By Herminia S. Jacinto
AFTER a busy and stressful week, I thought that I will just cool it and do what women like to do — roam around their favorite mall and go shopping with tons of coffee in between! However, before doing that, I decided to browse over my laptop to check on my mail messages. One of them was the link to the PIRA Fact Book, which I recall I requested for. PIRA stands for Philippine Insurers and Reinsurers Association, Inc., the association of the non-life insurance companies in the country. I quickly forgot about the shopping trip and decided to continue reading the fact book. It is good to know that the 55 non-life insurance companies are all doing well and except for a few, have complied with the minimum net worth requirement of P1.3 billion as of Dec. 31, 2022. Some are way above the minimum level which should be a big comfort for the insuring public. Gross premiums reached a record P120 billion and net income for 2022 was P6.9 billion.
The Fact Book mentions the several challenges still facing the industry.
Among them are low insurance penetration, competition, natural disasters, claims management and regulation. Low insurance penetration, competition and claims management are internal industry issues which the companies have a certain degree of control over. They can continue improving their products and their marketing strategies. Claims management has improved considerably due to computerization, fast and efficient recording and maintenance of files. Insurance personnel have to undergo continuous training in handling claims of various lines not only here but with specialists abroad. Online courses provide tremendous help in this area.
While we have no control over the happening of natural disasters and other events due to climate change, the companies can structure their reinsurance programs to get adequate facilities for the losses that may be incurred. New products like parametric insurance should be studied and recommended to buyers of insurance with the proper understanding of what they cover. There are many other products and facilities available in the global market to address possible and probable losses arising from natural disasters. The challenge is how to fit them into the local reinsurance programs and affordability.
Since insurance companies need to be stable, strong and capable of responding to its obligations to the insuring public and society in general, regulation is required. The Philippine insurance companies are regulated and supervised by the Insurance Commission of the Philippines which is under the Department of Finance. Republic Act 10607, more popularly known as the Insurance Code of the Philippines, contains all the legal provisions, including the reportorial requirements of the companies. The Insurance Commission or the Secretary of Finance issues department orders and/or circular letters as the need for them is warranted.
But this is not enough. Other government agencies and global regulating bodies have also imposed certain reporting requirements that have to be complied with. The justification is that insurance companies' financial statements and other financial reports have to be comparable with similar financial institutions, insurance being a global business.
As of now, the insurance industry is in the middle of revising their accounting systems and ROI's and investment decisions. The revised reporting will be effective for the year 2025 but a parallel run has to be done for the 2024 reports for comparison purposes. While the companies are still in the midst of complying with IFRS17, comes the requirement of the World Bank for companies to submit their Own Risk Solvency Assessment (ORSA). Again, this will require gathering of data which heretofore has not been done by most companies.
The challenge is whether the data can be found in existing data bases or will there be a need to revise them? All these new reporting requirements have diverted the resources (most important of which are people) of insurance companies to complying with them and perhaps setting aside the very core of the insurance business which is providing protection for the insured. And revising the accounting and other systems costs a lot of money.
The consultants, usually the auditing and actuarial firms, charge high professional fees during the crafting and the implementation of the new accounting system. We just hope that the companies can comply with these new regulations with less impact on their profitability. And that the regulator will be less strict in their audit during the transition period.
Source: manilatimes.net