Business district of Metro Manila, Philippines
Author: Leticia C. Tendero, Director of Investor Relations, Standard Insurance
December 18, 2021
The year 2020 blindsided the world with the Black Swan occurrence of the deadly Coronavirus disease that spread so swiftly across the globe and that had devastating consequences. Global activity ground to a halt, hampering economic growth as we paused to deal with this crisis. The healthcare industry was temporarily crippled, and the virus caused people to lose their jobs across all industries.
On the local front, the Philippines was faced not only with this devastating pandemic, but started and ended the year with natural disasters – from the unexpected eruption of the Taal volcano to the influx of typhoons during the latter part of the year. Reeling from all these, but most especially from the pandemic, the Philippine’s GDP suffered its biggest annual contraction on record at negative 9.6 percent, year-on-year, according to the Philippine Statistics Authority. Nonetheless, we must salute our selfless overseas Filipino workers who, in spite of global lockdowns and mass layoffs, found ways to send more money back home to help support their struggling families, with total remittances decreasing by 0.8 percent in 2020, dismissing a rather more grim forecast of a sharper fall due to the pandemic.
Highest growth in 33 years
Despite the challenges during these past two years, the Philippines has seen a gradual improvement quarterly, year-on-year, 2020 to 2021. From its worst dip in the second quarter last year, GDP posted a record high of 11.8 percent growth in the second quarter of 2021, year-on-year, the highest since the fourth quarter of 1988. This robust performance may be a result of the ‘base effect’ as some analysts claim. Some optimists nonetheless reason that this is a result of the gradual improvements in business confidence as the economy learns to live with the virus and the hope of a safer future with the vaccine roll-out in March. Following the performance of the economy, the Philippine non-life insurance industry faced its toughest and most challenging year as COVID-19 redefined the ‘face-to-face’ norm of insurance business transactions, with most insurance companies pivoting their business operating models and systems. Considered a non-essential sector, and thus not operational for several months during restrictive quarantine status, this propelled insurance companies to embark on more aggressive initiatives towards the digitalisation of operations. The non-life insurance sector’s business portfolio contracted by 9.3 percent at PhP83.8bn ($1.7bn) with total net premiums written posting a 16.2 percent negative growth at PhP49.3bn ($984m).
In terms of profitability, however, net income leaped by 65.8 percent to PhP5.7bn ($113.8m) as losses spiralled down 20.9 percent to PhP21.5bn ($429.2m). With lower claims incidences during the lockdown period and operational efficiencies partly brought about by work-from-home arrangements for the whole year, these somehow balanced off the decreasing premiums, hence maintaining the non-life insurance sector’s profitability. The loss ratio in 2020 was therefore at 41.7 percent versus 49.1 percent in 2019. On the whole, despite the challenges of the pandemic, the non-life insurance industry remains strong and stable with aggregate assets and net worth ending a challenging year with increasing growth rates at 7.96 percent and 7.66 percent at PhP280.2bn ($5.6bn) and PhP105.6bn ($2.1bn), respectively.
The route ahead
Moving forward, the non-life insurance industry is optimistic that it can recover lost ground and exceed expectations as the administration is fast-tracking its vaccine programme, imposing more localised and granular lockdowns, thereby reducing the drag on the economy. In addition to this, it is expected that the sale of new motorcars will lead to an annualised growth of 18.2 percent based on motorcar sales as of July 2021, so insurance premiums on these will naturally move up substantially relative to last year.
Nonetheless, to remain relevant, insurance companies need to advance technology as innovation will be an important component of the future. Equally important, artificial intelligence (AI) will be integral to better underwriting capabilities. There is no path back to pre-COVID, only a path forward to the post-COVID market, accelerating digital infrastructure and product offerings to meet the evolving demands of the market with minimal human intervention.
As we leave the most challenging year so far, we send our overwhelming gratitude to our colleagues and associates, our clients, our business partners and to everyone who went the extra mile during the global health crisis. The year leaves with us a reverberating memory of a sense of awe at how people can naturally adapt to a Black Swan situation and be resilient, tolerant, and empathetic in dealing with a diversity of challenges during this global COVID-19 pandemic; but at the same time, move on with a sense of caution, hopeful and optimistic that this too shall pass. We shall continue to face all difficulties with gratitude, strength, perseverance and we, together, shall work hard for a sustainable, dignified and fulfilling future. We should look beyond the short-term ‘new normal’ and towards the long-term ‘new normal,’ towards sustainability.
Through all these difficult times, we turned challenges into a wealth of opportunities as Standard Insurance has been well prepared for catastrophic events. Our systems are all digital, integrated and upgraded continuously. Everything is online, whether for internal or external customers. All of our systems are also in the cloud, having migrated all of our systems onto the public cloud years ago, making us possibly the first domestic insurer to be an Amazon Web Services partner. The company’s ISSIoffice plus is an ‘insurance office in an app’ and is accessible via smartphone or any telecomputing device and is another platform that allows one to do the whole insurance cycle. These allowed us to fluidly adjust to the work-from-home arrangement.
Yes, we took a quick pause immediately after the declaration of the community lockdown in March, to check on our people nationwide, ensuring that all our associates were cared for and kept safe so that they too would care for our customers. When it comes to caring for each other, everything is personal to us at our company. After all, that is the very essence of our massively transformative purpose (MTP), ‘peace of mind for all mankind,’ starting with our associates. It is an MTP that we try to ingrain into our DNA so that we are guided by this in all aspects of our operations.
With everyone settled and secure of their future, we immediately plunged into the business of the day, maximising our digital capabilities while easing into the new ways of doing business and conducting meetings using the different platforms of digital communications. We looked at the ‘new normal’ just as a way of looking at and doing things from a different perspective. As long as we persevered and continued to focus on proper underwriting, intelligent pricing across all lines, fast and accurate claims turn-around, and sustainability in the long run, we knew we would be okay. As our Swiss independent director always likes to say, “If it doesn’t make cents, it doesn’t make sense.” Correct business decisions and sales, profits, cash flows, and balance sheets that we understand and can count on, are critical to the welfare of all of the enterprise’s stakeholders, especially during these times.
Furthermore, we strongly believe in both the power of an individual to make a difference, and in the greater power of individuals moving together as one enterprise. More importantly, we are in a unique position of working with a diversity of generations in our workforce, made up of millennials, generation Xers, late baby boomers, and even early baby boomers, with the latter two categories still very much able to work and learn. Getting the best out of the mix of all four generations is a highly challenging but necessary and worthwhile endeavour. We believe that combining the different but existing concepts and people in novel ways creates the products, companies and industries of the future that will surpass and overcome any adversity.
Utilising technological advances
Another unique position is having the capability to be data scientists, having the fundamental product of an insurance algorithm. As such, we have the capability to optimise a large database and engage in mutually beneficial customer-to-company interactions, and drill down on revenues, recurring losses, expenses and investments. We utilise technology to do this and consider it an imperative, recognising that these tasks require the often severely and chronically under-tapped computing power of today. This predictive and advanced analysis goes a long way in enhancing and updating our underwriting and pricing strategies, among others. These last two years brought out both simple and complex innovations of doing business, of delivering despite the challenges of lockdowns and quarantines, of consistently providing quality service to our customers and business partners. We successfully rose to the evolving demands of the market, in terms of innovative products and services.
To remain relevant, insurance companies need to advance technology as innovation will be an important component of the future
We further enhanced our market footprint across digital platforms as well as in physical sales offices in untapped and business areas with high potential. Moving forward, we continue to strive to be better and make an impact, making meaningful connections through well-established distribution channels, harnessing technology to improve our accessibility. We continue to bridge the gap with our strong presence in key cities, with the aim of bringing our products to where you are. We are building a collaborative network as we diversify boldly and expand globally. We are forging strong connections with leading institutions and broadening the spectrum of our local and international clients. Standard Insurance continuously strives for excellence in both national and international arenas, serving the needs of the insuring public according to global standards.
World Finance awarded us the ‘Best Non-Life Insurance Company, Philippines for 2021,’ for the eighth time, even at the height of the pandemic. Equally important, Global Credit Rating upgraded our financial strength ratings to A+(PH) (single A plus) and an international scale rating of BB (double B). We also maintained our ISO 9001:2015 certification by SGS International.
A sustainable future
Finally, the world is insisting that we do things sustainably. Let us all do things that create sustainable lives for everyone: work towards cleaner water for others; more nutritious food for others; cleaner energy for others; let us work towards a future in which we are able to live, work and study in clean and safe neighbourhoods without having to commute expensively for hours; let us be part of a society that provides more equality in terms of opportunities (even if there will always be some who will strive more than others).
We will always respond rapidly no matter what crisis falls in our way. With our massive team of claims experts, highly advanced digital platforms and total insurance infrastructure, we are attuning ourselves to all important challenges and needs, and with our strengths, we are making a difference, the way only we can