How Singlife plans to magnify the Philippines’ insurance penetration through GCash

Experts cite the country’s economic exposure to climate change over all other nations.

The Philippines’ low insurance penetration, albeit a narrower figure than the previous year’s, is compelling insurers to transcend their offerings into a more viable option for the everyday Filipino – such as electronic wallets.

With embedded insurance expected to skyrocket $270b (P14.99t) in gross written premiums by 2030, insurers like Singlife have been trickling their way to fill these protection gaps.

“To put this into perspective, we understand that the insurance penetration rate in the Philippines is at only 1.75%. This means that a majority of Filipinos are at risk for financial distress during unforeseen circumstances like medical emergencies, which potentially affects their finances for children’s education, and for their retirement,” Richard Vargo, Singlife Group head of products, propositions and transformation, told Insurance Asia magazine.

On the other hand, data from the Philippines’ Insurance Commission showed that insurance penetration – premium volume as a share of gross domestic product or contribution of the insurance sector to the national economy – as of end-September of 2023 stood at 1.68%, smaller than the 1.81% in 2022.

What troubles the Filipinos?

Insurance Commissioner (IC) Reynaldo A. Regalado emphasised the importance of financial inclusion and consumer protection at the Professional Insurance and Financial Advisors Association of the Philippines (PIFAAP) annual convention held last year.

Regalado urged financial advisors to tailor insurance and financial solutions to better meet the needs of Filipino consumers, promoting financial inclusion in the country.

He also highlighted the government’s support for private sector initiatives to make financial products and services more accessible. Whilst acknowledging the increase in premium collection by the insurance industry, Regalado noted the significant protection gap in the country, particularly among the vulnerable poor facing risks from natural calamities.

The nine months to September period saw the country’s net earnings jump 9.4% year-on-year (YoY) to P38.2b ($688m). Total premiums also climbed 2.8% YoY to P289.6b ($5.22b).

To address this, the IC has actively promoted micro-insurance as financial protection, covering risks like accidental death, injury, and property damage. As of the first quarter of 2023, 51.7 million Filipinos are insured under some form of micro-insurance.

Swiss Re Institute identified the Philippines and the US as currently the most economically exposed countries, with high probabilities of hazard intensification due to climate change. The Philippines stands out as the most impacted country by the four major weather perils of all 36 countries analysed, experiencing annual economic losses equivalent to 3% of GDP.

Climate change is expected to have a significant impact on economic losses in the future, with certain countries already highly exposed to weather-related hazards. Thus, risk reduction through adaptation can enhance insurability, with the insurance industry ready to play a crucial role by catalysing investments in adaptation projects and sharing risk knowledge.

“Climate change is leading to more severe weather events, resulting in increasing impact on economies. Therefore, it becomes even more crucial to take adaptation measures. Risk reduction through adaptation fosters insurability,” Jérôme Jean Haegeli, Swiss Re’s group chief economist, said in a press release.

“The insurance industry is ready to play an important role by catalysing investments in adaptation, directly as a long-term investor and indirectly through underwriting climate-supportive projects and sharing risk knowledge. The more accurately climate change risks are priced, the greater the chances that necessary investments will actually be made.” Haegeli said.

Fast-growing Asian economies like Thailand, China, India, and the Philippines are identified as particularly vulnerable. Looking ahead, floods are projected to intensify globally, while tropical cyclones remain a significant driver of economic losses, especially in the US and parts of Asia.

Implementing adaptation measures such as enforcing building codes and increasing flood protection will be crucial in reducing loss potential and mitigating economic impacts. Ultimately, the extent of future losses relative to GDP in each country will depend on the effectiveness of adaptation, loss reduction, and prevention efforts.

The IC’s Regalado stressed the importance of cooperation between the government and the private sector in developing catastrophe insurance products and incorporating data analytics into insurance industry processes like marketing, distribution, and claims processing.

Coincidentally, Singlife’s Vargo points out persisting challenges in accurately assessing and validating claims in parametric insurance.

“The crux of this challenge lies in the reliance on data availability and quality. For us to assess claims promptly and accurately, it's crucial to work with business partners who have a proven track record in managing dedicated data infrastructure. This infrastructure must provide readily available data and adhere to the highest standards of data integrity and credibility,” he said.

The insurer said to achieve this, Singlife implements stringent validation procedures and leverages advanced analytics to verify claim triggers against predefined parameters rigorously. Singlife also said it keeps transparent communication channels with our policyholders, clearly elucidating the claim settlement process at every juncture to ensure transparency and trust.

Most accessible e-wallet

Embedded insurance is pivotal in bridging the protection and savings gap, particularly in markets like the Philippines, where insurance penetration rates remain low, Vargo pressed.

In line with this vision, Singlife is in a running partnership with digital platforms like GCash – an e-wallet app with over 75 million users as of December, 2023.

G-Xchange, Inc. or “GCash” is also a subsidiary of Globe Fintech Innovations, Inc. Additionally, the e-wallet application is one of the Bangko Sentral ng Pilipinas’ (Philippine central bank) regulated electronic money issuers (EMI).

“With Singlife Products being available on the platform, GCash expanded its services to provide customers with easily accessible and affordable life insurance products to its customer base,” Vargo told Insurance Asia.

“Furthermore, embedded insurance products may fall under different regulatory frameworks depending on their nature and distribution channel. As such, insurers will need to stay abreast of evolving regulations and ensure compliance across all channels,” he said.

“We work very closely with the GCash team and collaborate to try to improve the customer journey, trying to address issues that inevitably arise in a digital-first type of market opportunity. Sales are going quite well and they're continuing to improve,” he added.

Singlife’s partnership with GCash began over two years ago, with the formal launch in the Philippines taking place about two or three years ago. At present, the Philippines is the only non-Singaporean market Singlife caters to. But with the recent acquisition of Singlife by Sumitomo Life Insurance, the insurer is looking into expanding in the region.

Singlife’s perspective

Apart from e-wallets, Singlife is exploring opportunities with digital banks and other ecosystem and platform providers with large customer bases.  An example of Singlife’s embedded insurance expansion is the Cash for Goals plan and 100-in-1 Medical Plan – a coverage allowing individuals to curate it to their lifestyle and budget.

Looking ahead, Singlife anticipates significant growth in the embedded insurance market, driven by increasing demand for simple, affordable, and digitally integrated insurance solutions. With strategic partnerships, innovative product offerings, and a customer-centric approach, Singlife said it commits itself to the evolving insurance landscape in the Philippines and the rest of Asia.

“At the end of the day, as with every insurer, we welcome ecosystem partnerships and meaningful collaborations to develop new products and services that allow us to serve our customers better.” Vargo concluded.