Non-life insurance in the Philippines: A look into the industry

• Main Authors: Aque, Margarita, Chan, Joseph Anthony, Ching, Marc Frederick, Tuazon, Raymond
• Format: text
• Language: English
• Published: Animo Repository 2002
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/17215
• Institution: De La Salle University

1. Summary of the Project. 1.1 Brief description of the industry. Non-life insurance, in principle, is the sharing of the burden of loss by many individuals. It is in fact a risk transfer device. It helps in promoting the optimistic attitude of firms to conduct business since the risks involved in operating is insured. The industry started with marine insurance, when trade was done via ships and the risks of the sea were high. The first insurers were risk takers who undertook the risk of the perils of the sea. On June 8, 1906, the first domestic non-life insurance company, Yek Tong Lu Fire & Marine Insurance Company (Now Philippines First Insurance Company.) was established, thus starting the non-life insurance industry in the Philippines. And so, 96 years later, we take a look into the industry of non-life insurance. 1.2 Industry Analysis. 1.2.1 Brief description of the industry. Today, the non-life insurance industry is brimming with companies, as of October, 2001, there are more than 100 companies licensed and operating in the Philippines. Majority of which are domestic companies that are either family owned or owned by a closed small group of stockholders. A lot of events in the recent years has affected the non-life insurance companies. The liberalization of the industry, the increase of capital requirements, the slowdown of the economy and the September 11 attacks in the United States all contributed to shaping the industry. These are discussed exhaustively in the next chapters. 1.2.2 Technical. Being in a third world country, the technical aspect of the industry is not as developed in other countries. Mr. Eduardo Malinis, the Insurance Commissioner, stresses the need for more people who are technical experts in the field of underwriting and forensics. Even amidst the obvious benefit of investing in technological advances like the internet and computerization programs, there are still some insurance companies that are behind. These are most often than not due to the limitations of budget and for some, the adherence to the old school way of doing business. 1.2.3 Management. Majority of the firms are managed by a small group of people since, the prevailing structure of the industry are family owned or closed corporations. However, this does not mean that they create a great impact in the industry. In fact, most of the small players in the industry are these family owned corporations. The Insurance Commission is now taking an active part in selecting the management of insurance companies. In case of mergers, the Insurance Commission must first approve the prospective new management to ensure the fit and proper qualification of the new management. 1.2.4 Financial. The financial analysis of the industry further supports the claim that the movement of the large companies directly affect the movement of the industry. It can be seen that the changes in the top 10 reflects in the changes in the industry. This is further explained exhaustively in chapter 10.