The best part about life is that it is unpredictable. Funnily enough, it is also the worst as this invites the thought of unexpected muddles and not just surprises for which we need to be primed. It is better to be safe than sorry which is why most procure a security blanket they can rely on during times of crisis and problems. This is commonly known as insurance and is procured for a number of reasons and on a number of products and services ranging from financial offerings to instruments to even parts of the body. This is used as an indemnity in cases wherein customers stand to lose something that is of value to them and is not easily replaceable. Scenarios that prompt customers to procure insurances include accidents that cause damage to vehicles, medical emergencies and issues that require customers to cough up a lot of money and so on.
What is Insurance?
Insurance is nothing but an arrangement or practice through which an agency, either government or private provides compensation for a certain damages, illness’ or losses. In other words, insurance provides immunity against a possible contingency. When customers procure an insurance plan from a company, it is like entering into a deal with the company and paying a certain amount over a predetermined amount of time to them for which a cover is offered by the insurance company. This way, the impact of risk affecting a customer’s day to day life is reduced.
Certain terms that are commonly used while handling insurance are ‘premiums’, ‘underwriting’ and ‘reinsurance’. Premium refers to the amount paid by the customer to the company providing insurance in return for the policy. Prior to providing insurance cover, the policy provider will look into all the aspects of the risk (that the customer is availing insurance for) and assess the situation completely. This process is referred to as underwriting. Sometimes, some risks are quite large and the repercussions involved are quite high and in such situations, certain insurance providers take out insurance for themselves as a protection and this is known as reinsurance.
Insurance in the Philippines
There are a number of principles that govern insurance policies in general some of these are elaborated below -
- Principle of good faith is one of the fundamental concepts of insurance. Insurance is procured so as to reduce risk and which is why is it is essential for both parties, both the insurer and insured to trust each other and be honest about all the risks, regulations and need to lay out all their cards on the table.
- Indemnity refers to compensation in case of damage or loss. The basic premise is that in case the amount of damage goes beyond the economic loss of the insured then he/she may not be compensated for by the insurance company. This principle is more strictly applied in property insurance as compared to life insurance.
- Subrogation is another commonly followed principle wherein the insured customer can claim recompense from a third party as well. For example, in cases of accidents, customers can claim their insurance from not just the insurance company but have the company sue the third party (who caused the accident).
- Nature of contract is a rudimentary principle of insurance. This means that the contract should be hassle free, simple and should have the customer enter into agreement of their own free will.
Why is Insurance necessary?
As mentioned previously, risk is an essential part of life. without risk, life would be dull, but sometimes these risks also have the potential to derail a very significant aspect of a person’s life as well. There insurance policies are procured as a security measure allowing customers to not worry about details they sometimes do not have complete control over such as accidents, disorders, etc. Some of the other reasons include -
- In cases of illness or medical emergencies, insurance policies cover the expenses or compensate for the same thereby reducing the burden on the family during trying times.
- Sometimes, certain types of kinds of insurance is mandated by the law. One such example is motor insurance.
- Insurance options such as life insurance do not just offer protection but also act as a savings plan and thereby helps manage a person’s finances, even if it is for a short extent.
- Other insurance options such as home and travel provide coverage against disasters, both natural and man made.
- All in all, it is a security blanket and offers protection which is why everyone should avail insurance schemes.
Types of Insurance
There are a plethora of insurance options based on the products and services customers are availing insurance policies against. However, they are commonly divided into the following - Life Insurance, Health Insurance, Car Insurance, Property Insurance and Travel Insurance.
Simply put, life insurance refers to the insurance policy that pays returns after a set period of time or after the death of the insured person to his/her policy. Although the explanation is simple, the implications are immense. It acts as a security to life itself and provides rewarding returns. This kind of an insurance also enables customers to build up savings over a set period of time. Sometimes, certain insurance policies are linked to stocks thereby increasing chances of receiving greater returns.
Insurance companies also provide additional features such as loss of income because of accidents, total and permanent disability coverage and so on.
The popular Life Insurance providers within the Philippines are,
Alternatively referred to as Medical Insurance, Health Insurance provides coverage against exorbitant medical fees and hospital bills in case of accidents or illnesses. These compensations are generally provided for both outpatient and inpatient care. A number of expenses are covered such as consultation fee, surgery bills, professional and hospitalization fees and so on. These plans vary from insurance provider to insurance provider.
Within the Philippines, Medical Insurance is primarily offered by Health Maintenance Organization who act as intermediaries between the health service providers and insured customers by providing quality medical services to Filipinos.
Non-HMO plans are also available for a wider coverage with other benefits such as lump sum payment for serious illnesses, cash assistance and so on.
The renowned Health Insurance providers within the Philippines include,
Procuring an insurance cover for vehicles is sometimes mandatory, if not, it is highly recommended. An insurance cover for a car protects against all the risks that comes with driving. In the Philippines, Third Party Liability insurance is compulsory as decided by the law and covers damage to a third party person or property, death, injury. Insurance companies in the Philippines provide car insurance that provides coverage for third party liability and also against loss or damage to the vehicle that has been insured and the people in it. Other features may also be offered such as road assistance and other optional benefits based on the plan chosen by the insured customer.
Prominent companies providing car insurance in the Philippines are,
The wanderlust bug has been on a biting spree for quite sometime now. More and more Filipinos are travelling all over the world. Touring has increased due to the numerous improvements in the process and connectivity that is at an all time high right now. Also, due to the internet, information from various quarters are available, allowing customers the luxury of researching a place thoroughly before going there. However, despite customers’ best efforts, certain mishaps do occur such as misplacement of baggage, flight delay, medical emergencies ranging from the most basic of illness to more complicated ones. Customers are therefore advised to procure travel insurance before leaving on the trip and enjoy a more relaxed outing. Immediate assistance is provided in case of emergencies during travel.
Some of the prominent providers of travel insurance in the Philippines include,
Property procurement is a wonderful investment option and is also a necessity. Procuring insurance for property is also just as important as it provides protection against manmade and natural disasters such as earthquake, fire, floods and so on. In addition to paying for the property itself, insurance also pays for all the contents of the building or house such as money, furniture, jewellery along with cost of restoration and repair as well.
Leading providers of property insurance in the Philippines are,
Factors determining the cost of the Insurance policy
Insurance policies are procured based on customer’s varying needs. However, there are certain factors that remain common and are determiners of the cost of the policy. These include -
- Age - The customer’s age is one of the signifying factors that affect the cost of the policy. This is because the older the customer is, more are the risks that come with it which is especially the case with health insurance schemes.
- Occupation/work - This indicates the amount that the customer can pay along with the frequency of payment. Those who are employed will be able to make steady payments but those own businesses or do not work in a formal space may not be able to pay as frequently or the amount.
- Health and habits - A person’s health and habits has a significant impact on their policy. For example, if the customer is a drinker or a smoker then they will end up paying a lot more for their policy.
- Demographics - In case a customer stays near areas that are prone to earthquakes or floods or other natural disasters, they may end up paying a higher amount for their policy. this may also include high crime rates or or quality of life.
- Term of the policy - In case a customer opts for a policy of a longer tenure then he/she may actually pay less as compared to the amount for a shorter term.
Tips to follow while choosing a policy
With a wide variety of policies being available in the market today, customers can experience confusion while procuring a particular policy. In order to make things easier, customers can follow the tips given below -
- Customers should first decide the risks they wish to be covered for health, travel, property, etc. The cover that they require for risks should be carefully planned. With increasing costs, if the cover is low then it will not serve the required purpose.
- The company from where insurance is being availed is also important. The company must be reputed, commanding a significant amount of trust from its customers.
- A policy with a tenure that is quite short may not serve the required purpose. Customers should keep their requirements from the insurance policy in mind before opting for a particular tenure.
- Claim settlement ratio is another factor customers must pay attention to. If a company has an unfavourable ratio then it becomes hard for the customer later while claiming the amount.
- The most important factor is to research and compare the options available. Customers should not opt for the first plan that they find but instead look around and compare.
Frequently Asked Questions (FAQs)
- What are the main principles that govern insurance?
- What is principle of indemnity?
- What are the different types of insurance that are available?
- Are there any factors governing insurance policy?
- What does Subrogation refer to?
The main principles that govern insurance are Principle of Good Faith, Subrogation, Indemnity and Nature of Contract.
The compensation provided in case of loss or damage is referred to as indemnity. This is more commonly applied to property insurance.
The more commonly available insurances are Travel Insurance, Property Insurance, Car Insurance, Health Insurance and Life Insurance among others.
Yes, there are and these factors are age, occupation, health , demographics and term of the policy.
Subrogation refers to the recompense that customers can claim from a third party. This is especially so in the case of an accident.
News About Insurance
GSIS suggested reforms on pensioners group
This is in reference to the letter written by Alfredo D. Pineda. The reforms that were suggested by Pineda are in place. The ones that are not implemented yet cannot be done as there is no provision for them under the law.
Republic Act number 8291 compels and obligates the members of GSIS and the agencies associated with them to remit on a monthly basis without any delay. The benefits that a member can avail should correspond to premiums that are contributed on his / her behalf to GSIS.
The premium based policy was adopted by GSIS in 2003. Since then, there has been no compulsory deductions of premiums from the GSIS members’ retirement benefits. The records have been updated by GSIS and the benefits have been restored to more than 800,000 members, including the people in the education department.
22nd July 2016
Philippines to Expand their Insurance Cover for the Poor
With the adverse impact of climate change, Philippines is looking at innovate strategies to provide insurance cover to those most in need, the poor. The DOF (Department of Finance) Undersecretary Gil Beltran has stressed that natural disasters that frequently strike the country have reduced the GDP by approximately 1% every year. Therefore, micro-insurance has become one of the most effective ways for inclusive growth. The micro-insurance cover has increased from previously providing coverage to 3 million people to approximately 31 million people today within a short span.
The micro insurance products have been specially designed to be affordable and the premiums have a cap of 7.5% of the minimum daily wage. The coverage under these policies pays up to 1000 times this minimum wage.
14th July 2016
Members in El Nino hit areas to receive P533 million
GSIS (Government Service Insurance System) will be providing emergency loans worth P533 million to members from Tagoloan and Palawan, who were hit by El Nino. The state pension fund stated that more than fifteen thousand members will be able to apply for P 20,000. For people with existing loans, can get P 40,000.
The annual rate of interest of these loans will be 6% per annum and the tenure that you can choose is 36 months. As coverage, you can avail the loan redemption insurance. Members may apply for the loan via GWAPS (GSIS Wireless Automated Processing System) kiosks.
05th July 2016
Blue Cross Philippines to be called as Pacific Cross Philippines
Leading travel and medical insurance company Blue Cross Insurance, Inc. stated that it has changed its name to Pacific Cross Insurance, Inc. Even the name of its subsidiary has been changed from Blue Cross Health Care, Inc. to Pacific Cross Health Care, Inc.
This group has its insurance business spread across many places in South East Asia like Vietnam, Thailand, Cambodia, Indonesia, etc. The Group wants to make a better knowledge base and network by coming under the same name. All the member companies will be able to cater to the needs of the local customers. The CEO and President of Pacific Cross, Mr. John Casey said that the change of the name is a milestone in the history of the company.
30th June 2016
Insurance Companies Make Loss in Q1
Although the economic growth of 6.9% in the first quarter has exceeded expectations, the sales and profits of insurance firms have seen a drop from the previous year. Total premiums in the industry have dropped by 15.2% to P47.7 billion at the end of March compared to P56.3 billion from last year. Similarly, life insurance sales have also dropped to P38.6 billion. However, on the other hand, the total net premiums of non-life sectors have seen a year on year increase of 11.3%.
The net income of life sector saw a year on year increase of 3.1% to P4.5 billion but the combined profit of non-life insurance sector dropped 38.8% to P518.4 billion.
On the whole, the total assets of the industry saw an increase of 9.6% to P1.2 trillion as of March end this year compared to P1.1 trillion last year. Q1 liabilities are at P949.9 billion, up from 8.3% year on year. The total investments of insurance firms increased by 12.1% and exceeded P1 trillion by the end of Q1. to reach P 47 billion in 2016.
28th June 2016
Non-Life Insurance Sector Expect Growth
Philippines Non- Life insurance sector expects its net premium to grow by double-digit in 2016. According to Philippine Insurance and Reinsurers Association’s former President and the current Chief Executive and President of Fortune General Insurance Corporation, Michael Rellosa, this sector can achieve 16.2 percent growth like last year again, if the country does not face any major problem. As per Insurance Commissioner, Emmanuel Dooc, the reason for this sector’s expansion is the net premium that it had earned in the last quarter of 2015, which amounted to P 11 billion. He said that the sector has the potential to reach P 47 billion in 2016.
19th June 2016
Bank Deposits in Philippines Increased by 11%
Bank deposits in Philippines have increased to P 9.39 trillion at the end of 1st quarter of 2016. As per Philippine Deposit Insurance Corporation (PDIC), it has increased by 11 percent compared to last year’s amount at the same time. Out of P 9.39 trillion, insurance deposits account for P 2.09 trillion. Accounts have increased by 7.5 percent to reach a total of 51.85 million. Eighty-three percent of deposits were held in peso accounts while the other deposits were held in foreign currency accounts. PDIC is hosting an International Conference on ‘Raising Public Awareness on Deposit Insurance’ in June. Delegations from Indonesia, Korea, India, Japan, Kazakhstan, Mongolia, Malaysia, Singapore, Philippines, Russia, Thailand and Taiwan are expected to attend the conference.
14th June 2016
PDIC Charter Amendment Takes Effect
According to the Republic Act No. 10846, amending the Charter of PDIC or the Philippine Deposit Insurance Corporation has come into effect as of June 11, 2016. The objective of this amendment was to further the strengthening of the state deposit insurer’s ability in protecting the depositing public and promoting financial stability. By enhancing the depositor protection, PDIC’s authorities will now be able to allow depositors with quicker access to the deposits they have insured in any case of bank closure. This amendment empowers PDIC to resolve depositors’ problems while the banks are still open and hasten the process of liquidation for closed banks. It will also help to provide more stringent penalties and sanctions to those committing frauds, irregularities and anomalies that detriment the banking system and the depositing public.
Penalties that include up to 12 years of imprisonment are applicable to erring bank owners, officers and employees as well as individuals who participate in schemes to defraud the bank. The amendments have also led to the formulation of a new resolution which will be used to resolve problematic banks while they are still open. This resolution will help address the risks posed by bank closures and thereby promote financial inclusion.
11th June 2016
29 million people of Philippines covered under microinsurance
According to the IC (Insurance Commission), it has crossed the target of providing microinsurance coverage to Filipinos in 2016. The regulator mentioned that the target number of people to be covered under microinsurance in 2016 is 27 million now.
In the 3rd quarter of 2015, the Commission saw that the rate of penetration was 28.52 percent. This suggested that more than 29 million people were covered under microinsurance. According to Dooc, the new products is entering the Philippine market with framework for pre-need, health and agriculture.
03rd June 2016
Policyholders to be protected by the Bill of Rights
A bill of rights has been introduced by the insurance commission with details of the obligations of the insurer for the consumers. This is done to protect the policyholders in a better way. Policyholders refer to the people who are assured or insured in a non-life or life insurance policy. The bill of rights offers protection to the insured individuals and the covered dependants.
The holders of the policy have different rights that they can enjoy. These include right to confidentiality of information, right to receive policy, right to fair claim settlements, etc.
01st June 2016