LAST week’s Social Weather Stations (SWS) survey found that 79 percent of the population consider themselves to be worse off now than immediately prior to the onset of COVID-19. This means that the incidence of poverty will have risen, though we do not know by how much.
I believe that we should continue to implement social amelioration programs. The Philippines still ranks well compared with many nations in that our debt to GDP ratio, a measure of our ability to repay loans is still around 60 percent. This means our indebtedness is proportionately less than many developed nations, including the UK and US where the indebtedness is 100 percent of GDP. We can still borrow more and be confident that we shall make on-time repayments.
The ratings agency, Fitch, has hinted that it may lower the US rating whereas we have not yet received a similar reduction.
Even in a pandemic we should continue to implement poverty alleviation measures, although it is recognized that our indebtedness will, of necessity, increase.
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As expected, some banks are reporting an increase in non-performing loans where customers have borrowed money but are now having difficulty in making repayments. Banks, nowadays, value “know your customer” (KYC) information. Reputable banks appreciate customer frankness about any changes in their financial position and would make efforts to agree on loan restructuring, particularly for long-standing customers.
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The insurance sector also has customers with long-term commitments which, in some cases, will be more difficult to meet.
Last month a national broadsheet published an interesting interview with AIA Philam Life’s CEO, Kelvin Ang. Philam Life has experienced serious organizational difficulties since the 2008 crash when AIG, then Philam Life’s parent company was unable to meet its obligations. Ang is the sixth person to be in charge of the Philippine operations since that time. There has also been a substantial senior management turnover.
The life insurance sector has since struggled to generate the volume of business that we would expect from a well-run industry operating with undoubted probity. In the past, the favourite mantra from former Insurance Commissioner Emmanuel F. Dooc was that the low take-up rate of life insurance products was that we are financially illiterate. I never agreed with this assertion and still do not.
I recall an interesting television interview with former Sun Life CEO, Riza Mantaring, who addressed us, the televiewer, and said: “You think it’s all a racket”. Yes, there are trust issues with commission-based salesmen which have not yet been properly addressed by the industry.
Mr. Ng gave a personal account for the need for life insurance protection. This applied to a nuclear family environment with complete dependence on a sole bread-winner. The Filipino extended family with several income earners is more resilient to adversity. I am not saying that this obviates the need for life insurance but it lessens its necessity.
Direct dialogue with customers is helpful. Staff have a way of concealing the warts and all reality about what goes on.
I emailed Mr. Ng in 2017 when he came to the Philippines.
He did not reply.
He should have done as he would learn things he does not know./PN
