IN BRIEF:
• Global insurers have shown resilience and strong performance, positioning themselves for growth in both established and emerging markets.
• There is a rising demand for essential protection and value-added services, alongside new opportunities in risk assessment and pricing.
• By focusing on innovation investments to address protection gaps, insurers can secure a competitive edge in the market.
Insurers have a unique opportunity to drive innovation and growth by addressing protection gaps in the market. In the Philippines, growth in the country’s insurance penetration rate is at 1.89% in the first quarter this year from 1.78% in the same period in 2024. While the momentum is expected to carry throughout the remainder of the year, it is still below the global rate of 6%. As reflected in the insurance premium expense per capita growth to P1,094.94 from P965.56, insurance density also improved 13.4%. Per Statista, the insurance industry in Southeast Asia is forecast to grow 3.5% annually until 2029. This optimistic forecast is attributable to the global silver tsunami expected to triple by 2050.
The “silver tsunami” refers to the significant demographic shift as the Baby Boomer generation reaches retirement age, which will drive demand for financial planning services, life insurance, and health insurance with integrated wellness programs.
Despite promising growth, geopolitical tension and trade wars are also expected to result in economic shocks this year, requiring strategic and operational flexibility from insurers. Coupled with increasing risks from cyber threats, climate change, and demographic shifts leading to a growing retirement savings gap, insurers are called to rethink their strategies.
According to the 2025 Global Insurance Outlook, significant protection gaps exist, particularly in cyber and climate-related risks, where a staggering 99% of cyber losses and 60% of natural disaster losses remain uninsured, according to Munich Re’s Cyber Survey 2024 and Swiss Re research unit Sigma, respectively. In 2024, the World Bank reported that natural disasters affected $3.5 billion in Philippine assets yearly while direct losses to both public and private assets topped 1% of gross domestic product (GDP). Additionally, the growing retirement savings shortfall presents further avenues for value creation. A strategic focus on enhanced data utilization and modernized technology is essential for insurers to capitalize on these opportunities.
DEVELOPING TARGETED PRODUCTSThe most significant protection gaps, particularly in retirement savings and climate-related risks, are expected to widen. According to Swiss Re, the global retirement savings gap is projected to increase from $106 trillion in 2022 to $483 trillion by 2025. With longer life expectancies and aging populations, there is a pressing need for products that provide income for older adults. Insurers can enhance financial security by offering innovative solutions.
While the neighboring ASEAN countries are currently experiencing the silver tsunami, the Philippines is expected to have an aging population by 2032 of 7%. Overall, the country’s young demographic occupies a bigger share of the insurance market. Insurers must clearly communicate their value propositions to increase awareness about the need for protection from growing wellness concerns and cater to shifting priorities by focusing more on health and family protection instead of investment growth.
To foster climate-related solutions, the Philippine government under the Disaster Risk Finance and Insurance (DRFI) strategy has tapped contingent financing from the World Bank and other partners to provide immediate liquidity to help manage the financial impacts of disasters. The government secured over $14 billion in risk transfer protection to improve fiscal resilience, including through a catastrophe bond, a parametric insurance program for local government units, and the 2024 National Indemnity Insurance Program (NIIP), which protects more than 130,000 schools.
To implement this comprehensive risk layering strategy, public and private partnerships should be strengthened and strong ownership ensured to continue protecting more people in the coming years.
PERSONALIZING OFFERINGS TO INCREASE CUSTOMER ENGAGEMENTImplementing usage-based products, customizable features, and tailored pricing can demonstrate a commitment to meeting consumer needs, fostering loyalty and engagement. AI tools can facilitate personalized messaging, precise pricing, and expedited underwriting processes. On-demand coverage and real-time risk prevention are additional avenues for enhancing value through personalization. Advanced analytics can help identify high-potential customers for bundled offerings that maximize customer satisfaction.
The impact of technology is significant, with insurers experiencing a 10 to 25% increase in operating profits when employing effective data and analytics strategies, according to Gartner (2023). Furthermore, generative AI-enabled automation can enhance underwriting capacity by 35%, as reported by Willis Tower Watson.
PURSUING SCALABLE INNOVATIONBy adopting a lean and automated operational model, insurers can expand low-margin products to new market segments through partnerships and ecosystems. The rise of embedded offerings illustrates the potential for growth. According to Swiss Re, parametric insurance, which pays out based on specific events, is gaining traction and is projected to grow from $11.7 billion in 2021 to $29.3 billion by 2031. This model has applications in agriculture, natural disaster protection, and can also be extended to business interruptions and cyber threats.
LEVERAGING REGULATIONThe evolving regulatory landscape, particularly in Europe, presents both challenges and opportunities for insurers. While 61% of insurers identify regulatory changes as a primary operational challenge, those who embrace compliance as a strategic advantage can derive business value, as noted by Mercer. The upcoming EU Financial Data Access (FiDA) legislation, set to take effect in 2025, will enable consent-based data sharing across various insurance sectors, offering firms a chance to broaden their service offerings. Additionally, participation in government pension schemes will necessitate improved data sharing capabilities.
ADOPTING A COMPREHENSIVE DATA STRATEGYSuccess in the digital era requires a unified data strategy that is comprehensive and led by top management. Enhanced data utilization is crucial for innovation, and the CEO should spearhead the data and technology agenda rather than relegating it to the IT department. A robust data strategy must harness AI and advanced technologies, ensuring a flexible infrastructure and establishing strong governance models to maintain data quality and trust.
FOCUSING ON UNDERSERVED MARKETSThe potential to attract millions of new customers lies in developing solutions for the underserved. According to Insurance Asia, cultural and economic factors limit insurance growth in the Philippines. Significant reduction can be noted in the poverty incidence among the population of 15.5% in 2023 from 18.1% in 2021. However, despite this, the poverty rate is still high while pressing concerns about income inequality and inflation mount. A substantial market opportunity for insurers currently lies with the potential growth of the younger generation, expanding middle class, vibrant labor market, and its demographic sweet spot.
Innovative products that are affordable and easy to access, such as microinsurance and tailored policies for small businesses, can create significant value for these segments. Insurers in emerging markets are already offering health and life insurance for as little as $0.20 per month, highlighting the need for strategic thinking to meet the demands of underserved populations.
CREATING VALUE THROUGH INNOVATIONAccording to Insurance Asia, the Philippines has demonstrated stronger growth in insurance penetration, with a remarkable increase of 30%. This is way above the 15% growth in the ASEAN region from 2023 to 2024, presenting a significant pivotal moment for the country that can be capitalized upon. However, insurers are still hindered by outdated IT systems, fragmented data/geographies, and complex organizational structures that could impede innovation.
While 73.7% of the investments of insurance companies are planned to be allocated for artificial intelligence (AI) and machine learning, 40.6% of Philippine companies cite legacy IT infrastructure as a key challenge to digital transformation, which is above the ASEAN average per the 2024 ASEAN Enterprise Innovation Survey.
AI adoption comes with challenges that can be addressed by the careful evaluation of data infrastructure, having the right talent, and customizing solutions based on the local landscape. By utilizing AI-driven technology effectively and enhancing data management capabilities, insurers can deliver personalized products and services, ultimately benefiting a broader range of customers and communities.
As the industry adapts to new realities, those who strategically target investments in innovation can enhance their market presence and contribute to societal resilience against emerging risks.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Bernalette L. Ramos is an assurance partner and the insurance sector leader, and Charisse Rossielin Y. Cruz is a business consulting partner and the insurance sector deputy leader, both of SGV & Co.