Frameworks for small insurance products out
THE INSURANCE Commission (IC) has announced new guidelines on the development and sale of micro agriculture, health and pre-need products following the launch of an enhanced regulatory framework for microinsurance.
Insurance Commissioner Emmanuel F. Dooc said the improved framework — which the government and the private sector came up with last October — detailed the roles and functions of the various players in microinsurance to fortify the sector and further push financial inclusion by expanding insurance penetration in the country.
“The Enhanced Regulatory Framework seeks to broaden the scope and deepen the reach of microinsurance providers without sacrificing their viability and sustainability while protecting the insuring public,” Mr. Dooc said in a recent speech before microinsurers, noting that the vision is to create relevant, responsive and affordable insurance for all.
“We clarify and delineate the roles and functions of microinsurance regular agents, brokers and distribution channels, while providing guidelines for product bundling and sharing of risks among local and foreign insurance entities,” he added.
The government launched the Regulatory Framework for Microinsurance last January 2010 outlining the policy thrusts and direction for the establishment of a policy and regulatory environment for microinsurance, followed by the issuance of several regulations and circulars by the IC, the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission and the Cooperative Development Authority to implement the framework.
The IC noted that the Philippine Development Plan of 20112016 identified microinsurance as one of the “alternative products” and “financial services” that will have to be promoted in unserved and underserved areas of the country, part of government’s key reform strategies on financial inclusion.
Mr. Dooc said in a short time, microinsurance was able to attract private insurers who began “seeing the potential in protecting the poor” realizing that the only thing necessary for the masses to buy insurance is to make insurance affordable and accessible. He also noted that barely two years since it was introduced, the country was already recognized for having the highest market penetration rate of microinsurance among 19 countries in Asia.
“We are introducing an Enhanced Regulatory Framework. And we are also introducing new frameworks for new microinsurance product lines — micro agri, micro health and micro pre-need. We are going to do this through the Enhanced Regulatory Framework we developed, and the new microinsurance products that will soon hit the market,” the top official of the industry regulator said.
SIMPLE, AFFORDABLE
Micro agriculture products are meant to make insurance coverage more simple, more affordable and more accessible for both farmers and fisherfolk to manage the risks brought by typhoons, droughts and other natural phenomena, Mr. Dooc said, while encouraging microinsurance providers to innovate and design products that are tailor-fitted to the needs of agricultural clients.
Among the highlights of this framework, he noted, is its recognition of parametric-based insurance or index- based insurance which is distinct and separate from the traditional indemnity based insurance.
Micro health products, for their part, aim to achieve the objectives of the National Health Insurance Act of 2013.
“Through the framework, we seek to augment the government’s universal healthcare program by providing more affordable options to our low-income countrymen,” Mr. Dooc said.
FUTURE NEEDS
Meanwhile, the framework for micro pre-need products is also aligned with efforts to further strengthen the pre-need industry and assist poor families prepare for future needs be it on sending their children to school, retirement, or even burial.
“We have developed a micro pre- need framework to help poor families including contractual employees who do not have a steady stream of income. Pre- need insurance is like saving for a future need — saving for education, for retirement, or even burial when death finally comes.”
Currently, pre-need firms offer pension, memorial and education products.
“We are looking at providing micro educational benefits to enable poor families send their kids even to vocational schools. We are also looking at micro pension plans for seafarers whose contracts are limited to nine months or a year. This micro pension plans can guarantee small payouts that would mean a lot in retirement,” the IC chief said.
Microinsurance was institutionalized in 2013 with the enactment of Republic Act No. 10607 or An Act Strengthening the Insurance Industry that among others increases the premium and coverage limits of a microinsurance product and grants the Insurance Commissioner the authority to issue rules and regulations on microinsurance.
Microinsurance products provide a financial cover on specific situations, such as calamities and sickness, for low- income consumers with low premiums and simplified requirements.
This area is among the priorities of the Insurance Commission.
In a chance interview last week, Mr. Dooc said microinsurance take-up in the Philippines continues to expand and he enjoined more commercial players to offer such products in a bid to further push insurance penetration in the country.
There are currently around 31 million people covered under microinsurance, he added, a “huge jump” from the official 28 million figure in 2014.
There are only 47 life and nonlife companies —from around 97 players — taking part in the microinsurance business along with 22 mutual benefit associations ( MBAs), which are the major providers of microinsurance, Mr. Dooc said then.
Estimated total premium income from MBAs stood at P7.2 billion in 2015, up 12.5% from 2014’s P6.4 billion or roughly 3% of the entire country’s insurance sector’s approximate total premium income of P233 billion in 2015.
Around 38 million individuals of the country’s total population are covered by insurance policies. In 2016, Mr. Dooc said “the country could hit 40%” and by 2020, approximately “60-70% of the Philippine population would be insured.”
Insurance penetration in the Philippines could have hit 2% last year, Mr. Dooc earlier said, noting that as of third quarter 2015, insurance penetration in the country “hit almost 1.8%.” By 2019, it could also increase to 3%, the average rate in the Association of Southeast Asian Nations.