THE AMATEUR video taken at the UERM parking lot during the height of typhoon Ondoy showed what happens to cars when flood gets to them: they float and bump into each other, and become heavily damaged.

The flood was considered by insurance companies as an act of God, and those without coverage for it sadly could not claim for damages.

We asked Arthur L. Panganiban, EVP/COO of Gotuaco,Del Rosario Insurance Brokers, Inc., an all-Filipino professional insurance broking and consulting firm in the Philippines, what this is all about and here is what he said.

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WITH THE country reeling from a triple whammy calamity (flooding in the National Capital Region, flooding in Laguna, and flooding in northern Luzon), the last thing we would like to be hit with are price increases.

After Typhoon Ondoy unleashed its devastating effect, it was really kind of big business to lower prices. The day after the great flood, MRT charged only a flat rate of P10 regardless of whether one’s destination was near or far. Pan de Manila lowered the price of its pan de sal during the days after the deluge. Kalinisan Steam Laundry offered free laundry services to typhoon victims. Even SM malls and other malls waived the overnight fee for cars left in their carpark overnight when shoppers were stranded during the flooding.

So price increases after Typhoons Ondoy and Pepeng have left the country really leave a bad taste in the mouth.

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Here is SunLife’s reply to reader Chris’ questions about his VUL product;

Dear Chris,

As mentioned, VULs are products that have an insurance and an investment component. It’s a flexible product wherein your money works harder because you are covered with life insurance and at the same time, a portion of your money is invested in potentially high-yielding instruments that is accessible to you. In your case, an allocation of your insurance premium is invested in the Sun FlexiLink Equity Fund.

The Sun FlexiLink Equity Fund is a basket of blue-chip securities (top equity holdings as of Jan ‘09 include: PLDT, BPI, Globe Telecom, Ayala Corp, Ayala Land to name a few) that are prone to market fluctuations and by itself more risky than the other funds available under Sun Flexilink such as Sun Flexilink Bond Fund or Sun Flexilink Money Market Fund. We must remember that the valuation of these funds is done on a daily basis.

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Chris, one of MoneySmarts’ regular readers, raised a very interesting question the other day:

I was offered last year by an agent of Sunlife to subscribe to this VUL insurance thing. I did, and put the fund in equity with a NAV of 1.8. Ok so far.

After one year, they gave me this annual financial statement with an insurance charge of P230/month and the amount is deducted from the VUL units of my equity fund. Since the NAV of the fund is gong down due to their investments, they deducted bigger units from my VUL so, at the end of 12 months, 117 units na lang natira with a NAV of 1.2.
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There’s no official statement yet from Philamlife, but AIG issued a late advisory that it will no longer sell its crown jewels including the local office. Read the story here.

I am almost disappointed. Consolidation is always good for any industry. A sale to BPI, BDO or some other big player could only push the others to offer the public with better products.

The flipside is that the sale might put pressure on the buying entity to recover its investments, and this could mean dividends originally meant for policyholders could be lessened. Would a need to repatriate earnings to AIG have the same effect? I guess we will soon see.
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I can’t help but compare Philamlife to a lady in the prime of her life who has no choice but to get married to the richest guy around. On one hand, you can’t blame her if she takes her time to choose—and extract the most from the deal. On the other, suitors are sure to throw in the towel if the requirements are too stringent and the price too steep, considering the situation.

Granted, it’s not her chastity that is in question. Her mother is the one who has been too intimate with the underbelly of finance. Still, she needs to raise funds for mummy and fast.

So far, Sunlife Financial has dropped out of the race. So has Government Service Insurance System. Philam was called “arrogant” because of all her posturing. Those that remain are:

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If you’re buying a house and taking out a loan to pay for it, you’re probably being asked to pay for mortgage redemption insurance, a kind of insurance that protects the bank in case of the borrower’s sudden death or disability. This also means, of course, that your beneficiaries don’t get saddled with a loan on the house in case the breadwinner, you know, goes.

An MRI is prohibitively expensive, and if you’re the average type of bank borrower, you won’t know that unless it’s too late. You may also fail to realize that there are other options, and would likely just sign the contract just to get the entire process over with.

Here’s a tip I learned from an insurance professional: ask your bank if you can assign a term insurance instead to the creditor. You will pay much less in premiums but get ample coverage. However, you will have to make sure that the insurance company you get your term insurance from is accredited by your bank.

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So the US government is taking over American International Group. What now, asks one reader. Lines of clients at Philamlife branches, and similar scenes in other Asian countries have many people asking: Is my insurance policy now worthless? What happens to all the money I have paid? Should I withdraw my investments?

I asked several insurance and investments experts and found that there are only five things you need to know:

1. AIG is not directly responsible for the contract that you hold. The responsibility for that lies in the subsidiary whose contracts will have to be respected even by the Fed. It is thus perfectly possible for AIG to be taken over or even to file for bankruptcy, and your policy to be fine. Now even if Philamlife, being one of AIG’s profitable businesses, is sold, the Insurance Commission will require anybody who buys Philamlife to service claims now, or when the contract matures.

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(This piece is written by Bianca, one of the readers of MoneySmarts who has been chosen for the one-year Money Makeover challenge by INQUIRER.net. Bianca’s real identity is confidential, so that MoneySmarts can share her family’s financials and the lessons she has learned with the rest of the world. Read more about Money Makeover here.)

I am faced with the possibility of death.

I never felt I needed life insurance, always resisted it, reasoned that under the mass law’s hierarchy of needs of Filipinos, it was way below –- after all, I had other more important bills to pay, I had properties under my name that I can pass on, and I never really cared much for the pestering of insurance agents who only saw me as their next paycheck. Okay, I did have it at one point, a P750,000 investment, which I lost because I did not give a damn. I was young and immortal.

Now, ten years after, I began to see it in a new light. I had undergone psychological-financial overhaul courtesy of Joe and Salve, and realized that, yes, I might actually need it. The tipping point, however, was a seminar on estate and trust that I attended. I learned that insurance is a great tool to transfer wealth –- there was no income or estate tax payable (provided the beneficiary is irrevocable), it was better than a transfer via a donation or a sale, or setting up a corporation to hold property, better than other very complex methods to hide and transfer wealth which would entail the assistance of lawyers and accountants, and yes, paying their fees. I realized too that I was not getting any younger and should consider these things seriously.
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How do you prepare yourself for a loved one’s death?

Not exactly a peachy thought on a MoneySmart Monday, I know. But as they say, there’s no going around death and taxes. And while it may be easy to prepare for the loss of a loved one financially, the emotional part is something else again. Can you attache a peso sign to that?

This story from MoneySense about a widow’s journey from tragedy to triumph is worth the few minutes it will take to go through it from start to finish.
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