The low level of Filipinos’ financial literacy is one of the causes of the slowing growth of the country’s insurance industry, according to a regulatory official.
Insurance Commission (IC) deputy commissioner Ferdinand George Florendo cited a World Bank report that said the Philippines had a 25% financial literacy rating, which is much lower than its neighbours Singapore (59%) and Malaysia (39%).
“This relatively low level of financial literacy in the country certainly contributes to the slow growth of the Philippine insurance industry,” said Florendo, who was speaking at the Insurance Truth and Consequence forum, hosted by The Manila Times on Tuesday.
“On the economic side, the prevalent poverty contributes to the low financial literacy in the country,” he said. “Despite being among the fastest-growing economies in the region, poverty remains to be a pressing issue.”
According to Florendo, with 3.5 million Filipino families living in poverty as of 2021, many believe that insurance is a discretionary expense rather than a necessity.
While this is true even in other markets, the high number of Filipinos living below the poverty line has caused the insurance industry to struggle with growing its premium income, he said.
Another factor holding back the growth of the sector is the public’s negative perception of insurance, associating it mainly with death and accidents.
“This negative reputation surrounding anything insurance-related tends to make insurance products less appealing to many Filipinos,” Florendo said.
Due to these factors, the Philippines’ insurance penetration rate has yet to exceed 2%, despite the IC reporting PHP2 trillion (SG$48.6 million) worth of assets for the insurance industry, as well as a 50% growth in premium income over the past six years – from PHP253 billion in 2016 to PHP379 billion in the first half of 2022.