Philippines: Insurance expected to grow as a wealth management tool

04 Apr 2017

The use of insurance combined with trusts is expected to be more important going forward in the Philippines, which, mirroring a trend across Asia, continues to experience rapid growth in the number of wealthy individuals and families. What comes with this, however, is a wider and more complex set of needs in managing their business and personal assets - both for today and in the long-term, reported Hubbis.

Thus the scope for more comprehensive planning, support and education is clear. The strong wealth creation around the region has led many wealth planning and insurance specialists to estimate that universal life (UL) policies – jumbo life insurance plans for High Net Worth (HNW) and UHNW clients – will continue to generate double-digit growth per annum in the coming years., said Mr Martin Wong, CEO of Private Client Services at JLT, who was speaking at a gathering of 15 business leaders from the Philippines’ wealth management sector.

The trend comes with the potential for much greater take-up of other legacy and estate planning instruments to facilitate wealth transfer to the next generation. 

In addition, a survey by Transamerica Life (Bermuda) Ltd and Asian Private Banker in 2016 found that only 5% to 10% of private bank clients have purchased UL policies. Over the next two years, 56% of private bankers expect UL policies to show the fastest increase in popularity compared with other life insurance products.

Younger HNW clients, aged 31 to 50, were also found to be more inclined to purchase UL than those who are older than 51 – as well as view these policies as a way to create wealth and also a financial planning tool.

Although insurance has typically been a bit taboo, said the Hubbis report, regarded as a morbid topic that gets sold based on fearmongering, there are ways that wealth managers are increasingly finding to introduce certain products and solutions – and which don’t always involve the client having to die to benefit from it.

This approach requires a more proactive advisor. Given that the typical Filipino family consolidates most of their wealth with the decision maker, and aims to resolve questions about distribution of this wealth if something happens to one of the members of the family, their adviser can play more of an active role. This means driving the discussion and introducing tools to prevent disputes after the death of the patriarch or matriarch.

Industry leaders believe there needs to be a lot more effort to introduce such subjects as part of high school education in the Philippines. Their rationale is that by planting the right seed and framing the mind-set at this stage of someone’s life will make them better prepared for the eventualities down the line.

The full report on the discussion can be found here. It was hosted by Hubbis, Mr Peter Golovsky of Amicorp and Mr Martin Wong of JLT.