Passion for the insurance industry
August 6, 2019, 10:00 PM
THE MERCANTILE INSURANCE CO., INC.
By Bernie Cahiles-Magkilat
Insurance is one of the hardest products to sell. It takes character and strong determination to stay long in this industry.
Industry veteran MELECIO “Mel” CASIBANG MALLILLIN has all what it takes to be an insurance professional. Armed with the right disposition and sheer hardwork, the leader of Mercantile Insurance Co., Inc. sees a bustling business as Filipinos increase their incomes following an improving domestic economy.
Established in 1962, Mercantile is one of the Philippines’ longest-standing non-life insurance companies offering a wide variety of products.
Headquartered in Manila’s oldest and most historic walled city, Intramuros, in Manila, Mercantile Insurance exemplifies stability and long-term steady growth.
Starting with nine employees, Mercantile has expanded with 15 regional offices in different parts of the country.
As a non-life insurance firm, it provides insurance to anything inanimate and outside of life. Among their long list of non-life insurance policies include surety, fire, engineering lines, marine, casualty, and car insurance. The company has become a top choice among government agencies such as the Bureau of Customs, Department of Public Works & Highways, Central Bank of the Philippines, and others.
“We want to be the top of mind when Filipinos think of non-life insurance,” says Mel.
Mercantile is owned by Camerton Holdings, a Filipino firm with Taiwanese investors. According to Mel, before the Camerton group came more than two years ago, there were only 15 agents then of Mercantile. Now, they have 565-strong agents and 250 employees.
“We grow the number of agents and we make sure we develop direct relationship with them because keeping agents pose a big challenge as workers leave to non-insurance organizations because they do not consider insurance a sexy business,” adds Mel.
Mercantile’s growth is driven by two models. The first is organic which supports the company’s 51 percent growth in the past two years as against industry average of 29.15 percent.
As government regulators through the Insurance Commission requires a higher capital requirement, most insurance firms are looking at mergers and acquisition as a new approach to grow their business.
“Now, it is a play for more capital so existing players have to boost their financial muscle through mergers, acquisitions or joint ventures,” adds Mel.
The development of the industry has become very attractive because the penetration is so small at 2 percent only of population. There is a growing number of SMEs that needs insurance, too. “All we need to do is craft products that they are willing to buy,” he adds.
In the case of Mercantile, they have roughly all products in non-life including the micro segment in the last 10 years that are very successful with coverage of up to P100,000 for a premium of P250 only. Mercantile even offers insurance products for all special occasions such as Christmas cards with insurance.
“The micro insurance business is growing strongly,” says Mel although this segment is just 2 percent of total.
To support its growth, Mercantile has invested in new technology and software programs developed locally to ensure effective management and controls.
Already, Mercantile has gone up its industry standing. From 26 out of 54 in terms of net premium written when they started in 2016, Mercantile moved up to 17 the largest in 2017. Mercantile never stopped improving that in 2018, it jumped to become the industry’s 11th largest player.
As of end May 2019, Mercantile boasts of a 31 percent increase in gross premium. Their premium in 2018 reached P1.5 billion from P900 million in 2017. For this year, Mel expects to hit P2.5 billion or 50 percent increase and ensure their spot in the top ten players. They can leverage this strong growth to whoever might be interested to partner with them.
“All told it is very positive for us,” he adds.
What differentiates one insurance firm from another is compliance to the law to pay all claims within the 30-day period.
“In our case, we try to beat the 30-day regulatory requirement but with competition you have to be faster,” says Mel.
Among Mercantile’s previous big insurance claims include the Negros Navigation sea mishap in the 70s, the collapse of Semirara heavy equipment and the gas facilities in Batangas. Other than these, the biggest could be P5 million and the rest are small claims.
As of 2018, this industry was estimated to be around P80 billion with 54 non-life insurance firms operating. This is expected to further rise as government implements higher capital requirements to P900 million by end this year.
With that, Mel sees further consolidation of industry players to around 40. By 2022, capitalization will again increase to P1.3 billion. That would trigger further consolidation and a far leaner but more robust 25 players.
“There will be merging or converting into agencies or joint ventures with local firms or even with international insurance firms that would like to set foothold in the Philippines,” says Mel.
The higher capital requirement is a protective tool not just to policy holders but to insurance firms also.
As the economy develops, so is the insurance industry, which has grown 10 percent year on year on improved and increased premiums. On a per capita basis, Mel said there is excess funds to buy but there is still difficulty for those with the low-income bracket.
With only 2 percent penetration in non-life insurance, a huge business potential is waiting to be tapped. According to Mel, the best insurance penetration rate is Singapore and Japan.
Aside from SMEs, Mel said the government’s push for huge infrastructure spending would attract interest from many foreign components to go into the Philippine insurance space because these big-ticket projects need insurance coverage.
“If we are successful in inviting local and foreign firms, this will translate to more capital and more business resulting in building the capabilities of local insurance companies,” he adds.
Even as insurance coverage is growing, Mel noted that insurance is still is a hard to sell type of products. “Filipinos have yet to reach that level where individuals feel the need to get protection for their properties. So, we push it. Hopefully, with all the marketing strategies we see a higher penetration rate,” he adds.
“This is largely because insurance is not considered a basic necessity because people don’t realize its importance,” says Mel.
The government is also pushing for micro financing where lots of NGOs are offering assistance for micro insurance with the aim of providing protection to as many Filipinos as possible.
The new capital requirement is also expected to boost the industry and further consolidation. Mercantile itself has received interested parties looking at strategies to grow their business via mergers, acquisitions or joint ventures with local or foreign partner.
“There are interested American funds and a European interest, but we are not in a hurry because we are confident, we have enough capital,” he adds noting the owners will have to decide on what growth path to take.
At present, the local non-life insurance market mix is 40 percent property, 35 percent motor vehicles and the balance is divided into marine cargo, surety and general accidents. But Mercantile has the reverse because 40 percent of its portfolio are motor vehicles and property is 30 percent. The remaining 30 percent is divided into marine cargo and surety.
Mel has an unflinching passion about the insurance business. He even teaches to tackle insurance issues. Since insurance is a product that cannot be picked up from school and is only superficially involved in commerce and law degrees, Mel teaches obligations and contracts, which is the best and closest insurance-related subject.
Mel teaches the rudiments and intricacies of insurance under the obligations and contracts subject at the Insurance Institute for Asia and the Pacific (IIAP) where he is a lecturer since 1983. He also teaches at De La Salle University.
“The concept is purely a learning situation, not a school, but the institute was solely organized for insurance practitioners,” adds Mel, who is vice-chairman of the institute. Aside from the rudiments of the industry, Mel also teaches soft skills because the challenge of the industry is keeping their agents, who eventually move on to non-insurance organizations because they find it hard to sustain their work.
“We have to develop people skills programs to further entice students to join the industry. We instituted scholarship programs to train these students. Insurance firms bid for these students,” he adds. The institute also further hones these students to become financial analysts, actuaries, underwriters, and technical software programmers. These are engineers who can assess risks.
“We need to attract qualified people because insurance is not just about selling policies but calculation of premiums so we need technology for that,” he adds noting that all products are approved by the IC, including the rate of commissions.
For instance, a very careful driver gets into trouble because another driver was not so careful resulting in vehicular accident.
He noted there are about 7 million vehicles registered as of 2017 with CTPL with P600 in annual premium, which is estimated at P4.2 billion, but only roughly 50 percent would avail of the comprehensive coverage. So, there is still a huge potential for the motor vehicle insurance.
“The concept of insurance is sharing of contribution from policy holders to a common fund where payments will be taken from. In the meantime that we have the fund we invest and manage and make it grow and realize income from the business under the assumption that collection of premium is sustained,” he adds.
“Insurance is a very beautiful concept,” Mel emphasizes.
After graduating with political science degree cum laude at San Beda in 1973, Mel wanted to become a lawyer, but eventually worked with a manufacturing firm – San Miguel Corp. He, however, left because the job did not fit his personality. He decided to become a management trainee in an Ayala Corp. unit that was engaged in training for finance and insurance because that was the company’s core business then. He was assigned in the Visayas area where he had lots of people engagements.
“I’d say that over time, the values and character was molded when I inter-phased with people and guided by goals,” he adds.
As he climbed to the top post of an organization, Mel attributes all these to hard work: “Sweat rules over inspiration.” He also cited credibility and integrity as major success contributors because there are lots of temptation in this kind of business. “You have to look into the other person’s eyes to know the trade,” he adds.
Mel finds fulfillment in being able to pass on his knowledge to others. He also feels complete when they pay the claims of the beneficiaries. “That is something you cannot buy,” says Mel.
As Mercantile competes with 54 other players, Mel said they are driven by their ethical standards that they set above industry’s level.
He is proud of his pool of agents. To encourage their team, Mel empowers and trusts them but with close supervision and regular reviews. He would look into situations and give them pointers to be able to hit targets. “But I give them all the space because I want them to be responsible and be able to compete with the big guys,” he adds.
His opening phrases would always be “What can we do to help you?” His mantra has always been to strive for Good, Better, Best. “Do not let them rest till the good becomes better and the better becomes best,” he adds.
One time he had a client in Zamboanga with claims for Mercantile’s 25 percent insurance participation. The three other insurance firms just mailed the claims, but Mel went down all the way to the client and personally delivered the claims. When it was time for renewal, the client gave the 100 percent insurance coverage to Mercantile.
“Filipinos are different, they look for added value that you sincerely provide. That speaks very well of the way we run our business. Proper services play a very important role and will dictate the pace of Mercantile’s growth.”
“I would say that an insurance executive must learn the trade and put passion into it to get successful result otherwise it can be boring. It takes a different character to be in this profession. You should be happy for being able to pay for the claims because business is also doing good,” says Mel.
He calls insurance agents smart and people of integrity and credibility. In addition, a good insurance agent must also have social skills stressing “the more skills you have the higher your success will be.” Most of all, he must have good understanding about the industry.
These parameters have guided Mel for the past 45 years of continuous engagement with the industry.
“I have been with the industry for over 45 years and I still like to understand it very well because my advocacy is for more and more people to gravitate into the business because of the big opportunity to be successful in this area. This is an open market where the penetration is still very low so the potential for monetary success is huge,” he adds.
The industry offers a performance incentive program so the higher volume you deliver the higher monetary rewards you get.
As a professional manager, Mel looks up to his former boss Don Jaime Zobel De Ayala. He also admires the late George S.K. Ty for being good at handling people, circumspect and driven.
At 67 years old, retirement is far from his mind. Mel still has the zest and passion for work as he reports at 7:30 in the morning and goes home at 8 in the evening.
“Life in the insurance business can be very stressful but my way out is to make fun of the situation,” says Mel.
Coming from humble beginnings with a father who earned a living by driving a calesa, a horse drawn vehicle, then transitioned as tricycle driver and a dressmaker mother from Tuguegarao, Mel knew how hard life was for their family. But his father had set the bar higher for his children.
He would remind them to study hard or else go back to Tuguegarao as tricycle driver. Mel graduated valedictorian during his primary and secondary education and cum laude in college.
“What carries us four siblings are their values, not resources,” says Mel, who says they all have given back to society for the government support they enjoyed as students stressing, “Life is more meaningful if you are able to share it.”
Despite his achievements, Mel lives a modest life as evidenced by his Ibanag upbringing. Ibanags are known to be thrifty and modest people.
He is someone anyone can talk to. He can simply engage with any type of group whether they are leaders, businessmen, young professionals or even staff members with any point of interest under the sun. Approachable, calm, open minded and an inspiration to many specially in achieving excellence.
“When I look back, I am very happy with how my life has turned out. Getting out of poverty that is your number one motivation,” says Mel recalling that while in college he could not afford a book but he became a librarian and he had more books than anyone.
As he pours over his 67 years on earth, Mel would say, “I cannot thank the Lord enough for making me who I am now.”