Persistent inflation continues to be a major concern in the insurance sector this year, especially for the middle-class market, as the Philippines grapples with economic recovery from the pandemic. This was underscored by Gary Ogilvie, Chief Financial Officer of AIA Philippines, in a recent briefing.
Ogilvie expressed worry over inflation affecting the affordability of insurance, primarily within the middle-class segment, which he identified as the critical driver for long-term growth in terms of insurance penetration rate.
Despite inflation slowing down for three consecutive months, it still exceeds the government’s target, causing commodity prices to rise and consequently reducing the purchasing power of Filipinos.
Given this scenario, AIA Philippines plans to concentrate its sales efforts towards the upper-class sector, with a greater net worth and disposable income.
“We are very focused on some of these innovative funding opportunities and guaranteed products, but we continue to lay the ground for the middle market as they recover over time,” Ogilvie stated.
Despite the challenges, AIA Philippines reported a net income of P6.3 billion last year, with assets amounting to P257.6 billion and a net worth of P68 billion.
AIA Philippines CEO, Kelvin Ang, indicated that the life insurance demand has seen a significant improvement compared to the previous years.
However, he acknowledged that the country’s insurance coverage still lags behind its neighbors, with insurance penetration only around two percent of GDP.
“There’s a lot of opportunity for growth because of that unmet demand,” Ogilvie commented.
AIA Philippines remains optimistic and steadfast in its business objectives for this year, spurred by the considerable growth opportunities arising from the immense protection gap, low insurance penetration rate, and financial insecurity triggered by the pandemic.
The company plans to introduce a range of products in response to the increased awareness of protection needs, health and wellness, and a preference for guaranteed benefits.
The strategy seeks to tap into the latent demand in the middle-class market as they gradually recover from the effects of the pandemic.