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Extending the protecting arm of insurance

Article - July 28, 2011
Nowhere has President Aquino's election-winning pledge to improve governance been taken more seriously than in the insurance sector, which is set to become one of the cornerstones of the country
The benefits of streamlined procedures are already becoming visible in the health insurance and pension sectors, with the powerful state-owned Social Security System (SSS) leading the way in preparing to meet Millennium Development Goals (MDGs) set by the new administration. The SSS, which provides insurance protection to workers in the private sector against sickness, disability, maternity, death and old age, is undergoing a major reform with a view to extending the life of the fund to perpetuity.

As Emilio S. de Quiros Jr.,

president and CEO of SSS, points out, “The challenge we currently face is putting together a structure for the SSS that will continue to be around even after we have left the institution. Under current estimates the fund is expected to last until 2039, but our ultimate objective is to extend it to perpetuity.”

And Mr. de Quiros confirms that this cannot be achieved without pushing for increases in the contribution rate, which is currently one of the lowest in Asia. “Right now it is 10.4%,” he says, “This compares unfavorably with Asia, which has an average contribution rate of around 23%, and Europe with about 35%.”

THE SOCIAL SECURITY SYSTEM AIMS TO PROLONG THE FUND’S EXPECTED LIFE SPAN FURTHER THAN ITS 2039 EXPIRATION DATE

CONTRIBUTION TO SOCIAL SECURITY STANDS AT 10.4% (UNDER HALF THE ASIAN AVERAGE), A FIGURE THE SSS PLANS TO RAISE

THE DEPARTMENT OF HEALTH IS WORKING TO INCREASE COVERAGE OF HEALTH INSURANCE SERVICES AMONG THE POOR

THE INSURANCE COMMISSIONER BELIEVES INSURANCE PENETRATION IN THE PHILIPPINES COULD REACH 20% BY THE END OF 2011
The challenge is significant since it requires a drastic change in public opinion, namely: persuading employers and employees alike that increased contributions are an investment in their future. The SSS president is clear about members’ responsibilities in this regard.

“Some members may harbor the misconception that they save more if they underpay their contributions, but ultimately they are denying themselves of meaningful SSS benefits when financial contingencies strike them and their families,” he stresses.

The SSS has also made progress in bringing the overseas Filipino workers (OFW) community on board by making it easier and more convenient to pay via its Flexi-fund program and its wide network of foreign representative offices in key locations such as Abu Dhabi, Al-khobar, Sydney, Brunei, Doha, Hong Kong, Jeddah, Kuwait, London, Milan, Riyadh, Rome, San Francisco, Singapore and Taipei.

As Mr. de Quiros explains, “we are doing two things for the OFW market. First we are allowing them to become voluntary members so that they can continue paying their contributions and avail themselves of the lifetime pension when they retire. At the same time we are increasing the number of bilateral agreements with other countries. This will enable a member who has worked five years in the Philippines and five years in another country to qualify for a pension, for which 10 years of contributions are required.”

These measures are already paying dividends, with the SSS reporting that its net revenue surged by 36% in the six months to June 2010, mainly due to gains in contributions and investments.

Also tasked with meeting key MDGs is the country’s Department of Health (DOH), whose prime objective is to improve the welfare of the poorer sections of Philippine society through universal coverage and the provision of adequate human resources, health information and healthcare facilities. But as Dr. Enrique T. Ona, Secretary of Health at the DOH, explains, this is just the first phase. “The future phase is to improve the support value. In the Philippines health insurance does not cover everything, and we aim to increase the amount it does.”

This will inevitably require considerable levels of investment, which is why the DOH is opening up the country’s 25 major hospitals to private involvement via public private partnerships (PPPs). “I estimate that we need something like 40 to Php45 billion [$923 million to $1 billion] to upgrade and modernize these 25 hospitals,” says the Secretary of Health. “This is where we will be interested in big players partnering with us.”

Another institution with a vital role to play in extending and consolidating insurance protection in the country is the Insurance Commission (IC). Emmanuel F. Dooc, the insurance commissioner, states that the regulator’s vision is to provide “an opportunity for every Filipino to secure insurance protection by 2020.”

The IC has therefore taken proactive measures aimed at boosting consumer and investor confidence in the sector, recently revoking the licenses of two insurance agencies for a string of violations. “We are determined to observe practices at par with regional and global standards,” Mr. Dooc says.

The commissioner believes that insurance penetration in the country could reach as much as 20% by the end of this year, which in a still developing nation such as the Philippines represents genuine progress, suggesting that the sector is finally tapping into one of the largest potential markets in Asia.

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