Look Towards A New Future

Oct 17, 2012

Non-Life Insurance in the Philippines, Key Trends and Opportunities to 2016

The Philippine non-life insurance segment grew in written premium value at a compound annual growth rate (CAGR) of 8.9% during the review period (2007–2011). This was supported by the country’s economic growth, expanding automobile industry, improving awareness of the benefits of insurance and demographic changes such as its growing middle-class population. Over the forecast period (2012–2016), the non-life insurance segment’s growth will be driven by the development of the automobile industry and the rising construction activity in the country. Property insurance is the largest category in the non-life segment, which accounted for 45.2% of the category’s written premium in 2011, followed by motor insurance with 37.0%. The marine, aviation and transit, and general liability insurance categories accounted for 13.1% and 4.7% shares respectively.

Property and motor insurance categories will drive the non-life segment
Property insurance accounted for the largest share of the Philippine non-life insurance segment during the review period, with 45.2% of the total non-life insurance written premiums in 2011. Despite the global economic crisis, property insurance grew at a CAGR of 8.1% during the review period. This category is expected to grow at a CAGR of 5.5% over the forecast period. Furthermore, the country’s rising consumer disposable income levels and expanding middle-class population are encouraging the growth of the Philippine automobile industry. Consequently, new vehicle sales in the Philippines increased significantly in 2011, and are expected to continue increasing over the forecast period. As the automobile industry expands, the customer base and demand for motor insurance also increases. As a result, the motor insurance category registered a CAGR of 9.6% during the review period.

Opportunity from an underdeveloped customer base
The Philippine non-life segment grew in value at a CAGR of 8.9% during the review period. The non-life segment also recorded an annual growth rate of 10.8% during 2011. Non-life insurance penetration as a percentage of GDP was 0.34% in 2011, which is considerably lower than that of other Asian countries such as Malaysia, China and India with penetration levels of 1.49%, 0.99% and 0.41% respectively. This low penetration rate reflects the large underdeveloped customer base in the Philippines, and with less than 13% of the population having any kind of insurance, there is a huge potential for non-life insurance, particularly in the property and motor insurance categories.

Expanding middle-class population and rising per capita annual disposable income
The Philippines recorded sustained economic growth during the review period, with an expanding middle-class population and rising disposable income levels. The country’s per capita annual disposable income (PCADI) increased at a CAGR of 6.7% during the review period. This growth in PCADI, rising consumer awareness and the frequent occurrence of natural disasters is expected to drive the growth of the non-life segment over the forecast period.