Manulife eyes new business

The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife Philippines) is venturing into microinsurance, becoming the first foreign insurer to do so.

Company officials are now holding talks with possible distribution partners, noting the importance of a wide distribution network for the low-cost product targeted at the poor.

David S. Wong, Manulife Financial Corp. senior vice president and regional executive for Malaysia, Philippines, Thailand and Vietnam, said during a briefing last Monday the insurer is looking at partnering with nongovernment organizations.

“We are also looking at partnering with MFIs (microfinance institutions), MBAs (mutual benefit associations) and rural banks,” Manulife Philippines President and Chief Executive Officer Indren S. Naidoo told BusinessWorld in a phone interview yesterday.

He said large insurers cannot rely on traditional channels such as agents and banks, pointing out that microinsurance’s low premiums require large volumes to turn in a profit.

“Instead of annual premiums of P30,000 of typical insurance products, we are looking at microinsurance premiums of around P5,000,” Mr. Naidoo said. “It will not be efficient for us to distribute them through traditional channels.”

Manulife Philippines was the country’s eighth largest insurer in premium terms in 2009. It is a wholly-owned subsidiary of The Manufacturers Life Insurance Co., the insurance company of Canada-based Manulife Financial Corp.

According to latest data from the Insurance Commission, only 13.90% of the population was insured in 2009. The insurance penetration rate — total premiums as%age of gross domestic product — was a mere 1.02% that year.

Estimates have placed the number of Filipino poor — the market for microinsurance — at 2.9 million, a minuscule number compared to the 35-million potential.

Microinsurance players at present count several local insurers, rural banks, MBAs and cooperatives.

Manulife Philippines’ decision to venture into microinsurance could be credited to the success of a microinsurance product pilot-tested by Manulife Vietnam in 2009, Mr. Naidoo said.

Manulife Vietnam partnered with the Vietnam’s Women Union, with an estimated 13 million members, to provide a simple microinsurance life product that covered accidental death and hospitalization costs. Mr. Naidoo said about 60,000 policies have been sold since its launch.

“We want to leverage our experience to make microinsurance successful in the Philippines,” he said.

The company is still exploring the microinsurance product to develop, but Mr. Wong said it is considering the life-savings plan the government is planning to launch this year.

This product combines insurance with savings, so premiums could just be deducted from the savings.

However, Mr. Wong said Manulife does not want to be limited to just savings.

“Based on our studies, there are low savings rates in rural accounts, and these are sometimes not enough to cover their insurance policies,” he said.

Mr. Naidoo said Manulife is treating microinsurance as a vital business strategy, and “the CSR (corporate social responsibility) aspect is only incidental.”

“Our goal is to increase the penetration of insurance in the country, and this can only be helped by the expansion of microinsurance,” he said.

The insurance regulator welcomed the news of a foreign insurance company venturing into microinsurance.

“We are happy they are interested. Surely, this will help promote microinsurance in the country. This is a welcome development,” IC Chief Insurance Specialist Reynaldo M. Vergara told BusinessWorld in a phone interview yesterday.

Mr. Wong said one reason why Manulife chose to launch microinsurance in the Philippines is it is one of the two countries in Asia with a microinsurance law, the other being India.

Insurance Memorandum Circular 1-2010 issued January last year set the regulatory framework for microinsurance.

“Because of this legal framework, it is now clearer for microinsurance providers how they can sell their products,” Dante Portula, senior finance adviser at the German Agency for International Cooperation (GIZ) told BusinessWorld in a phone interview yesterday. The GIZ helped the government and insurance groups come up with the regulatory framework.

“The framework also required all informal microinsurance schemes, like hulugan and damayan, to formalize,” Mr. Portula said, which opened up the market for insurance companies to come in. — Diane Claire J. Jiao

Tags: Manulife