Philamlife keeps its lead in the pack its lead over the Canadian insurer Sun Life is a narrow one with only a 600M lead. 2011 will be an eventful year for 2010′s 2 largest life insurers. Ayala Land’s Rex Mendoza took over the leadership of Philamlife as its newest CEO. Rex Mendoza was Philamlife’s former EVP and the President of Philam Asset Management (PAMI) prior to his transfer to Ayala Land in 2005. Sunlife, on the other hand has acquired substantial ownership of Grepalife & will soon launch a Bancassurance partnership with RCBC. The heat is on between these two and 2011 would be an interesting year to watch.

2010 also saw the dislodging of Insular Life by Axa Life as the 3rd largest insurer in terms of premium income. Further, Prulife UK also gains ground and also overtakes Insular by landing in the 4th place.  Canadian insuerer Manulife improves a notch and lands on the 7th place. The Italian insurer & BDO partnership Generali Pilipinas slides to the the 10th spot from its 7th slot in 2009.

Many of the top insurers sells market driven products and it seems that the robust market of 2010 seems to have helped the industry. In contrast, Generali Pilipinas decided to discontinue selling single pay products and focus on the more profitable regular pay products.

While there has been some growth in the life insurance industry, a bigger concern is the minuscule number of Filipinos being insured as compared to our growing population. We still have a very low percentage of insured population which is a tragedy as insurance is a very important tool for risk management and long term savings.

Unfortunately, insurance products are still being pushed and peddled although I know there have been vast improvements on the competencies of intermediaries. It’s just that we need to get all insurers & intermediaries on board and consider the advocacy of education first and foremost. I encourage the insurers and those selling insurance products to try harder in educating the Philippine market on the merits of financial planning — herewith is the key that will unlock substantial & sustainable growth for the industry.

My 2 cents.

There are many other areas one should consider when choosing an insurer other than its ranking such as claims experience, customer service, charges, etc. Further, chose a life insurance intermediary (agent, broker, adviser) who will take time to educate you in the rudiments of risk management and not just push a product.

I believe that the industry went through some great changes in the 80s with the establishment of the Life Underwriters Association of the Philippines (LUAP) — it paved the way in drastically improving the image of the insurance agents, which ushered the  ‘golden era’ of the 90′s. However as the new century came, the professional agent went through a lot of challenges — policy yields, dividends, commissions started to drop while the competitive environment became more unforgiving.

The need and value of Life Insurance did not change. Now more than ever, people should have the benefit of financial protection only a life insurance policy can give. It is important to note that having a life insurance coverage is the beginning of the financial planning process and as our population yearn to achieve financial stability, it should be reflected in the increasing number of people buying life insurance. However, it is perceived that the growth in the number of insured individuals are not even catching up with the growth of population. The number of professional agents should be even growing with the supposed increase in demand… but it isn’t. I feel that there is a great need for change… pretty much when many concerned parties advocated needed changes in the 80′s — and this change should be initiated by the professional agents themselves, just like in the 80′s. Don’t get me wrong, there have been milestones already.. I see more Financial Planners (in deed, not just in name) now… we just need more, way more.

Let’s look at hard facts… total premiums are still growing but where did the growth come from? 2 major reasons contributed to growth — Variable (Unit-linked) Life and Bancassurance. The current bull run in the Philippines made the new product very encouraging… double digit growth rates would really attract a lot of people. I dare say that the number 1 selling strategy of many practitioners is anchored on the performance of the investment-linked funds. Bancassurance allowed Banks to start selling insurances in their own branches… believe me when I say that selling in the banks is way ‘easier’ but that’s another topic. Hmmm, how much is bancassurance’s market share lately? A lot… as in a lot! The sad part is, although there are growth in total premiums, it really is still a drop in the bucket. The increase in absolute premiums was not driven by the increase in number of new family heads being insured but rather by the 2 reasons I mentioned earlier.

My question… what happens now as we are faced with a very volatile market — wiping all those gains or at the very least, tempering growth rates? Remember the times when some pooled funds were giving -30%? That wasn’t too long ago. What if Bancassurance completely dominates the environment? What then is the future of the Professional Life Insurance Agent?

My answer? Create VALUE! The Professional Life Insurance Agent would be of great value to the insurance company and the clients because he can provide better service, better advice if he is genuinely true to his profession. The professional agent should make himself very valuable; upgrade his skills, move away from the very traditional ways of selling as they are now turning off clients. Where ‘soft’ skills were enough to make a sale before, hard or analytical skills are just as important nowadays. This is important if the life insurance agent is to survive the onslaught of many changes.

The Professional Agents should lead in these changes. They should not wait for their insurance companies to do it for them. Bring ‘professionalism’ to a different level, an evolution in the truest form. Upgrading of skills should be foremost in every life insurance agent’s priority list. Technical knowledge should be at par with good selling skills. I’ve met many who experienced success in their sales when they started evolving — we just need to see more, more, more of them. Our professional organizations should also be in the forefront of changes — their conventions are still the same, mostly about ‘soft skills’.. and it’s as if motivation is the only thing that is important. In the last insurance convention I attended, I did so to check if the ‘quality’ of the conventions changed. Well, it is still the same — same speakers, same topics, same format.

Well, these are just my thoughts. I’ve spent many years in the frontline for me to write this article. I strongly believe in the Professional Life Insurance Practitioner… I strongly believe in Life Insurance. I hope that what I wrote here will plant the seeds to openly discuss this concerns.. we need to start talking about it and doing something about it.. again, and again. Maybe it is time for me to once again go back into Life Insurance Sales so I can practice what I preach — not really, I think I’ll just stick to advisory and planning services, haha.

To buyers of life insurance policies, be very particular when you chose your agent – look for someone who is very competent and someone who will really take care of your needs for a long time, a true Professional. Doing so will help force my friends in this industry to evolve faster.

However, I do not recommend getting life insurance coverages for children. In the past, I must admit that I made a mistake recommending life insurance for children and even bought some for mine as well. In retrospect, I regret doing so. Investopedia states best why you should not get life insurance for children:

“Life insurance is designed to provide a safety net for your heirs/dependents. Because children don’t have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids…”

Instead of paying premiums for coverage, it is better to use those funds and invest in mutual funds, uitf, deposit accounts and other more viable investment instruments and invest it on their behalf. Years from now, you will realize that said investments will perform so much better than the life insurance policy of your kids. Unless you child is a child star and he or she provides for you, reconsider getting a policy for your child. Instead, assess your own insurance needs — chances are you will need to add more insurance on your own life or that of your spouse.

I think a lot of insurance agents would stop reading my blogs after this post… but, I encourage you to periodically assess your need for insurance and act on it — just don’t believe those who will tell you to get for your kids too because it’s really not a good idea.

For some reason, and despite the obvious importance of taxes in the daily operation of the state, it has exempted life-insurance proceeds from the ambit of tax laws, save for some exceptions, of course.

Our Tax Code recognizes the role and importance of insurance to the family of the person insured. It also exempts insurance proceeds from garnishment, attachment and execution of judgment-creditors. For those who have accumulated a hefty estate, life insurance can do wonders for them.

Most, if not all, estates left and brought into the inventory of the Bureau of Internal Revenue (BIR) are comprised of illiquid assets. If the typical Filipino would put it, the heirs are already in their advanced ages before they step into the succession, and the grateful recipients are not individually willing to shell out money for the settlement of estate tax and money claims of creditors. Others do not simply have the means.

In one case, the Supreme Court sustained the BIR when it assessed and collected the entire tax due from one of the heirs among several even if it means that all he had inherited would be dissipated in the process.

This need not happen unless we forget that life-insurance proceeds can be used to pay the taxes and claims and, in the process, keep the assets intact. A person can also use insurance proceeds to provide for his illegitimate descendant who may be left out of any shares in his estate. An illegitimate child gets the equivalent of half of the share of a legitimate child, and that share will be taken from the free portion, if any.

In other words, life insurance can promote “equitable” sharing. Most important, for a person with modest earnings, life insurance can provide an estate as big as his millionaire neighbor who did not believe in his insurance, the latter probably has very little or none at all.

Life insurance is just one of the tools for your estate plan. To emphasize its importance, Black’s Law defined estate planning as “the preparation for the distribution and management of a person’s estate at death through the use of wills, trusts, INSURANCE POLICIES and other arrangements, especially to reduce estate-tax liabilities.”

Do not just plan on the aspect of accumulation, plan for its conservation and distribution, for in the latter is where your absence will be.

Life insurance is not the only way to go about estate planning, it is just a tool among many. However, life insurance is a very powerful and cost-effective tool.

“A good man leaves an inheritance for his children’s children, but a sinner’s wealth is stored up for the righteous.” – Proverbs 13:22, NIV

Christianity has modernized our mystic concept and infused it into our laws. “Birth determines [legal] personality. Death extinguishes it.” You, as the owner of the estate, may be about to leave this mundane world, but your legacy may be passed on to your heirs and for generations to come, and that’s what makes you immortal.

People have been looking at ways on how to distribute wealth to their heirs—hence, estate planning. This is a concept that is looked at as a design, a scheme, to help a person avoid the impact of heavy taxes on a person’s “privilege” of accumulating wealth and passing it on to his heirs.

Yes, the Tax Code will tell you that what you have is a mere privilege. Settling taxes first is the operative act before the family can acquire the properties left to them.

Is inheriting automatic? How automatic is “automatic”? my beloved professor so loves to ask.

Technically so, inheriting your parent’s or grandparent’s properties is not simply “automatic” even when the law says “by operation of law.”

Estate planning is much more than simply avoiding taxes. Tax is not always the main consideration when one looks at estate planning.  This writer believes that estate planning is all about supervision, conservation and distribution. Tax avoidance is just an incident of what planning brings to him.

There are many tools for planning one’s estate in the aspect of conservation. Let us, however, focus on the most simple yet effective of them all—that is, life insurance.

Taxes are the lifeblood of the state. Its collection should not be in any way delayed. It cannot be overemphasized how important taxes are. The Supreme Court says in a myriad of cases that if there is doubt on whether or not to grant tax exemption, the doubt shall be resolved against the taxpayer.  Avoiding taxes and grant of exemptions are frowned upon. Nonpayment of taxes even merits a criminal offense. The Tax Code also assesses the taxpayer, “whichever is higher.” … (to be continued)

Catch Part 3…

For those who do some form of estate planning, we notice that many of them forget one estate-planning tool: life insurance.

I have asked my good friend, a legal expert on financial services, lawyer Carlo Carino, to help me write this article. Carlo is also a recent graduate of the Registered Financial Planner’s program and is one of the featured experts at www.income-tacts.com.

Let’s try to have a more powerful (and creative) introduction for today’s article (wink).

Thousands of years ago, and up to the relative present, man has always thirsted for immortality. This has been his greatest quest. The Egyptian pharaoh believed he can achieve it and, thus, prepared for his next life by bringing his riches, women and faithful servants with him into the grave. Hundreds are taken along with him, his riches and favorite earthly possessions delivered in his grandiose and mythical grave.

Chinese emperors, likewise, held this devotion.  The fountain of youth, however, was nowhere to be found, albeit Madonna, with her youthful looks and stunning dance repertoire, may have found it.

Now, immortality is achieved figuratively through halls of fame or burning a page in the annals of history. Some try to achieve immortality by writing songs, as Barry Manilow puts it. Some write poetry, poems, literature.

To thwart history and immortality, Xerxes of Persia threatened to erase the Spartan king Leonidas by burning every Spartan literature, cutting the tongue of every Greek and sentencing to death any person who spoke his name. That probably never happened because I just saw the movie on HBO.

I also remember a movie starred by Peter O’toole entitled The Wings of Fame. The movie is set in a limbo-like place where those who were famous remain in this limbo until the mortals forget their name. Once forgotten, he or she disappears, never to be seen again.

Fortunately, our law has brought forth a similar solution for man’s quest for immortality: succession.

Our law on succession helps a man achieve immortality through the passage of wealth from one generation to another. A person’s wealth is just like a hero in a movie. It is the same character, but the actors who portray it have been several…

Catch part 2