Interview: Rizalina Mantaring
How can changing products and distributions channels overcome penetration barriers?
RIZALINA MANTARING: Although the agency model is the country’s dominant channel, bancassurance has the advantage of being able to tap the bank’s client base as well as being offered as part of the bank’s financial portfolio.
Overcoming penetration barriers includes the introduction of smaller, simpler products. These can be as small as personal accident insurance with premium less than $1. Showing larger segments of society that financial safety can be obtained through simple mechanisms is a step in the right direction. Inclusive financial products are an attempt to grow the client base by helping to uplift lower-income demographics. It is crucial for more Filipinos to experience the value of insurance. Word-of-mouth testimonials and familiar distribution channels are key to penetrating existing barriers.
Mobile technology will play an increasingly important role in the development of the industry. However, it will take time before mobile apps are adopted on a wider scale for the purchase of insurance products. Although we expect this to change, people prefer personal interactions when buying a financial product. In the short term, mobile apps will be helpful mainly for servicing existing clients. Technology is moving faster than traditional industries can keep up with, and so we need to work with the regulator to accelerate transformation while having rules in place. We are going to see amazing developments in insurance and in banking all over the world. The challenge for financial service companies is how to keep up.
What will be the sector’s role in financing infrastructure projects under the Build, Build, Build campaign?
MANTARING: The insurance sector is interested and although we have been speaking with various government agencies to become involved, as the administration moves to increase overseas development assistance funds, it is becoming harder to discern how we can participate. In previous years, we have worked with private entities to invest in energy and infrastructure projects, which are good matches for the insurance industry. However, it is important to clarify the rules to understand when and how insurance companies can participate – understanding how open the government is to our capital and what the rules governing investment are could increase local funding sources for the administration’s infrastructure push.
While risk-based capital rules have changed, capital charges are still quite punitive for loans financing infrastructure projects, and it’s not entirely clear if this situation will improve. However, coordination and faster approval of all new assets – even automatic approval if a project is certified by the government – by the Insurance Commission could expedite participation in infrastructure investment.
Where do you see opportunities to work with the administration to achieve policy goals?
MANTARING: The industry has been actively trying to support the government’s push for financial inclusion. Vast segments of the population, however, cannot be reached through traditional channels like agency and bank distribution. We see opportunities in distribution through new channels, such as mobile and affinity partners, though this requires product and process innovation, which in turn entails new or revised regulations.
In addition, new regulations on data privacy, and conversely, the provision of data to government bodies, are having a major impact on the way we do business. With costs on the rise and regulations changing, it is going to be important for all insurers to keep abreast of what is going on and to have a dialogue with the government. While the spirit is good, the implementation of rules may be too unwieldy for effective implementation. It is critical to maintain an ongoing conversation to ensure we do not have regulations that cannot be implemented or do not add value to the government’s policy goals.
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