, Philippines is among the world’s most vulnerable countries to natural disaster. Despite that, general insurance penetration – as a percentage of GDP – was just 0.48% in 2017, compared to the 3.28% average for developed markets.
Most of the time, Filipinos will purchase insurance not because he really wants protection. Filipinos buy insurance because they are compelled to do so. Either they are mandated by regulators like the Land Transportation Office (LTO) or it is a contractual requirement.
Filipinos buy Compulsory Third Party Liability Insurance (CTPL) in order to register their car. They buy Commercial General Liability (CGL) because it is a precondition for the issuance of a business permit. They buy Fire Insurance or Comprehensive Motor Car Insurance because their property is mortgaged and the mortgagee bank requires them to be insured. They buy Professional Liability Insurance because it is a requirement by the Insurance Commission insofar as brokers are concerned or by their foreign clients with respect to BPOs and IT firms.
I believe one of the main reasons can be attributed to Filipinos' lack of knowledge and understanding about the importance of insurance and how it will benefit them. Even the Supreme Court, in one of its decided cases, described insurance as "complex and difficult for the layman to understand."
I consider insurance a paradoxical product. You buy it but you do not want to use it. I have yet to hear an insured who is very excited to use his insurance policy, particularly a Personal Accident or Life Insurance policy. Why? Because you must suffer a loss, get injured, or be involved in an accident first in order to trigger a claim.
And if the event or peril insured against will not happen within the policy period, effectively, what the insured has bought is a very expensive but useless piece of paper! It has zero value once it expires.
In the Philippines, it is more expensive compared to its Asian peers because of taxes. The average tax rate imposed on Motor Car and Fire Insurance is 24.7% and 26.7%, respectively. And if there is reinsurance, an additional 12% VAT is further charged against the premium.
The objective of this website is to explain insurance and its complexities in a manner that can be easily understood by a layman or those who are pursuing a career in insurance.
This is also my simple way of giving back to the industry and sharing the knowledge I have gained for the past 20 years.
Most of the time, Filipinos will purchase insurance not because he really wants protection. Filipinos buy insurance because they are compelled to do so. Either they are mandated by regulators like the Land Transportation Office (LTO) or it is a contractual requirement.
Filipinos buy Compulsory Third Party Liability Insurance (CTPL) in order to register their car. They buy Commercial General Liability (CGL) because it is a precondition for the issuance of a business permit. They buy Fire Insurance or Comprehensive Motor Car Insurance because their property is mortgaged and the mortgagee bank requires them to be insured. They buy Professional Liability Insurance because it is a requirement by the Insurance Commission insofar as brokers are concerned or by their foreign clients with respect to BPOs and IT firms.
I believe one of the main reasons can be attributed to Filipinos' lack of knowledge and understanding about the importance of insurance and how it will benefit them. Even the Supreme Court, in one of its decided cases, described insurance as "complex and difficult for the layman to understand."
I consider insurance a paradoxical product. You buy it but you do not want to use it. I have yet to hear an insured who is very excited to use his insurance policy, particularly a Personal Accident or Life Insurance policy. Why? Because you must suffer a loss, get injured, or be involved in an accident first in order to trigger a claim.
And if the event or peril insured against will not happen within the policy period, effectively, what the insured has bought is a very expensive but useless piece of paper! It has zero value once it expires.
In the Philippines, it is more expensive compared to its Asian peers because of taxes. The average tax rate imposed on Motor Car and Fire Insurance is 24.7% and 26.7%, respectively. And if there is reinsurance, an additional 12% VAT is further charged against the premium.
The objective of this website is to explain insurance and its complexities in a manner that can be easily understood by a layman or those who are pursuing a career in insurance.
This is also my simple way of giving back to the industry and sharing the knowledge I have gained for the past 20 years.
ABOUT THE AUTHOR
A non-life insurance practitioner for over 20 years already.
A member of the Integrated Bar of the Philippines since 2007.
An active member in various technical committees at the Philippine Insurers and Reinsurers Inc - the umbrella organization of the non-life insurance sector.
A faculty at the Insurance Institute for Asia and the Pacific (“IIAP”) since 2009. He lectures on the following topics: Insurance Principles and Special Characteristics of an Insurance Contract, Advanced Motor Car, Principles of Suretyship, Miscellaneous Casualty, and Overview of Claims.
As a faculty of IIAP, he received one of the highest evaluation ratings in 2016, 2017 and 2019.
Achievement-oriented and a consistent topnotcher in various IIAP seminars such as the following: Basic Non-Life Insurance, Principles of Suretyship, Principles of Accident and Health, Intro to Loss and Adjustment, Insurance Claims Course, and Non-Life Insurance Marketing.
A member of the Integrated Bar of the Philippines since 2007.
An active member in various technical committees at the Philippine Insurers and Reinsurers Inc - the umbrella organization of the non-life insurance sector.
A faculty at the Insurance Institute for Asia and the Pacific (“IIAP”) since 2009. He lectures on the following topics: Insurance Principles and Special Characteristics of an Insurance Contract, Advanced Motor Car, Principles of Suretyship, Miscellaneous Casualty, and Overview of Claims.
As a faculty of IIAP, he received one of the highest evaluation ratings in 2016, 2017 and 2019.
Achievement-oriented and a consistent topnotcher in various IIAP seminars such as the following: Basic Non-Life Insurance, Principles of Suretyship, Principles of Accident and Health, Intro to Loss and Adjustment, Insurance Claims Course, and Non-Life Insurance Marketing.
THE DATA CONTAINED IN THIS SITE ARE FOR GENERAL INFORMATIONAL PURPOSES ONLY. THE ADVICE OF A PROFESSIONAL INSURANCE INTERMEDIARY AND COUNSEL SHOULD ALWAYS BE OBTAINED.
THE INFORMATION CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN.
THE INFORMATION CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN.