NATIONAL REPORT FOR PHILIPPINES by Enrique M. Zalamea, Jr. I. GEOGRAPHY AND LOCATION The Philippines is made up of 7,100 islands with a total area of 300,000 square kilometers and a total coast line of 1,839 kms. stretching from the northernmost tip of Batanes to the southernmost island of Taw!-tawi. The three major island groups are Luzon, Visayas and Mindanao of which Luzon is the largest island and it is also where the capital city, Manila, is located. The archipelago is bordered by the South China Sea to the West, the Pacific Ocean to the East, the Bashi Channel to the North and the Sulu and -. Celebes Seas to the South.
11. POPULATION As of 1990, the Philippines has a total population of 61.5 million broken down as follows: a a 1980 1989 1990 Population (M) Male Fema 1 e Urban Rural Age Distribution ( X ) 100.0 100.0 Children (0-14) 42.0 39.0 Working age (15-64) 54.6 57.5 Elderly (65 & over) 3.4 3.4 111. ECONOMY The Philippine economy has been through a lot of catastrophe during the year 1991. As of the last three consecutive quarters, the economy has been ebbing. M - million. a - Projection based on 1980 census.
According to the National Statistical Coordination Board (NSCB), the Gross National Product (GNP) dropped by 0.23% as of the end of June this year compared to the 5.8% growth registered last year in January-June 1990. The International Monetary Fund (IMF) expects the full-year QNP to shrink by 1%. The Real l3ross Domestic Product (GDP), as of first semester 1990, reported an increase of 3.94%. However, as of this year 1991, GDP subsided by 0.58%. There was also an increase in unemployment. Published report, as of November 5, 1991, shows that there are now 1.164 million unemployed people including some 651,000 dispelled by the eruptions of the volcano known as the Mt. Pinatubo last August. Despite these things, the National Economic and Development Authority (NEDA) remains optimistic that the economy would still attain a positive growth rate of 0.5-0.8% for the year 1991. The economic growth target for the year 1992 will be at 2.5% to 3% or below the original estimate of 4%. Other major economic indicators are as followsr 3.1 EXCHANGE RATE (as of December 26, 1991) Philippine Peso U.S. Dollar U.K. Pound Philippine Peso 1.0000 0.0375 0.0200 U.S. Dollar 26.6500 1.0000 0.9336 U. K. Pound 49.9421 1.8740 1.0000
The exchange rates of the other major currencies are shown below : Philippine Peso vs. 8 Major Currencies (Exchange rate as of Dec. 26, 1991) Source: Central Bank 3.2. INFLATION RATE Inflation rate during the year 1991 averaged at a high 19.01% compared to last year's rate of 12.06%. Government expects inflation to go down to about 12% by February or March next year.
IV. THE ACTUARIAL PROFESSION Here in the Philippines, an actuary is considered professionally qualified if he is a fellow of the Actuarial Society of the Philippines, Inc. (ASP). The Insurance Code also recognizes as qualified actuaries the fellows of the Society of Actuaries (SA) in the United States. Fellows of the ASP are those who passed all the 6 parts of the prescribed examinations of the Society. Aside from the Fellow, the ASP has two other membership classifications. These are the following: 1. Associate - those who passed the first three parts of the prescribed examinations1 and 2. Affiliate - those who are interested in the field or who are involved in an actuarial job for at least a year. The ASP has 163 members in good standing for the year 1991 summarized below : MEMBERS OF THE A.S.P. FOR THE YEAR 1991 AFFILIATES 77
The Insurance Code requires all life insurance companies to have a resident employed actuary but due to the scarcity of qualified actuaries here in the Philippines this provision of the code has not been strictly implemented. Aside from the technical responsibilities of Actuaries, that is, the calculations of premiums, reserves and non- forfeiture values, they are also involved in management, budgeting, investment and market analysis, product planning and designing. There is no separate organization for consulting actuaries here in the Philippines. Since Pre-need companies have been growing tremendously for the past years, consulting actuaries have been involved not only in the establishment and valuation of Pre-need plans, specifically pension plans, for funding purposes also in giving advice on the over-all administration of but the plans. V. FUNDINO OF PENSION PLANS There are two types of Plan. These are: 1. the Qualified Plan; and 2. the Non-Qualif ied Plan. Under a Qualified Plan, the retirement fund is administered by a trust and it is funded through regular contributions by the employer alone or both by the employer and its employees.
For tax purposes, employer contribution for normal cost is 100% deductible expense whilst funding of past service liability is deductible expense to the extent of 10% of actual funding (remaining 90% is recognized at the rate of 10% every taxable year). The employee's contribution, if the Plan is contributory, is not a tax deductible expense to the employee. However, his retirement benefit is tax exempt (from income tax) provided he is at least age 50 and have rendered at least 10 years of service to the Company. The earnings of the Retirement Trust Fund are tax exempt from income tax. In a Non-Qualified Plan, it can either be financed on a pay-as-you-go basis or by creation of book reserves. If the Plan is trusteed, the contribution of the Employer is a deductible expense. No tax exemption privileges can be availed by this type ot Plan. Likewise, the employee's contribution is not a tax deductible expense for him. VI. THE PHILIPPINE INSURANCE INDUSTRY A. Insurance Structure The Insurance Commission (IC) issued certificates of authority to a total of 130 private insurance companies for
license year 1990 to 1991 broken down as follower Type of Direct Writers Prote~eional Company Life Non-Life Composite Reinsurers Total Domestic 21 91 2 Foreign 2 10 - Total 23 101 2 4 130 There are also five government-owned insurance corporations, which are not under the management of the IC, which also play an essential part in the Philippine insurance industry. These are t 1. The Government Service Insurancm System (GSIS); 2. The Social Security System (SSS); 3. The Philippine Crop Insurance Corporation (PCIC); 4. The Philippine Deposit Insurance Corporation (PDIC); and 5. The Home Guaranty Corporation (HGIC). The GSIS, as the name implies, provides social insurance benefits to government employees and extends property insurance coverage not only to all government properties but also to other properties mortgaged to it ao well. The SSS, which provides social security to employeme in the private sector, w i l l be discussed in full detail later on. The PCIC implements the crop insurance program in the country while'the PDIC insures bank deposits. -The HGIC extends mortgage guarantee on housing loans.
B. The Insurance Business, 1990 1. Private Life Insurance Companies There was an increase in the production of new business during the year under review by as much as 11.48% compared to 1989. There was also an increment in the corresponding new sums assured. The total insurance in force of the life insurance companies generated a total amount of P 234,025,471 (UKE 4.69 M or US* 8.78 M) for the year 1990 compared to P200,837,538 (UKf 4.02 M or USS 7.54 M) of the previous par thereby achieving a significant growth rate of 16.52% compared to the previous year. The life insurance companies also generated a total premium income of B 5.35 billion (UKL 107.12 M or US* 200.75 M) for the year 1990. 2. Private Non-life Insurance Companies As of 1990, the non-life sector produced P 7.26 B (UKL 145.37 M or about US* 272.42 M) in total gross premium. C. Total Investments There was a 20.58% increase in the total investments Of the industry in 1990 amounting to P 25.14 B (UKL 303.03 M USS 943.34 M). 37.22% of the total amount invested went to government securities such as bonds, treasury bills and reconstruction bonds.
VII. OUTLINE OF SOCIAL SECURITY SYSTEH (SSS) BENEFITS 7.1 RETIREMENT BENEFITS Those who can avail of the Retirement Benefits are : 1. members who are 60 years old andlare no longer employed and have paid at least 120 monthly contributions; 2. members who are 60 years old but still working provided that their monthly compensation is less than P300.00 (UKL 6.01 or US* 11.26); and 3. members who are 65 years old, whether employed or not, and have paid at least 120 monthly contributions. A monthly pension for life will be given to those members who have paid at least 120 monthly contributions to the SSS. However, if a member fails to meet the required contributions, the member w i l l receive a lump sum amount equal to the total contributions, both by the member and his employer, plus interests. The monthly pension will depend on : 1. the number of monthly contributions paid by a member; 2. his credited years of SSS membership; and 3. the number of dependent children, if any.
The minimum monthly pension is 8800.00 (UKE 16.02 or US* 30.00). If a retiree pensioner dies, 100% of his monthly pension plus the dependents' pension (which will be discussed later) for each child will be granted to his primary beneficiaries. However, if he has no primary beneficiaries and he dies within 60 months from the start of his pension, his secondary beneficiaries will receive a lump sum benefit. 7.2 DE6TH BENEFITS There are two types of death benefits r 1. the monthly pension; and 2. the lump sum amount. If the deceased member has paid at least 36 months of contributions before the semester of his death, a monthly pension will be given to the primary beneficiaries, e.g., dependent spouse and dependent children of the member. However, if the deceased member has paid less than the required 36 monthly contributions, a lump sum amount will be given to the primary beneficiaries. 7.3 FUNERAL BENEFIT 86,000.00 (UKE 120.14 or US* 225.14) - Funeral Benefit will be given to whoever shoulders the burial expenses of the deceased member or pensioner.
7.4 DISABILITY BENEFIT A lifetime monthly pension of not less than 8600.00 (UKf 12.01 or US$ 22.51) is granted to members who arm totally and permanently disabled and have paid at least 36 monthly contributions to the SSS. The monthly pension of a partielly disabled member is limited only to certain number of months according to the degree of disability. The lump sum amount is provided to those who have paid less than tho required contributions. 7.5 DEPENDENTS' PENSION 10% of the monthly pension of a deceased member, n totally disabled member or a retiree pensioner is grantad to each of up to five dependent children provided that the dependent child is : 1. alive; 2. less than 21 years old; 3. not married; 4. unemployed; and 5. if he gets employed, he earns less than 8300.00 (UKf 6.01 or about US0 11.26) a month. 7.6 SICKNESS BENEFIT This benefit applies to all members who were not able to work due to illness or injury provided that they were
able to pay at least three monthly contributions within the 12-month period immediately before the semester of sickness. Those members who can avail of this benetit are given 90% of their average daily salary credit. 7.7 MEDICARE The Medicare Program covers all SSS and GSIS members and their dependents who get sick or injured and require hospitalization. To be eligible for the Medicare benefits, the individual must have paid a minimum of 3 months of Medicare contributions. The benefits under this program has two divisions - Hospital Services & Medicines and Professional Fees. The Hospital Services & Medicines include room & board allowance, medical expense benefit (e.g. drugs, medicines, x-ray, laboratory and other expenses) for ordinary, intensive and catastrophic cases, and the Operating Room Fee for minor, medium and major operations. The Operating Fee for surgical procedures shall be based on the Philippine Medical Care Commission's (PMCC) relative unit value scheme. The Professional Fees cover the Medical/Dental Practitioner ' s Fee, the Surgeon ' s Fee, The Anesthesiologist's Fee and fees for Surgical Family Planning Procedures.
7.8 EMPLOYEES' COMPENSATION The Employees' Compensation applies to all SSS - registered employers and employees and it aims to assist workers who suffer work-connected sickness or injury resulting in disability or death. VIII. HOME DEVELOPMENT MUTUhL FUND OR PAG-IBIG FUND The Home Development Mutual Fund (HDMF) provides, home ownership for its members through an affordable and adequate housing credit system. Membership in the Fund is voluntary on all employees whether employed, in private or in public sector, or self- employed. 8.2 RRTE OF CONTRIBUTIONS Employees earning not more than P 1,500.00 (UKE 30.03 or US* 36.29) per month and those earning more than the amount mentioned earlier should contribute one (1%) percent and tno (2X) percent, respectively, of their month1 y gross income to the fund. Employer's, on the other hand, should contribute two (2%) percent of the gross monthly income of the contributing member. The gross monthly income shall mean the basic monthly pay plus the cost of living allowances. As for the self-employed people and other working
groups, a minimum of B 100.00 (UKE 2.00 or US* 3.75) shall be contributed to the fund. 8.3 BENEFITS 8.3.1. Return of Contribution Upon termination of his membership, the total accumulated value, that is, all his contributions, the employer's share and his dividend earnings, nil1 be granted to the member, whether active or inactive. However, if the member dies, his beneficiaries are entitled to receive the total accumulated value. 8.3.2. Dividend Benefit Members without outstanding housing loan shall be given fixed dividends of 7.5% per annum as credits to their total accumulated values or it can also be in the form of cash. 8.3.3. Death Benrfit Upon the death of a membrr, the total accumulated savings plus earned dividends due to the deceased member and an additional amount to be determined by the Board of Trustees will be granted to his beneficiaries. 8.1.4. Guaranty If the membership matures, the payment of total accumulated values to the member of the fund the is guaranteed by the government. December 1991