At the heart of change in the Philippines

The last few years have been a huge challenge for the non-life insurance sector in the Philippines. Fortunately, Standard Insurance has been leading the recovery with innovations and improvements designed to help its clients navigate whatever life throws their way

Rolex China Sea Race 2023 ©Rolex/Daniel Forster 

The past three years have been a challenging period, globally. With economies still finding their feet post pandemic, the world has been presented with new or evolving challenges. Whether natural calamities or man-made challenges, Standard Insurance has consistently been prepared, always ahead of its time in terms of technology and innovation, complemented by its internal culture – a passion for excellence.

The non-life insurance industry sector continued its growth momentum in 2022 as gross premiums grew by 13.2 percent at PhP106.8bn (approx $1.9bn), from the previous year’s growth of 12.6 percent and negative 9.4 percent growth in 2020 at the height of the Covid-19 restrictions. In the meantime, with the normalisation of businesses and mobility, losses incurred grew by 1.6 percent at PhP21.8bn ($387.1m) from negative growth in the last two years. Nonetheless, the industry sector’s net income growth was 39.7 percent at PhP6.9bn ($122.6m).

Similarly, riding on the positive economic and industry developments, as well as driven by its associates’ passion for excellence, Standard Insurance continued its growth momentum, posting a 12.9 percent growth on its gross premium business for the year 2022 at PhP4.3bn ($76.4m) versus the previous year, and surpassing pre-Covid 2019’s Php3.9bn ($69.3m) premium level. Motorcar insurance remains the core of the company’s business portfolio, accounting for 79.3 percent of total generated premiums for the year, followed by fire and property at 11.3 percent. It continues to be the standout leader in motorcar insurance.

Nonetheless, the non-life insurance sector faced challenges in 2022 and continues to do so in 2023. These challenges include: inflation, climate change effects, and the continued need for digital transformation.

Digitalisation revolution
The evolution of digitalisation, precipitated by the Covid-19 related lockdowns, has now progressed to data-driven transformation and artificial intelligence. It has proven to be a challenge for the other industry players. Early adopters have a competitive edge, but eventually, all players must follow suit, posing a major problem for the industry.

Standard Insurance has a strategic technology platform that features a core processing system and sub-systems whose functionalities are continuously upgraded as the need arises. The company’s systems are in the cloud, allowing it to scale its operations effectively.

The company uses data analytics and artificial intelligence, which now includes an Application Programming Interface (API), allowing for predictive and advanced analysis, better pricing, better underwriting analysis and decisions, as well as improved churn rates.

In recent years, the Industry has evolved in terms of the changing market dynamics, demographics, and preferences. For one, the customers of our core business are now predominantly Millennials and Gen Zs, replacing the Baby Boomers and Gen Xers. As such, we needed to further elevate our systems to enhance our responsiveness to client engagement. Our adaptation includes widespread use of AI and more interfaces via text and online platforms like Viber, Messenger, WhatsApp, Tiktok and other multiplatform messaging apps.

The company has a presence in different fintech platforms for ease of payments. Aside from being an e-wallet, fintech enables remittances, banking, investments, payment gateways, and other services, including insurance purchases. We are likewise carried by all aggregators in the digital space. Standard Insurance is actively enhancing its service quality through a customer experience team that scores our performances, ensuring continuous engagement with clients and addressing gaps.

We aspire to be a 21st-century insurer, on the cutting edge of technology

Another internally developed app called the Standard Insurance Customer Assistant (SICA), our customer facing platform, allows clients to register and monitor their respective policies (for now confined to motor and travel policies) and file their travel claims or motor claims online.

But one of the major industry game changers is the introduction of ISSI Office, an insurance office in an app, our ISSI agent platform. It allows our nationwide agent intermediaries and branch associates to conveniently perform the whole insurance cycle, from negotiations between an intermediary and the client, to consummation of transaction and payment of premiums, up to filing and servicing of the claims, using only a smartphone or any telecomputing device, or the web. Standard Insurance received its certificate of copyright registration for this mobile app in February 2023.

For now, ISSI covers our motorcar, travel and personal accident insurance and most recently, our property lines limited to residential and pure office risks. For the latter, the app uses a combination of AI and APIs for the conflagration and natural hazards assessments aligned with the set of underwriting guidelines. Standard also has APIs with banks and other intermediaries, which allows our systems to communicate with each other, thereby streamlining digital processes such as online payments, among others.

The company is utilising technology to enhance clients’ insurance experience, providing peace of mind and security during unforeseen events. We aim to give our clients a sense of security so that in worst case scenarios when they need us the most, we are there to cover their downside. We aspire to be a 21st-century insurer, on the cutting edge of technology and able to meet our customers’ requirements in a time when both technology and markets are changing.

Challenges of reinsurance renewals
The year 2022 started with the non-life insurance sector reeling from the effects of Typhoon Rai (locally known as Typhoon Odette) that hit 10 regions in the country at the close of 2021, which impacted around 2.3 million families. The Western Visayas was hit hardest. The total estimated cost of destruction was PhP47bn ($834.6m) in economic damages, outpacing Typhoon Haiyan’s (Typhoon Yolanda) PhP40bn ($710.3m).

The company is utilising technology to enhance clients’ insurance experience

The company, with 64 years of experience in weathering calamities, responded effectively to this catastrophic event. With a strong reinsurance facility, the company was protected financially. Standard Insurance was the first to determine its gross loss reserve, surprising reinsurers as none of the industry players did so for several months after the event. This allowed the company to finalise and renew its treaty programmes for 2022–23 and 2023–24, setting it apart from competitors.

On the other hand, competitors’ reserves in 2021 were not properly managed, leading to changing loss reserves and challenges in renewing reinsurance treaties in 2022 and 2023. Accurate consolidated loss reserves have yet to be reached for our competitors. Standard Insurance conducted exposures in typhoon-affected areas, calculated potential losses, and maintained gross loss reserves, while other players increased reserves, some multiple times the original declaration.

The company made a presentation showing the path of the typhoon and photos of the damaged properties, particularly in Cebu, and the initiatives undertaken by the company during and immediately after the typhoon. Cebu is the second largest area next to Metro Manila in terms of insured values. This presentation was shared to all our reinsurers, who acknowledged that this was the first time they were seeing things on the ground, following complete silence from the local insurance market in the wake of Typhoon Odette.

The reinsurance market has attempted to harden in the last two or three years and has markedly done so in 2023. Capital is thus becoming scarce and proportional treaties in some markets, including here in the Philippines, were not renewed. Standard Insurance’s reinsurance treaties have been in an excess for loss programme for many years. As such, the company renewed its treaties, with the same treaty capacities and retention levels at reinsurance costs within our expectations. On the whole, our reinsurance programme is now even stronger, with Munich Re and Swiss Re acting as our treaty leaders.

Unique challenge of underinsurance
Inflationary pressures in 2022 continue to heavily impact in the current year, increasing insurance acquisition, claims, and indemnity costs, particularly spare parts and labour costs for motor car insurance and replacements costs for property insurance. Underinsurance can occur due to inflation spikes, and more often than not, clients’ expectations are not met when unexpected losses and claims occur.

By default, property insurance cover is based on sound value where depreciation is computed at the time of loss. Requesting the client to have his asset professionally appraised so that insurance cover is based on replacement cost means additional fees which clients are generally resistant to, especially if the appraisal needs to be updated periodically.

Following Typhoon Odette, underinsurance was one of the major challenges faced by the industry. For Standard Insurance, our property policy includes an average clause as one of the conditions, which simply means that the client becomes a co-insurer on the difference between the actual value of their properties at the time of loss, and the policy TSI (total sum insured). However, this led to uncomfortable discussions with our clients as their expectations were not met.

In 2023, one of the biggest initiatives of our risk management division was to re-educate our associates about the adequacy of clients’ insurance vis-à-vis the basis of the policy sum insured, and then update our clients on this so that we are all on the same page, in the event of a claim. Moving forward this initiative may present some challenges, but the company is determined to educate its clients and make this its advocacy. Our campaign for 2023 is to ensure that our clients have updated their values so that when a big event hits, they are covered properly.

On the motorcar portfolio, underinsurance was not much of a problem, as the value of the units are automatically depreciated annually as basis for its TSI. Nonetheless, should inflation substantially affect cost of materials or spare parts and labour for vehicle repair, our technical training centre (TTC) may present an alternative repair service, potentially reducing motor car claims.

Despite the challenges in 2022, the company maintained a healthy portfolio of risks, regardless of the continued build-up of competitive pressures. For certain underwriting gaps that arise due to global and local inflationary and supply chain disruptions, we face these challenges headlong and will provide whatever it takes to address this.

Moving forward, we will continue to innovate systems and processes, empower our people, and maximise potential in the evolving market. We will invest in diversity of skills, perspectives, and approaches to ensure our combined ability to create, innovate, make decisions, and execute strategies to maintain relevance in the present and long term.

Passion for excellence
One recent example of our CSR supporting world-class Filipino athletes is our 2023 China Sea Race participation. Standard Insurance Centennial 5, skippered by Ernesto Echauz, won the historic China Sea Race. Clocking 12 hours, 45 minutes, and 47 seconds, Standard Insurance Centennial 5, with its 19 all-Filipino crew, crossed the finish line with an elapsed time of one hour, 25 minutes, and 47 seconds to win the Line Honours division of the Rolex China Sea Race. It marked the first time in the race’s 61-year history that a Philippine entry has dominated the event.

A big part of the company’s sustainability initiative is its lead role in the Philippine operation of the Scaling Up Nutrition (SUN) business network, a global movement whose main objective is to enjoin private companies in a collective effort to eliminate hunger and improve nutrition.

All these initiatives align with the company’s massive transformative purpose of providing ‘Peace of Mind for All Mankind’ and supports the United Nation’s 17 Sustainable Development Goals to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030. Our programmes support 12 out of the 17 SDGs.

Above and beyond all of this, we remain fully committed to doing our share to make this a better world because our past affects our present and our present determines our future.