THE IMPACT OF INSURTECH APPLICATIONS ON PHILIPPINES' NON LIFE INSURANCE SECTOR AND ITS CUSTOMERS

THE IMPACT OF INSURTECH APPLICATIONS ON
PHILIPPINES' NON-LIFE INSURANCE SECTOR AND ITS
CUSTOMERS
A Master's Thesis in Partial Fulfilment of the Requirements for the Degree of
Master in Business Economics (MBE)
Jeffrey R. Lacson, CPA, CISA, CIA, CLSSGB, CII (Award), FICD
SBEP 2018-2019
29 June 2021

Background
3
• Insurance - as a commodity in exchange for payment of
a defined premium, to provide an assurance of coverage
for a particular injury, damage, illness, or death
• Modern industrial revolution (Industry 4.0) - cloud
computing, telematics, the Internet of Things (IoT),
mobile phones, blockchain technology, artificial
intelligence/cognitive computing, and predictive
modeling
“The most imminent effects of disruption will be felt in the banking sector;
However, the greatest impact of disruption is likely to be felt in the insurance
sector”
93% of Insurance CEOs see the speed of technological change as a threat
(compared to 69% in 2016)*
Source: The future of financial services, World Economic Forum 2015 * PWC 2017 Insurance CEO survey
Insurtech
Fintech

Background
4
Non-life Insurance Market (Philippines)
Miscellanous
1%
Surety, Bonds &
Credit
5% Workers
Compensation &
employers Liability
1%
Motor
33%
Property
32%
Personal Accident
& Healthcare
20%
Marine, Aviation &
Transit
8%
0.34%
0.32%
0.31%
0.34%
0.37%
0.38%
0.37% 0.36%
0.48% 0.48% 0.48% 0.48%
0.43%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
GDP
CONTRIBUTION
2018: US$ 1.75b
2019: US$ 1.56b
2018 Market Division
(Insurance Commission, n.d.)
Premium to GDP Contribution
Insurtech Players

Definition of Terms
5
INSURTECH
Insurance Sector
N o n - L i f e I n s u r a n c e
Digitalization
Innovation
Challenges and Risks
Information and telecommunication technologies (ICT)
I M P A C T

Statement of the Problem
1. What significant benefits and challenges do non-life insurance customers face having
Insurtech-enabled interaction with insurance companies?
2. What significant benefits and challenges do non-life insurance companies in the Philippines
face having Insurtech-enabled interaction with its customers?
3. What significant impacts will Insurtech bound to bring to the non-life insurance sector?
4. How can the impacts of Insurtech on non-life insurance services and the sector contribute to
economic growth?
6

Significance of the Study
1. Non-life Insurance Sector – new information to better design and manage insurance
services to eventually improve the overall quality of the Philippine insurance industry, both
nationwide and worldwide, and ultimately contribute to economic growth.
2. Non-life Insurance Companies’ Management – as a venture and springboard in enhancing
their programs and activities and providing quality services. Inputs to revisit the existing
policies, ranging from the training staff, and evaluating the outcomes of Insurtech.
3. Non-life insurance customers - address the problems which could be probable as they
embark on the use of Insurtech. Additional insights on how to handle their insurance based
on the different factors and to either nurture and consider or discard to enhance their
knowledge of the new technology.
4. Stakeholders (including Future Researchers) –valuable reference on where the non-life
insurance sector is as far as the customers are concerned. Also, as a reference in their
parallel studies.
7

Scope and Limitations
• Focus on the impact of INSURTECH in the NON-LIFE INSURANCE SECTOR in the PHILIPPINES
and its CUSTOMERS and its eventual contribution to the Philippine economy.
• Results may differ when the LIFE INSURANCE SECTOR and its customers are considered as
subjects of the study.
• FINTECH as a broader umbrella was mentioned, but not considered in the study.
• The KIND OF CHANGES, and the BENEFITS and CHALLENGES that can be encountered by the
covered sector and customers were pre-identified.
• INTERVIEWS, PERSONAL DATA SHEETS, and QUESTIONNAIRES were used to gather data
through online platforms. Informal interviews were conducted to validate and clarify the data.
• Market disruption brought about by the 2020 GLOBAL PANDEMIC is not considered.
8

Review of Related
Literature and Studies
Chapter II

Related Literatures & Studies
Insurance in the Age
of Digitalization
Insurance
Technology
Insurance in the
Philippines
Non-Life
Insurance
Sector
Studies on
the Impacts
of Insurtech
10

Conceptual Framework
Insurtech
Benefits and Challenges for Non-Life Insurance Customers
Benefits and Challenges for Insurance Companies
Changes in the Philippine Insurance Sector
Contribution to Economic Growth
11

Research
Methodology
Chapter III

Research Design
A mixed-method approach (CONCURRENT TRIANGULATION DESIGN) was used to integrate both
quantitative and qualitative data gathered.
13
The QUANTITATIVE DATA gathered consist of the:
• rating scale responses from the survey questionnaire
answered by the selected insurance companies' management
and non-life insurance customers, and
• published industry data for Health Gross Premiums Written
(GPW_H) and Gross Premiums Written (GPW) of the industry
(2015 to 2018) and one of the top non-life insurance
companies in the Philippines (2015-2019)
The QUALITATIVE DATA were obtained from the
• one-on-one interviews conducted to selected respondents
online and other non-quantitative responses provided by the
research participants in the survey questionnaire they
answered.

Research Instrument
The study used survey questionnaires for the non-life
insurance management personnel (see Appendix A) and for
its customers (see Appendix B) both administered via
Google Forms, to ensure the government's observance of
safety health protocols.
The other instrument used were interview guides for both
the non-life insurance management personnel and its
customers (see Appendices C and D). These interview
questions were adapted from the thesis published by
Mennati (2010).
14

Research Locale & Participants
The researcher used PURPOSIVE SAMPLING in identifying the
participants for this study. It carried out the data gathering procedure
from the top twenty (out of 57) non-life insurance companies in the
Philippines, stated from the Insurance Commission website (2019),
representing 86% of the industry revenue.
In line with the foregoing, the researcher selected fourteen (14) non-
life insurance management personnel and 107 non-life insurance
customers as respondents for the survey questionnaires for the
management and non-life insurance customers, respectively.
On the other hand, the researcher planned that five (5) out of the
fourteen insurance companies' management and ten (10) out of the
107 non-life insurance customers would be interviewed.
15
2019 Top Non-Life Insurance Companies
1. Malayan lnsurance Company, lnc.,
2. Prudential Guarantee & Assurance, lnc., /
PGA Sompo lnsurance Corp. (Affiliated)
3. Pioneer lnsurance & Surety Corp.,
4. BPI/MS lnsurance Corp.,
5. Charter Ping An lnsurance Corp.,
6. FPG lnsurance Co., lnc.,
7. Standard lnsurance Company, lnc.,
8. UCPB General lnsurance Company, lnc.,
9. Pacific Cross lnsurance, lnc. (Blue Cross
lnsurance, lnc.),
10. PNB General lnsurers Company, lnc.,
11. Commonwealth lnsurance Company,
12. MAA General Assurance Phils., lnc.,
13. AIG Philippines lnsurance lnc.,
14. lnsurance Company of North America,
15. Mapfre lnsular lnsurance Corp.
16. Paramount Life & General Insurance
Corp.,
17. Philippine British Assurance Company,
Inc.,
18. Stronghold Insurance Company, Inc.,
19. Starr International Insurance Philippines
Branch,
20. Alpha Insurance & Surety Company, Inc.

Data Gathering Procedure
16
Request Letter
(Management)
Survey
(Management)
Referrals
Request Letter
(Customer)
Survey
(Customers)
Interviews
(Management
& Customer)

Data Analysis
• Content Analysis for qualitative data
• Frequency Count and Descriptive Statistics (i.e., relative
frequency and measures of central tendency)
• Thematic Analysis to scrutinize quantitative data
corroborated with the qualitative data gathered from the
other non-quantitative responses
• Time Series Analysis - Box-Jenkins Approach in
forecasting future values and comparing these to the
industry's expected values.
• Auto Regressive Integrated Moving Average (ARIMA)
models to forecast for an immediate period/time span
17

Summary, Conclusions
& Recommendations
Chapter V

Significant Benefits & Challenges to Non-Life Insurance Customers
19
8 Interviewees
107 Respondents
47% have policies for
more than 5 years, only
8% have less than 1 year
62% have more than 2
policies
Property
(includes
construction and
engineering)
22%
Motor/Auto
37%
Personal
Accident and
Healthcare
30%
Workers'
compensation
and employers’
liability
6%
Surety,
bonds, and
credits
3%
Marine,
aviation, and
transit
2%

Summary of Findings
NON-LIFE INSURANCE CUSTOMERS
Benefits:
1. Keeps up with the modernity of the world through its digitalization.
2. Offers easy, convenient, safe, and time-efficient transactions among non-life insurance customers.
3. Customers will get and feel more involved as insurance partners.
4. May possibly decrease insurance costs.
Challenges:
1. Adaptation of the customers in this new technology.
2. Gradual decrease in the number of insurance agents.
3. Technical issues that may threaten cybersecurity
20

Significant Benefits and Challenges to Insurance Companies Management
21
Management Profile
Head of the Company (1)
Head of Finance & Accounting (3)
Head of Human Resource (1)
Head of Underwriting (5) – Consumer, Property & Engineering, Casualty
Head of Claims (1)
Head of Distribution / Sales (1)
Head of Legal, Risk & Compliance (1)
Head of IT (1)
4 Interviewees
14 Respondents
Affiliated Company Represents
67% of industry premium

Summary of Findings
INSURANCE COMPANIES’ MANAGEMENT
Benefits:
1. Efficiency and a further improvement in the transactions and services offered to customers.
2. Save on costs and increasing profitability over time.
3. Opening many avenues for customers to choose from
Challenges:
1. Agile adaptation towards digitalization.
2. Expensive initial investment
22

Impacts to the Non-Life Insurance Sector
23
61% Female
62% Married /
In partnership
65% of
Customers
59% are below 40 y/o
7% of
Management
98% earned a
minimum of
bachelor's degree
44% of
Customers have
11-15 years
21% have <10 years
work experience
93% of
Management
have more than
15 years
107 Respondents
(Customers)
14 Respondents
(Management)

Summary of Findings
NON-LIFE INSURANCE SECTOR
Impacts:
1. improvement of the insurance company
2. development of a new distribution channel
3. provision of new services, and
4. simplification of the processes involved in providing services.
24

25
5%
5%
3%
2%
4%
2%
0%
0%
54%
27%
29%
21%
16%
17%
7%
0%
41%
68%
68%
77%
80%
81%
93%
100%
Decrease in Insurance Costs*
Improvement in Performance***
Better Quality of Services*
Improvement of the Supply Chain and Relations with Business Partners***
Improvement of the Company**
Simplification of Providing Services*
New Distribution Channel**
Provision of New Services**
Combined 'Low' & 'Very Low' So-So Combined ‘Very Much’ and ‘Much’ responses
71%
80%
82%
93%
100%
Improvement of the Supply Chain and Relations…
41%
66%
68%
78%
81%
Improvement of the Supply Chain and Relations…
Simplification of Providing Services*
(Insurance Companies’ Management) (Non-Life Insurance Customer)

26
0%
2%
17%
Much, 53%
Very Much, 28%
0%
0%
7%
Much, 79%
Very Much, 14%
0%
0%
0%
Much, 79%
Very Much, 21%
Providing new
services
(Insurance Companies’
Management)
A new distribution channel
(Insurance Companies’
Management)
Simplify the process of
providing services to you
(Non-Life Insurance
Customer)

..
27
0.00% 1.36%
1.95%
4.25%
16.23%
28.46%
Much, 56.49%
48.43%
Very Much,
25.32%
17.50%
Insurance Companies’ Management Non-Life Insurance Customers
Insurance Company’s Performance Improvement
102%
120%
123%
134%
147%
152%
159%
168%
169%
171%
181%
Decrease of the final price of the insurance services
Increase of market share
Decrease of costs
Increase of revenue
Increase of insurance sales and profit
Increase of competitive advantage in insurance market
Better access to market information
Increase of efficiency
Saving time
Increase of productivity
Possibility of better innovation

28
61%
65%
68%
69%
70%
75%
Possibility of insurance costs comparison
Increase of insurance companies' operations
transparency
Speed of claims payment/ management
Faster service delivery by insurance companies
Faster response time by insurance companies
Possibility of every moment access to the services
36%
50%
71%
71%
71%
79%
79%
86%
93%
100%
100%
100%
100%
Increase of customers' satisfaction and loyalty
Retention of old customers
Possibility of price comparisons by customers
Improvement of people knowledge of the services
Increased transparency
Lower cost of new customer acquisition and old…
Better communication
Every moment access
Better marketing methods
Better access to new customers
Improvement of customer service
Faster service delivery
Facilitation of work processes
Better Quality of Services
(Non-Life Insurance Customer)
Improvement of the Company
(Insurance Companies’ Management)
1%
3% 29% Much, 47% Very Much, 21% 1%
4% 16% Much, 51% Very Much, 29%

29
Improvement of the Supply Chain and Relations with
Business Partners
Indicators of the Insurance Company’s
Decrease in the Insurance Costs
(Non-Life Insurance Customer)
0% 0%
7%
1%
21%
22%
Much, 50%
54%
Very Much, 21% 23%
1%
4%
54%
Much, 35%
Very Much, 7%

Summary of Findings
Top Obstacles / Threats:
1. Security
2. Legal – uncertainty of legal issues surrounding Insurtech adoption
3. Organizational / Managerial
30

31
9%
5%
4%
8%
2%
3%
27%
28%
20%
27%
21%
16%
64%
67%
76%
65%
78%
81%
Financial
Cultural
Technical
Organizational/Managerial
Legal
Security
Combined ‘Strongly Disagree’ and ‘Disagree’ responses Neutral Combined ‘Strongly Agree’ and ‘Agree’ responses
11%
26%
10%
10%
2%
3%
36%
19%
29%
24%
24%
14%
54%
55%
61%
67%
74%
83%
Cultural
Organization / Managerial
Technical
Financial
Legal
Security
9%
8%
5%
2%
1%
3%
27%
26%
28%
20%
20%
16%
64%
67%
68%
78%
79%
81%
Financial
Cultural
Technical
Legal
Organization / Managerial
Security
(Insurance Companies’ Management) (Non-Life Insurance Customer)

32
Strongly Agree,
22.86%
34.37%
Agree, 60.00%
46.63%
14.29% 15.68%
2.86% 3.32%
0.00% 0.00%
93%
124%
124%
125%
System faults and capacity problems of servers
Concern about fraud
Danger of Hackers
Danger of leaks of information
69%
74%
79%
82%
86%
88%
Too much data entry
Online quote accuracy
Online payment uncertainties
Disclosure of personal data (confidentiality)
Danger of virus infection
Fear of theft of credit card information
Probable Security Obstacles

33
Strongly Agree,
11.90%
26.48%
Agree, 61.90%
51.71%
23.81%
20.25%
2.38% 1.56%
0.00% 0.00%
116%
119%
157%
Complexity of government Insurtech
regulations
Lack of known standards of E-commerce
in the country
Uncertainty of legal issues surrounding
Insurtech adoption
Probable Legal Obstacles

34
Strongly Agree,
7.94%
22.85%
Agree, 53.17%
44.76%
29.37%
27.73%
9.52%
4.47%
0.00% 0.21%
93%
124%
124%
125%
129%
133%
137%
140%
152%
Low internet use
Internet access
Connectivity problems
Complexity of new technologies which
require new skills
Software and hardware short life cycle
Reliance on external expensive consultants
Limited in-house IT skills/experts
Broad band connections
Improper network infrastructure in the
company
Probable Technical Obstacles

35
Strongly Agree,
19.05%
22.74%
Agree, 35.71%
55.76%
19.05%
20.25%
26.19%
1.25%
0.00% 0.00%
116%
119%
157%
Insufficient time spent by the
management on planning
The Management's insufficient knowledge
or experience of Information Systems/
internet services (IS)
Employee 's lack of awareness about the
benefits of Insurtech
Probable Organizational/Managerial Obstacles

36
Strongly Agree,
7.14%
19.16%
Agree, 46.43%
47.51%
35.71%
25.70%
10.71% 7.48%
0.00% 0.16%
93%
124%
124%
125%
129%
133%
Duplication of work
Reduced flexibility
Fear of new technology and loss of job
Cultural reluctance
Employee's preference to use traditional
medium (personal consulting preference)
Employee's resistance to change
Probable Cultural Obstacles

37
Strongly Agree,
21.43% 15.89%
Agree, 45.24%
47.98%
23.81% 27.41%
9.52% 7.17%
0.00% 1.56%
116%
119%
157%
Uncertainty of Return on Investment
Limited financial resources
Expensive initial investment
Probable Financial Obstacles

Summary of Findings
38
CONTRIBUTION TO ECONOMIC GROWTH
• Health Insurance segment is projected to have a compounded annual growth of 2.24%, the growth trend decreases on
an average of 1.51%.
• The Non-life Insurance Sector segment is projected to have a compounded annual growth of 5.81%, the growth trend
decreases by an average of 0.40% year on year
• GDP contribution of the Non-Life Insurance Sector is projected to have an organic compound annual growth of 4.09%.
• The impacts of Insurtech applications to non-life insurance services and the insurance sector will translate to additional
premiums that will fill the decline in the growth gap for the succeeding years of the sector.
• This will lead to the stabilization of the compound annual growth rate of the sector and an
eventual increase in the GDP contribution of the Non-Life Insurance Sector that will lead to
the Philippines’ economic growth. The contribution is expected to increase by 0.01% in 2021
and stabilized to a 0.41% GDP ratio until 2023.

40
0
1E+09
0 0 0 0 0 0 0 0 0
#REF! #REF! #REF! #REF!
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
2015 2016 2017 2018 2019 2020 2021 2022 2023
Insurance Company’s GPW_H Insurance Company’s GPW_H (Projection)
Industry’s GPW_H Industry’s GPW_H (Projection)
Premium Growth
Premium Growth Rate
NON-LIFE INSURANCE SECTOR – HEALTH SEGMENT

41
0
1
1
2
2
3
3
4
4
5
0
20
40
60
80
100
120
2015 2016 2017 2018 2019 2020 2021 2022 2023
Billions
Billions
Industry’s GPW Industry’s GPW (Projection)
Insurance Company’s GPW Insurance Company’s GPW (Projection)
-10%
0%
10%
20%
30%
40%
50%
Premium Growth
Premium Growth

42
NON-LIFE INSURANCE CUSTOMERS
1. Keeps up with the modernity of the world through its
digitalization.
2. Offers easy, convenient, safe, and time-efficient transactions
among non-life insurance customers.
INSURANCE COMPANIES’ MANAGEMENT
1. Efficiency and a further improvement in the transactions and
services offered to customers.
1. improvement of the insurance company
2. development of a new distribution channel
3. provision of new services, and
RELATED STUDIES
2016 insurance grew at a stable rate globally because of the
application of Insurtech and increased in most countries in life
and/or non-life insurance sectors the following year, especially in
countries with relatively low insurance penetration. Global Insurance
Industry: Peculiarities and Current Development Trends, Pidchosa
(2019)
5%
5%
3%
2%
4%
2%
0%
0%
54%
27%
29%
21%
16%
17%
7%
0%
41%
68%
68%
77%
80%
81%
93%
100%
Improvement of the Supply Chain
and Relations with Business
Partners***
Simplification of Providing
Services*
Combined 'Low' & 'Very Low' So-So Combined ‘Very Much’ and ‘Much’ responses

43
-
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
3,500,000,000
4,000,000,000
4,500,000,000
5,000,000,000
2015 2016 2017 2018 2019 2020 2021 2022 2023
Insurance Company’s GPW_H Insurance Company’s GPW_H (Projection)
Industry’s GPW_H Industry’s GPW_H (Projection)
Industry’s GPW_H with Insurtech
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
2015 2016 2017 2018 2019 2020 2021 2022 2023
0
20,000,000,000
40,000,000,000
60,000,000,000
80,000,000,000
100,000,000,000
120,000,000,000
0
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
3,500,000,000
4,000,000,000
4,500,000,000
2015 2016 2017 2018 2019 2020 2021 2022 2023
Insurance Company’s GPW Insurance Company’s GPW (Projection)
Industry’s GPW Industry’s GPW (Projection)
Industry’s GPW with Insurtech
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
2015 2016 2017 2018 2019 2020 2021 2022 2023

44
0.30%
0.35%
0.40%
0.45%
0.50%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Premium vs GDP Premium vs GDP (with Insurtech)
0.480%
0.485%
0.490%
0.495%
0.500%
0.505%
2020 2021 2022 2023
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2020 2021 2022 2023
Industry’s GPW Industry’s GPW with Insurtech

Conclusions
• Insurtech applications have impacts and challenges in all sectors involved (customers,
company, sector, and economy) upon its integration in the insurance sector.
• Non-life insurance customers are more progressive and digitally immersed with the
future of business transactions than the management, who are more conservative and
gradually plan to transition towards the advancement brought by Insurtech.
• Incorporating digitalization in the insurance industry will enhance transactions and
services offered to the customers and will have a return of investment to the insurance
companies, for this will be the new norm to survive demanded by the global pandemic
at the time this research has been conducted.
• Insurtech is an expensive yet worthy investment that promises to improve its clients'
insurance sector further. Not all aspects will be automated, and some essentials will be
preserved.
• With the combined impact of the above, Insurtech will produce additional premiums
that will fill the decline in the growth gap for the succeeding years of the sector. This will
stabilize the sector’s compound annual growth rate and eventually increase its
contribution to the country’s GDP.
45

Recommendation
• Insurance companies should take care of all their employees and create possible
opportunities for them to be trained, manifest their capabilities, and minimize job loss,
especially in these trying times where even the Philippine economy is striving to survive.
Insurance agents must not feel that they are being replaced by technology but rather
equipped for the insurance industry's future.
• Insurance companies should assure their clients that necessary precautions and
preparations are readily available to secure personal information. ICT professionals,
customer support, backup units, and contingency plans must always be ready at times
like this.
• Considering the downward trend in the non-life insurance sector growth rate, with
aggravating impact from the pandemic situation, Insurance Companies must seriously
consider implementing Insurtech applications to address clunky processes and
inadequate information that hinders penetration and market expansion. Insurtech can
provide the tools to analyze existing data while also collecting new information that
could make predictive modeling, which would expedite the application and underwriting
processes.
• The Industry Market Association should craft a roadmap for the sector with Insurtech as
central strategy/vision for adoption of the Insurance Commission
46

Roadmap
47
Assess
(Current State)
Industry
Capabilities /
Initiative
Market
Requirements /
Readiness
Analyze
(Positioning &
Future
Requirements)
Govern (Principles
& Standard) &
Fund
Set-up & Connect
(Common
Infrastructure &
API)
Collaborate
(FinTech)
Regulate (Oversight
Framework,
Consumer
Protection)
Execute /
Implement
2022 2023 2025
Open Market Insurance Ecosystem

End of Report
For any question or clarification, please reach out to
Jef Lacson (jef@lacson.co)

THE IMPACT OF INSURTECH APPLICATIONS ON PHILIPPINES' NON LIFE INSURANCE SECTOR AND ITS CUSTOMERS

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