The ratio between the number of insurance companies versus the number of costumers are way too far that it creates a wrong supply and demand effect.
It is a fact that the Philippines has a big market share with 90 Billion in population but majorit
y of it barely eats one meal a day. It is also true that the insurance market in the Philippines has not yet been penetrated thoroughly because the majority takes it for granted. With this reality, 100 insurance companies fight for a small portion of the pie and instead of selling the product and its features, agents/brokers or insurance companies themselves tend to sell the PRICE instead. So the rates go down and the sad truth about this is that the real coverage is being jeopardized.
This is the typical scene on how people buy insurance:
Agent: This is the feature of my car insurance, you will be protected with own damage and theft with third party
bodily injury and property damage. Comes with this package is a free 24hr roadside assistance. With your BMW X3, your coverage will be 2,500,000 and your premium is 50,000.
Customer: what? 50,000?! are you crazy, my bank manager offered me the same coverage with just 40,000 in premium.
A: Are you sure? i gave you the minimum allowable rate possible and i doubt if we have the same coverages…
C: The coverage doesn’t really matter, nothing will happen to me. I just want to get insurance because the bank needs it and because you are a friend. Can you adjust?
A: (wanting to get the sale) But…Ok, Since i gave you the minimum allowable rate already, i’ll try to bring down the coverage of your car at 2,000,000. and your premium will be 35000! deal?
C: You know what, another agent friend of mine just offered me. 2M coverage at 30k! In fact, when i tried selling my BMW X3, nobody is interested in buying it at 2M. Can you give me a quote at 1, 500,000.00?
A: But sir, that’s way below the Fair Market Value…the insurance might not allow it.
C: I told you, nobody wants to buy my car at 2M. In that case, ill have to choose my other agent because his insurance company doesn’t mind of the Fair Market Value and besides i haven’t had any accidents since birth!
A: Ok ok, 1,500,000 coverage premium at 20k. deal?!
C: That’s more like it, Deal!
After 6months, customer had a major accident and wrecked his BMW X3. The insurance declared that the car is under valued and
settled in to give customer 1M.
C to A: What? 1M? Bullshit! You never told me and explained to me before that your insurance has this policy. I should’ve got the other agents insurance, your useless! you cheated me…BLah Blah..
A: Uhmm, i tried to explain before but you insisted to get your premium price and you haggled to lower down the coverage…
C: Ofcourse i did not, see your putting the blame to me instead of working for me and getting something from the insurance?! Geesh! your a cheat!
Sad to say this is a norm in the non-life insurance industry. Agents/Brokers get the blame always and since the negotiation part is verbal, we can’t use that as a reason that we have explained it before. And because the customer is devastated with the situation, the best option is to blame us the Agents/Brokers. Its human nature!
The government should really look in to this. This is a serious industry with lots of money involved. I strongly believe that the reopening of the Glorietta explosion case has something to do with Insurance claim. If it was declared terrorism before, the insurance company “might” have no obligation of paying and that’s why they declared explosion of methane gas due to poor maintenance. However, this is my own theory only. And the real deal to this is that when an account is too big (amount insured is in the millions),local insurance companies practice is to re-insure it abroad. So if my theory is correct, the Philippine Government saved the Ayalas from its losses and generally fooled the insurance company to pay for it as well as the international re-insurers.
Isn’t this serious enough? The government should really inform the public and encourage the public that they should prioritize non-life insurance because this will help them in their darkest moments! Stop the diving of rates, sell the products and features and service not the price! Part of the regulation is to merge and solidify insurance companies, limit the number of insurance companies to 20 or less. So that the companies are solid and has more capacity of paying.