Insurance for the poor a step closer to reality

BusinessWorld - Economy
January 11, 2010

Insurance for the poor a step closer to reality

THE FINANCE department (DoF) will launch on Jan. 29 the national strategy and regulatory framework for microinsurance, in hopes of jumpstarting an industry that will provide insurance policies to the country’s poorest sectors.

"The launching of the national strategy and regulatory framework [for microinsurance] will be held on Jan. 29," Joselito S. Almario, deputy executive director of the Finance department’s National Credit Council, said via e-mail over the weekend.

"We do not have a formal microinsurance industry yet. The event will serve as the beginning of the industry. It will involve all firms that provide [micro]insurance," he explained in a phone interview yesterday.

The Insurance Commission (IC) defines microinsurance as a product that "meets the needs of the disadvantaged for risk protection and relief against distress or misfortune." Specifically, it is an insurance policy whose monthly premium does not exceed P1,050 and maximum amount of life insurance coverage is not more than P175,000.

Finance officials had previously said that the 42 million beneficiaries of the government’s microfinance program are the potential clients of microinsurance schemes. They pointed out that since these people already have access to funds, they are capable of buying insurance products.

In a statement, DoF said the event, whose theme is "Magpaseguro Para Protektado (roughly: ’insure to be protected’)," will outline the government’s policies and directions in providing the poor access to insurance services and products.

"It will create public awareness on the importance of providing appropriate risk protection for the poor through microinsurance and will enjoin the private sector’s participation in the delivery of simple and affordable insurance products for the low-income and informal sectors of society."

The national strategy for microinsurance specifies the objective, the roles of the various stakeholders and strategies to be implemented to improve access to insurance by sectors such as the poor, the self-employed and their families. It also seeks to encourage those who provide informal insurance and insurance-like products to register and to comply with government regulations.

The regulatory framework, meanwhile, will set the minimum requirements and standards that those who plan to deliver these products must meet.

"The regulatory framework is important because this will provide protection to those who avail of insurance policies. We want to make sure that the firms offering these are capable," Mr. Almario said in Filipino.

The strategic framework and the regulatory framework were approved by a steering committee in November last year after a series of consultations held nationwide. The committee consisted of representatives from the from the Bangko Sentral ng Pilipinas, Securities and Exchange Commission, Cooperative Development Authority, National Anti-Poverty Commission, Philippine Health Insurance Corp., as well as the DoF and IC.

After the launch of the frameworks, Mr. Almario said the next step would involve drawing up detailed performance standards to monitor the quality of service delivered by microinsurance providers.

The Asian Development Bank and the German Technical Cooperation are helping DoF develop the microinsurance market in the Philippines. -- Alexis Douglas B. Romero