Microinsurance which is insurance cover designed for the poor who cannot afford the standard life insurance cover has expanded substantially to close to 8% of the Philippine population. Depending on how much you quantify the poor in the country, further growth is there to be realised.
From BusinessWorld Philippines
September 12, 2012
Microinsurance clients surge
The IC bared a list of industry milestones as it concluded yesterday the Developing Microinsurance Project, a technical assistance program of the Asian Development Bank (ADB)–Japan Fund for Poverty Reduction that ran from 2008 to 2012.
Only 3.1 million Filipinos were protected by microinsurance before 2008, IC Chief Insurance Specialist Reynaldo M. Vergara said during the National Conference on Microinsurance yesterday.
The number has grown sharply to 7.8 million this year, he said, due to the concerted effort of the government, development partners and the private sector to develop microinsurance, low-premium insurance targeted at low-income individuals.
Moreover, prior to 2008, microinsurance products were only offered as an optional benefit for the credit and savings programs of microfinance institutions, he noted.
Now, there are 80 microinsurance products approved by the IC — 54 life and 26 non-life.
The uptake of the private sector has also been immediate, he said. There are now 17 mutual benefit associations and 28 insurance companies — 16 life and 12 non-life — licensed to offer microinsurance products from the “very few” seen before.
There are also 116 licensed microinsurance agents to date, 26 of which are rural banks and 90 are individuals.
Since 2008, with the help of technical assistance from the ADB, Japan and the German Agency for International Cooperation (GIZ), the government has been able to draft a national microinsurance strategy, a comprehensive regulatory framework and a roadmap to financial literacy.
“As a result, the Philippines is now the pioneer and the source of concrete best practices in the world when it comes to microinsurance,” Mr. Vergara said.
“Many countries have microinsurance products and providers but no foundation, which makes it difficult to develop the industry,” he explained.
Despite these early gains, stakeholders pointed out in the conference that there are 23 million Filipinos below the poverty line, and they need to be targeted for microinsurance.
“They remain susceptible to unpredictable incidents such as unemployment, accidents, illnesses and natural disasters. This is where microinsurance could enter as aid in ensuring that inclusive growth penetrates even the bottom layer of the society,” Takahiro Etchu, financial attache of the embassy of Japan, said.
Inclusive growth is growth that reaches the poorest sectors of society.
Kunio Senga, director-general of the ADB Southeast Asia department, added: “Under uncertainty of another global crisis, financial inclusion will enable even poor people to access a wide range of financial services, including credit, savings, insurance… integral to sustain and realize inclusive growth.”
In order to expand microinsurance coverage, GIZ program manager Antonis Malagardis called for the improvement of distribution channels so more people can be reached at less cost.
“Well-developed distribution channels are crucial in bringing microinsurance… to the doorsteps of the low-income people. It will not only make enrollment more efficient for insurance providers but more importantly, it makes the servicing of claims faster,” Mr. Malagardis said.
Some of the conduits that have been eyed are schools, pharmacies and utilities, he explained. Relationships with local communities must also be strengthened so they can be convinced to participate in microinsurance.
Finance Undersecretary Gil S. Beltran also revealed the government is considering imposing a mandatory allocation for microinsurance for insurance companies, similar to the case of India where 10% of premiums must be from microinsurance policies.
This will be similar to the Agri-Agra Reform Credit Act of 2009 which requires banks to set aside at least 25% of their total credit resources for lending to the agriculture and agrarian reform sectors.
Other than this possible quota, the government is not keen to offer subsidies or tax incentives to encourage microinsurance providers, Mr. Beltran said.
“These perks are not efficient. Microinsurance must be mainly private sector-led,” he said.