The COVID-19 pandemic has not only brought about death and disease, it has also plunged the nation in a state of “national insecurity.”
This ongoing pandemic has caused many Filipinos to pause and think about their respective future. According to BDO Life president Renato A. Vergel De Dios, now more than ever, it pays to have a plan. The company is putting its money where its mouth is by introducing the Plan B concept to address people’s fears in a recent online webinar.
Life insurance industry’s importance has become more evident today. Ironically though, only nine percent of adult Filipinos have availed themselves of a total life insurance package, plunging the nation into what he described as “national insecurity.”
This low number can be attributed to a number of factors: lack of funds, absence for the need for life insurance and people’s seeming mistrust, in general, to avail themselves of insurance policies. Working adults or family breadwinners only save money for their needs. The lack of safety nets from unforeseen events like critical illness and death has resulted in a “mortality protection gap”.
BDO Life, which ranks among the top five companies in its category in terms of sales, has launched the Plan B concept. While Plan A covers savings and investments, Plan B takes the form of life insurance, a safety net that will enable families to recover from unwelcome developments such as dreaded diseases and death.
“For 75 percent of the households, the gap is as much as eight times the annual income,” said De Dios. “The implications for this means that even the premiums we now have will need to grow minimum twice, probably more.”
A 2019 Swiss Re Institute study quantified the mortality protection gap covering 13 Asia-Pacific countries at $83 trillion.
“To cover this gap, (we need) about 20 years of catch-up work,” he said.
The lessons from the pandemic taught businesses to have a Business Continuity Plan, while individuals need a Family or Financial Contingency Plan in order for them to survive and thrive.
“The more you are unprepared, the more it becomes worrisome for many,” said De Dios. “What’s important is if you have smart planning in place and sufficient protection.”
As one’s income grows in the financial pyramid, one develops Plan A, which is to accumulate assets and overcome the need to be ready with Plan B. The industry leader further explains that there should be education on risk planning, and this should be a part of basic education even among children. Apart from the public’s tendency to underestimate the problem, not a few people see it as a complicated subject matter.
Aside from that, availing one’s self of life insurance is also seen by some as a luxury. De Dios said that life insurance policies are most relevant to middle-income families. The problem, however, is the country doesn’t have a huge middle class.
“If we can make people more financally literate, then we can make them understand budget, understand the importance of planning for risks that will help us in addressing national insecurity. We need to make more people realize that we need to have all of these Plan Bs to cover the what ifs of life,” he said.
He sees insurance as basically a “protection instrument”, and that national insecurity comes from that lack of protection.
“Everybody has to be prepared. That is why you need to have a Plan B, you have a protection element that will take care of that gap. Your biggest asset is your earning capability and the only instrument that can protect that is life insurance,” he said. “It is in those crucial moments when BDO Life unleashes Plan B to help your family, while keeping their financial dignity intact,” De Dios concluded. — By Precious Lyda Atriginio
