Will Covid-19 boost private insurance in the Philippines?

While the pandemic has placed extra strain on the Philippines’ health care system, increased awareness of health risks could lead to a spike in private insurance coverage.

With 273,000 recorded cases and 4700 virus-related deaths as of September 16, the Philippines has been the hardest-hit country in South-east Asia – despite the implementation of stringent lockdowns over the past six months.

The spread of the virus has not only placed pressure on hospitals, clinics and staff within the national health care network, it has also hampered plans to expand health insurance coverage due to related economic challenges.

Last year President Rodrigo Duterte signed the Universal Health Care Bill into law, which automatically enrolled citizens in the National Health Insurance Programme. The law aims for the state-owned Philippine Health Insurance Corporation, known as PhilHealth, to cover at least 50% of all medical expenses by 2022, up from the current levels of 15-17%.

However, amid a reallocation of health funding towards the Covid-19 response, allegations of mismanagement at PhilHealth, falling excises on alcohol and cigarettes – which are used to subsidise health care costs – and the current exemption of overseas Filipino workers from making health care contributions, there are concerns that PhilHealth could fall short of its targets.

These concerns, along with the medical risks of the pandemic, have further highlighted the insurance gap in the Philippines, where penetration stands at around 1.69% of GDP.

According to the most recent World Bank figures, out-of-pocket expenditure represented 53% of total health spending in 2017, the highest among ASEAN’s major economies.

By comparison, it was 37.9% in Malaysia, 34.6% in Indonesia, 32.1% in Singapore and 11.1% in Thailand.

Private players turn towards micro-insurance

Given the difficulties associated with expanding public health coverage in the current climate, there could be an opportunity for private players to fill the insurance gap, estimated by some industry figures to be worth $4.2bn.

By some measures, Covid-19 has created greater awareness of the benefits of insurance, which could shape future demand for coverage and products.

According to a survey of 300 Filipino insurance customers in May, carried out by insurance company Manulife, 77% of respondents said they intended to purchase additional insurance within the next 18 months – above the regional average of 62%.

In light of this demand, a number of private players have either entered the market or updated their existing offerings.

In mid-August Singapore-based insurance provider Igloo partnered with Union Bank of the Philippines and e-commerce firm Akalaku to offer a series of micro-insurance products.

The policies, which include those for households, have been specifically tailored for lower-income groups. To ensure flexibility and affordability, they come with three-, six- and 12-month payment plans.

Similarly, insurer Singlife Philippines announced in early September that it had teamed up with mobile wallet GCash to offer basic micro-insurance policies to people without bank accounts or access to other financial services.

The development of the micro-insurance segment could be key to the sector’s overall growth.

According to the Department of Finance, the number of people covered by micro-insurance increased from less than 3m in 2009 to 38.9m in 2018; by 2022 the micro-insurance penetration rate is projected to reach 48.7%, up from 25.4% in the third quarter of 2016.

Insurtech and digitalisation

As in many other industries, insurers are looking to digitalisation to boost revenue during the pandemic.

Insurance companies are increasingly building partnerships with e-commerce firms to generate online offerings – as exemplified by Igloo and Singlife ­– as well as modernising their digital platforms to facilitate access for customers.

For example, in June Manila-based Insular Life announced that it would allocate P500m ($10.3m) to boost its digital capacity, while also looking to build relationships with financial technology firms to service its health care products.

Meanwhile, insurance technology (insurtech) company Kwik.insure plans to launch an online insurance marketplace by the end of the year that would allow customers to view and compare the products on offer from different companies. As of mid-June the company was in discussion with more than 20 potential partners.

The creation of a regulatory sandbox for the insurance industry could help to drive further innovation in the insurtech market.

In June the Insurance Commission released a series of guidelines related to the development of such a sandbox, which would provide an environment for companies to test new products and services.

If approved, the initiative could speed up innovation and the development of accompanying regulations, which could then be adopted by the broader industry and oversight bodies.

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