Insurance industry’s biggest challenge
We are writing this letter in reaction to lawyer Raul J. Palabrica’s column (“Questionable mandatory insurance,” Business, 5/11/15) about the government’s move to introduce a Compulsory Insurance for Natural Catastrophes (NatCat).
Palabrica was spot-on when he said that the insurance industry does not enjoy a good reputation. We at the Philippine Insurers and Reinsurers Association (Pira), for the past eight years, have been working to address the roots of this bad reputation through regulations and technological solutions. We continue to address it, as we speak, through education.
The Insurance Commission has been addressing this through high capitalization and high net-worth requirements. Because of this, the number of insurance companies has dwindled to 65 from a high of 135 almost a decade ago. All insurance companies in the country are in fact required to have P550 million in net worth by the end of this year. It would be completely unfair to call these companies “fly-by-night.”
Our biggest challenge, however, is climate change. We face at least 20 typhoons every year. We are in the Pacific Ring of Fire. The West Valley Fault that traverses Metro Manila is said to be due to move anytime. These are the challenges we face, and we face them for our clients who have put their trust in insurance.
The Asian Development Bank was the first to propose a NatCat pool. This was about the same time the Philippine government unveiled its Disaster Risk Financing and Insurance strategy for homeowners, which called for a public-private partnership. The ADB responded by holding public consultations which resulted in the Philippine Catastrophe Insurance Pool.
Insurance relies on large numbers and to generate large numbers, a mandatory NatCat cover is not only necessary but inevitable. It is the only way to make insurance protection from natural calamities much, much affordable to our countrymen who need it most.
We have documented evidence that insurance works. A study in “Yolanda”-affected areas found out that some 70,000 survivors benefited from insurance. Insurance can indeed be a very effective tool in managing risks. And in a country like ours, it is an indispensable tool.
We hope that we can remove the rust of bad reputation that, for decades, has dulled this tool we call insurance. And we hope to sharpen this tool through experience and experimentation. Because in the end, this tool will make our lives a little lighter, and make our countrymen sleep much, much better.
As we say in Pira, we may not be able to stop typhoons and earthquakes, but we can make sure you have something to cling on to when such challenges happen.
—MICHAEL F. RELLOSA, chair,
Philippine Insurers and Reinsurers Association
