Sunday, November 27, 2011

Life insurers told to form ‘critical number’ for mergers

Business World
Finance
Posted on November 24, 2011 10:41:40 PM

LIFE INSURANCE companies mulling a merger need to form a “critical number” to secure the approval of the Insurance Commission (IC).

“Five insurers have already signified interest to merge,” Insurance Commissioner Emmanuel F. Dooc said in an interview yesterday, although he declined to identify the parties involved.

“We told them to come up with a critical number so they can better pool their resources. The ideal number for the merger is eight to 10 firms,” he added.

Talks of a merger among life insurers began last month, as smaller firms face higher capitalization requirements.

The IC has mandated all insurers to have a minimum paid-up capital of P175 million by the end of this year, increasing to P250 million by the end of next year.

The regulator is also eyeing a further hike in their capitalization to P750 million to P1 billion by the end of the Aquino administration in 2016.

“I don’t think many of the small companies can comply,” Mr. Dooc said.

But even the larger players hesitate when it comes to a merger, as some are family-owned or closely-held, and the owners do not want to let go their businesses, he added.

Some insurers also enjoy niche businesses that they will have to give up in a merger as products and services will have to be pooled in the surviving company, Mr. Dooc said.

Nevertheless, the IC is holding talks with the boards of insurers to ask them to consider a merger. It has also reiterated to the companies that the capitalization requirements will be implemented as scheduled.

“Whatever happens, the proposed merger must be finalized by next June, in time for the issuance of the CA (certificate of authority) to licensed insurance companies,” Mr. Dooc said.

There are currently 30 life insurance companies licensed to operate for 2011 to 2012, down from last year’s 34. -- Diane Claire J. Jiao

Tuesday, November 15, 2011

Manulife eyes micro insurance

Malaya Business Insight
BY Angela Lorraine Celis
November 10, 2011

AFTER the Insurance Commission approves its proposal, Manulife Philippines, an American firm, will start selling what it calls micro insurance specifically for the low income group.

The proposed product will have life cover value ranging from P10,000 to P20,000, according to Indren Naidoo, president and chief executive of Manulife. He declined to specify the premium rate but declared that the cover is valid for as short as a month to three months.

As is the practice, the insured is paid double the value of the cover if he dies in an accident.

"We’re hoping to get approval from the regulator this month," Indren Naidoo said.

"After we get the approval, we will sign up our first contract in Davao. We want to keep our promise that we will sign up our first client before the year is out," Naidoo said.

Naidoo added Manulife expects to penetrate the market that rarely has access to insurance products.

Based on government data, the penetration rate for life insurance in the Philippines was only 13 percent as of 2010.

"Part of our overall obligation is to expand life insurance for the less fortunate," Naidoo said.

The initial targets of the company’s micro insurance product are Cebu and Davao. Eventually, Manulife will move to other areas.

Naidoo also announced yesterday that as of end-September, Manulife Philippines’ total premiums had grown around 20 percent.

"The reason for our success is really the expansion of our agency network, particularly in … Davao, Cebu, Baguio, and more recently in Iligan and in Quezon City," Naidoo said.

"We’re really happy that we’re a large sales force of 3,000 agents, growing around 31 percent over the same period last year. That shows that our expansion strategy is working," he explained.

Manulife Philippines’ total new business for the first nine months of 2011 was 54 percent higher than for the same period last year.

"We’re very happy with that, particularly when you look at the half year, when the market was growing only 29 percent. So we’re extremely happy with the way we’re growing," Naidoo said.

Wednesday, November 9, 2011

Philippines to offer microfinance record

Business World
Top Story
Posted on November 09, 2011 12:24:47 AM

OFFICIALS will present the Philippines’ microfinance experience during this week’s Asia-Pacific Economic Cooperation (APEC) meetings in preparation for the creation of a financial inclusion strategy to be adopted by the body’s member economies.

“The Philippines is taking an active role in the APEC Economic Leaders’ Meeting. We have been asked to present the developments in our microfinance initiatives because we are very much advanced compared to other countries,” Finance Undersecretary Rosalia V. de Leon yesterday said in a telephone interview.

The presentation will illustrate the country’s microfinance policies and regulatory regime. These will also be used as a reference as the APEC drafts its National Strategy for Financial Inclusion for its 21 member economies.

“Financial inclusion is actually an initiative of the United States in APEC, but it saw that the Philippines is advanced in that perspective,” Ms. de Leon said.

The APEC Financial Inclusion Initiative aims to encourage countries to increase the poor’s access to affordable financial services, such as savings, payment, credit and insurance.

The Philippines devised a National Strategy for Microfinance as early as 1998 to institutionalize the provision of small loans to the poor to jumpstart entrepreneurial projects.

This paved the way for the establishment of wholesale microfinance initiatives, providing funding for institutions such as rural banks, nongovernment organizations and cooperatives.
The private sector, for its part, is responsible for retail microfinance or extending credit directly to borrowers from the lower-income sector to help alleviate poverty.

The government released a total of P168.693 billion in microfinance loans from 2001 to 2009 to nearly 7.14 million borrowers. A separate P82.53 billion was also extended from 2004 to 2009 to create 2.83 million jobs.

The Philippine Development Plan 2011-2016, the economic blueprint of the country under the Aquino administration, identifies microfinance as one of the strategies to build a resilient and inclusive financial sector.

Among the priorities are microinsurance, which provides affordable risk protection against financial distress caused by accidents, death and natural catastrophes. The plan also champions the Credit Surety Fund, a facility from which cooperatives can source funding for micro, small and medium enterprises.

The APEC’s annual meeting is being held this year in Honolulu, Hawaii. Preliminary discussions are already being staged and the event will culminate in a leaders’ summit on Sunday.
APEC has 21 member economies which account for about 40% of the worldís population, approximately 54% of world gross domestic product and about 44% of world trade.

Saturday, November 5, 2011

BRAZIL HOSTS 7TH INTERNATIONAL MICROINSURANCE CONFERENCE

Event will gather over 400 experts and worldwide delegates to push issues forward
Approximately 135 million people in developing countries already use microinsurance as a means of managing risk for the poorer social classes, according to a Lloyd’s of London report, and this number is only going to grow. In Brazil, the situation is no different and this line of insurance will play a key role in reducing the vulnerability of the low-income households. This issue will be one of many debated topics during the 7th International Microinsurance Conference, which will place from November 8th to 10th in the Sheraton Leblon Hotel, in Rio de Janeiro, Brazil.

The already confirmed participants are as follows: the Mayor of the State of Rio de Janeiro, Sérgio Cabral; the Chairman of Munich Re Foundation, Thomas Loster; the Chair of Microinsurance Network and ILO’s Microinsurance Innovation Facility, Craig Churchill; the Superintendent of Susep (Superintendence of Private Insurance), Luciano Portal Santanna; and the President of CNseg (National Confederation of General Insurance Companies, Social Security and Life, Complementary Health and Capitalization), Jorge Hilário Gouvêa Vieira.

The event will bring together more than 400 delegates and experts from over 50 countries to discuss challenges and opportunities in microinsurance, while also focusing on lessons learnt and emerging issues. Organised by Munich Re Foundation and Microinsurance Network, the 7th International Microinsurance Conference will be supported by the Brazilian Confederation of Insurers (CNseg), the Superintendence of Private Insurance (Susep), GIZ/BMZ and Georgia State University.

With 22 sessions and over 70 speakers addressing key questions in the field, the conference represents the largest gathering of microinsurance experts in the world. The issues to be discussed during the conference include an economic analysis of market opportunities and barriers, national and regional strategies for microinsurance development in relation to various parts of the globe, and innovative approaches that improve microinsurance distribution.
“As a host country Brazil is a perfect fit for the 7th International Microinsurance Conference,” said Dirk Reinhard, Vice Chairman of Munich Re Foundation and Chairman of the Conference Steering Committee. “The country is striving to improve access to insurance for the poor through a variety of avenues. With around one fifth of the population in Brazil living around or below the poverty line, Brazil’s impressive economic growth over the past decade, as well as a dedicated insurance industry, have put the country in a strong position to provide the poor with more effective risk management tools to break the cycle of poverty.”

The conference also marks the occasion when the Brazilian National Congress will vote on a law that will incorporate specific regulation on microinsurance activities to enhance the access to insurance for the low-income population of Brazil.

“The rising income over the last years in Brazil and the availability of credit has made the ascension of lower income groups (classes C and D) possible. Nevertheless, it is fundamental to create conditions that protect the equity of such families. Microinsurance is a lawful instrument to ascertain such accomplishments as well as to create the saving habit designed to finance education, thus indispensable to create saving habits among Brazilians” said Jorge Hilário Gouvêa Vieira, President of CNseg.

Microinsurance in Brazil and worldwide

The Microinsurance Committee of CNseg projects that the current premium percentage of the Gross Domestic Product (GDP) will increase from 3.5% to 7.5% in 2017 with the implementation of microinsurance regulation. The current estimation of microinsurance clients in Brazil is between 23 to 33 million clients according to a study by the Centre for Financial Regulation and Inclusion (Cenfri). The expectation is that over the next 20 years microinsurance in Brazil will touch close to a 100 million clients.

Data from the MicroInsurance Centre, a product development, research and advocacy institution, estimates that over the next ten years, the global microinsurance market will reach around one billion new consumers, equivalent to a third of the market potential. Climate change, population growth, urbanisation and a leveraging technological of innovations are determining factors for the expansion of this market.

According to Craig Churchill, the Chair of the Microinsurance Network, the expansion of microinsurance to protect the poor is coming from a diverse range of institutional arrangements. In the Philippines, for example, where the conference was held in 2010, the commercial insurance company, Malayan, expanded its outreach from 4.1 million to over 5 million low-income people from 2007 to 2009 by distributing cover through pawn shops, while Country Bankers Life covered 800,000 persons through rural banks. During that same period, other models also achieved significant outreach. For example, MicroEnsure, a specialised broker, facilitates the cover for 1.2 million lives, and PhilHealth’s scheme to extend social protection to workers in the informal economy covers at least 28,000 persons. However, the mutual benefit association of the NGO CARD eclipses them all, covering seven million low-income persons. “Now that we are seeing models that are successful in reaching huge numbers,” said Churchill, “we need to focus more on ensuring that the poor are actually benefiting from the cover.”

MICROINSURANCE – A SLOW-ONSET REVOLUTION

Innovation Flash
Issue 11, November 2011
The Newsletter of the ILO’s Microinsurance Innovation Facility

The Microinsurance Network will soon become a teenager. After nearly a decade of work, we can be proud of what this group has achieved. It has facilitated the creation of organizations such as the ILO’s Microinsurance Innovation Facility and the Access to Insurance Initiative. Both these organizations have advanced research into and the development of microinsurance pilot projects and the bases for a sound regulatory environment. The 7th International Microinsurance
Conference to be held in Rio de Janeiro from 8 to 10 November 2011, hosted jointly by the
Microinsurance Network and the Munich Re Foundation, will attract five times more participants than the initial conference in 2005.

Microinsurance has brought about change in the industry. Companies such as Zurich, Swiss Re and
Allianz have created teams to find ways to enter the low-income market. MicroEnsure now serves
millions of clients. Leapfrog’s success in attracting substantial capital to be invested in microinsurance shows that access to capital is not the key issue.

Yet have we seen the big breakthrough in developing profitable microinsurance solutions that provide good client value for large numbers of clients? Perhaps not. Should we be disappointed? Clearly not!

The development of microinsurance cannot take place independently of economic development, improved healthcare and education, and political stability. Since the lack of local experts seems to be a major obstacle to development, the insurance industry needs to invest in the education and training of such experts. What the developed world took several hundred years to accomplish cannot be replicated within a decade even given all the new technology and knowledge
that is now available.

What is needed, moreover, are strategic, country-wide approaches such as the one adopted by the Philippines, in which the insurance industry, government, donors and organizations representing the clients join forces. The challenges are often too great to be met by individual players alone, and the now mature Microinsurance Network will continue its work to catalyse cooperation throughout the industry.

Dirk Reinhard
Vice Chairman, Munich Re Foundation and Member of
the Executive Committee of the Microinsurance Network
I

Thursday, October 20, 2011

Philippines: Insurance reform in public utility vehicle sector

Asia Insurance Review


Operators of public utility vehicles will soon pay cheaper insurance premiums for passenger insurance coverage while there will also be an increase in insurance benefits accorded to dependents of victims of fatal road accidents.

These measures follow a decision by the Quezon City regional trial court to uphold the Department of Transportation and Communications’ (DoTC) initiative to institute reforms in the Passengers Personal Accident Insurance Programme of the Land Transportation Franchising and Regulatory Board (LTFRB).

The court dismissed a petition for a temporary restraining order against LTFRB’s move to open up accreditation for providers of passenger insurance service from two to five insurers. Prior to the decision, the industry was dominated by only two players— PAMI for those registering odd-numbered plates and by UNITRANS, even-numbered plates.

LTFRB chairman, Mr Jaime Jacob, will now move forward to open up insurance coverage. He has been talking with eight insurance companies who are willing to compete for the right to provide cover. He says that the new insurance terms will require the five accredited insurance players to offer an “all risk, no fault” insurance policy. This policy ensures that any passenger who meets with an accident will be paid by a PUV operator regardless of who is at fault in an accident.

“We have set a maximum premium and minimum benefit for the accreditation process. Those applying for accreditation will now compete in order to bring down the premium and raise the benefit,” says Mr Jacob.

Friday, October 14, 2011

Government abandons prototype for life microinsurance product

Finance
Posted on October 12, 2011 09:33:57 PM

BY ANN ROZAINNE R. GREGORIO, Reporter

THE GOVERNMENT no longer pushed through with its plan of coming up with a prototype microinsurance product combining life protection and savings, choosing instead to leave it up to market players to design it.
Rino C. Asuncion, senior adviser at the German Agency for International Cooperation (GIZ), said the government “called off” the plan after holding focus group discussions with representatives of the life insurers’ association, Philippine Life Insurance Association, Inc. (PLIA), and microfinance institutions (MFI) last February.

In January, the Department of Finance, the National Credit Council, along with the Asian Development Bank and GIZ, announced they were developing a prototype product combining microinsurance and savings, with insurance premiums to be deducted from savings accounts. The product, as well as a non-life microinsurance product called “Buhay, Bahay at Kabuhayan,” was envisioned to give a boost to the nascent microinsurance industry.

“The result of the FGDs made us decide to not pursue with our plan to create a prototype product that would combine life insurance and savings,” Mr. Asuncion said.

PLIA, during the FGDs, asked to “leave the product specifications to them” as some life insurers already offer a life insurance product with a savings component.

“PLIA wanted the freedom to construct the savings component of the product. It was just a matter of adjusting their existing products with a savings component to fit the microinsurance market,” Mr. Asuncion said.

PLIA also pointed out the difficulty of administering the savings component of the product.

“Aside from working as an insurance company, they would have to work as a ‘bank’ because of the savings component. So it would require insurance companies to either work with a bank or buy a new system or invest in a technical support group, which would be costly for them,” he said.

MFIs, meanwhile, opposed a microinsurance product combining life protection and savings as this would “directly compete” with their savings products.

MFIs are composed of rural banks, cooperatives and nongovernment organizations.

Mr. Asuncion said PLIA and MFIs instead asked the GIZ and the other institutions to come up with a simplified and standardized contract for a life microinsurance product, so a consumer could easily understand the product he or she was purchasing.

Contracts that covered insurers’ existing products were long and complicated.

“We came up with a contract and PLIA submitted it to the Insurance Commission (IC) for approval,” he said.

The contract was approved “months ago,” he said.

For his part, National Credit Council Deputy Executive Director Joselito S. Almario, in a phone interview, said: “We decided to leave to the insurance providers the decision to come up with a microinsurance life product with savings.”

“We didn’t want the industry players to have the impression we were dictating to them what product to sell. We didn’t want that,” he said.

Insurers at present are allowed to design their products in line with their target market’s demand and their products are considered microinsurance products as long as they comply with the IC’s definition for such products.

According to IC’s Insurance Memorandum Circular 1-2010, microinsurance products are those whose daily premiums do not exceed 5% of the current daily minimum wage rate of non-agricultural workers in Metro Manila.

Furthermore, the maximum sum of guaranteed benefits should not be 500 times the daily minimum wage rate for non-agricultural workers in Metro Manila.

Fifty microinsurance products have been approved since the circular was issued in January 2010. Of these, 33 were life products while 17 were non-life products.

BPI microfinance bank ventures into microinsurance

Business World
Finance
Posted on September 30, 2011 07:35:24 PM

MOBILE MICROFINANCE bank BPI Globe BanKO will begin offering microinsurance after partnering with two other subsidiaries of the Bank of the Philippine Islands.
In a statement, BPI Globe BanKO said it has partnered with BPI Philam Life Assurance Corp. (BPI-Philam) and BPI-Mitsui Sumimoto Insurance Corp. (BPI/MS) to offer insurance products that are affordable and targeted at low-income earning Filipinos.

BPI-Philam, the bancassurance arm of BPI, is an alliance between BPI and the Philippine American Life and General Insurance Co., the country’s biggest life insurance company.

BPI/MS is a joint venture between BPI and Mitsui Sumimoto Insurance Co., a non-life insurance company based in Japan.

BPI Globe BanKO on Friday launched three microinsurance products, namely, PondoKO, PuhunanKO and PaniguroKO.
PondoKO entitles an individual to life insurance and to a 1% interest rate per annum on his or her deposit once this reaches P2,000.

In the event of death -- regardless of the cause -- his or her beneficiary will get five times of the amount of cash in the account.

PuhunanKO provides both life insurance and loan coverage. An individual who purchases this will entitle his or her beneficiary to P10,000 and to 100% loan coverage in case he or she dies.

PondoKO and PuhunanKO are offered in partnership with BPI-Philam.

PaniguroKO, offered in partnership with BPI/MS, gives the account holder access to a life insurance policy that costs only P365 for a one-year coverage.

With PaniguroKO, an account holder is entitled to a P50,000 coverage for accidental death, P5,000 assistance in case of fire and P2,500 assistance in case of flood, typhoon and earthquake. This insurance can be purchased through mobile phones, thus doing away the need to fill out documents.

"Through BanKO’s ’banking the unbanked’ concept, the market that other banks have failed to reach will be given options and this is a very good way of giving back. We at BPI-Philam are hoping that more from the lower income segment will be empowered and will appreciate the need to save," Stephen James Clark, BPI-Philam president and chief executive officer, was quoted as saying in the statement.

"Getting an insurance used to be expensive or at least that’s what a lot of people think, especially those who are not familiar with it. Through the BanKO-BPI/MS partnership, we hope more people will realize the value in securing one," Mr. Takaaki Ueda, BPI/MS president and chief executive officer, was also quoted as saying in the same statement.

In the same statement, BPI Globe BanKO said it had partnered with the German Agency for International Cooperation to conduct financial literacy seminars nationwide. This is in line with the bank’s objective to educate depositors on the importance of insurance. The seminars will begin in the fourth quarter of this year and will run up to next year.

BPI Globe BanKO is a savings bank that handles the mobile microfinance operations of BPI, the country’s third largest in terms of assets.

It is a shared venture between BPI, Ayala Corp. and Globe Telecom, Inc. The bank uses Globe’s GCash platform to electronically transfer funds to microfinance institutions and individual borrowers. -- Ann Rozainne R. Gregorio

Thursday, October 13, 2011

Cash transfer beneficiaries targeted for microinsurance

Economy
Posted on October 03, 2011 11:42:32 PM

TACLOBAN CITY -- Beneficiaries of the government’s conditional cash transfer program -- supposedly some of the poorest of the poor -- are being targeted for microinsurance coverage next year, a senior economic official said here recently.

Finance Undersecretary Gil S. Beltran, executive director of the National Credit Council, said in a recent interview here that the Department of Finance is in talks with the Department of Social Welfare and Development to tap cash transfer beneficiaries who are part of state livelihood programs.

“With livelihood programs in place for beneficiaries, the third stage in the process is microinsurance,” Mr. Beltran explained in the interview.

Microinsurance involves low premium payments as well as simpler application and claim processes.
“Through this scheme, they will be protected from calamities and they won’t slide back to poverty,” Mr. Beltran added.

The cash transfer program, formally called Pantawid Pamilyang Pilipino Program, has 2.3 million household beneficiaries this year. Their ranks are targeted to increase to three million next year.

Reynaldo M. Vergara, who heads the Insurance Commission’s Actuarial Division, said in a separate interview that the government aims to insure about a fifth of the population by the end of 2012 from 16.65% currently. -- S. Q. Meniano

Saturday, September 24, 2011

IC to formalize unlicensed providers this year

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Roadshow on microinsurance advocacy opens on Friday

Please click here for link

Microinsurance Roadshow kicks off in Eastern Visayas

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IC stepping up campaign against unlicensed insurers

BusinessWorld
Finance
Posted on September 21, 2011 09:59:40 PM

TACLOBAN CITY -- The Insurance Commission (IC) wants the registration of unlicensed insurance providers completed by the end of this year as part of efforts to convince poor households to avail of microinsurance.

Ma. Lourdes L. Ramos of the IC’s public assistance information division said the regulator has been stepping up the enforcement of the joint memorandum circular issued by the IC, Cooperative Development Authority (CDA) and Securities and Exchange Commission (SEC), that sets the government’s policy on informal insurance activities.

“Unlicensed insurance activities are usually done by cooperatives.

These are the groups that think it’s okay to do that. We want them to be formalized, place them on the mainstream and regulate their activities,” Ms. Ramos said in an interview during the three-day financial literacy roadshow on microinsurance in this city.

Under the joint IC-CDA-SEC Memorandum Circular 1-2010 issued January 29, 2010, all entities engaged in insurance activities are required to secure a certificate of authority from IC.

Informal insurance schemes should have closed by January, while those that want to formalize and continue to engage in the insurance business have up to this year to secure a certificate of authority.

“We want to protect the interest of members [of these informal insurance schemes] by regulating their activities. That way, clients are assured that they will get what’s due them,” Ms. Ramos said.

Joselito S. Almario, Department of Finance-National Credit Council (DOF-NCC) deputy executive director, said 2.9 million Filipinos are covered by informal insurance schemes not certified by the regulator.

“Formalizing these unlicensed insurance providers will help people appreciate the importance of securing insurance and assure their benefits,” Ms. Almario said ­-- S. Q. Meniano

Road show aims to increase awareness of microinsurance

Business World
Finance
Posted on September 19, 2011 04:24:17

TACLOBAN CITY -- The government yesterday kicked off a road show aimed at increasing awareness of microinsurance and risk protection.

Joselito S. Almario, deputy executive director of the Department of Finance-National Credit Council (DOF-NCC), said financial literacy seminars will be held in 15 other regions after Eastern Visayas.

Through this road show, he said the government is hopeful microinsurance would reach the poor communities.

“It has been an impression that insurance is only for those who are in the higher class. We are promoting microinsurance because this is intended for the low-income families. Premium on this product can be as low as P30 a month,” Mr. Almario told BusinessWorld at the sidelines of the seminar here yesterday.

Only 13% of the country’s population has life insurance while only 1% is covered by non-life insurance, he noted.

Since the government introduced microinsurance last year, however, he said commercial insurance companies have gained some two million clients.

After the financial literacy seminars, Mr. Almario said the government aimed to form a corps of microinsurance advocates from government, insurance companies, civil society, support organizations, and donors.

“These future microinsurance advocates are envisioned to help address two causes of low insurance coverage among the low-income sector -- the lack of awareness of insurance and low financial literacy level,” he said.

The road show is being held by the Insurance Commission with assistance from the DOF-NCC, German International Cooperation-Microinsurance Innovations Program for Social Security (GIZ-MIPSS) and Asian Development Bank-Japan Fund for Poverty Reduction (ADB-JFPR).

GIZ-MIPSS senior finance adviser Dante O. Portula said in a separate interview the international agency has been assisting the government under a four-year program that will expire in 2012.

“We have to popularize microinsurance. Disasters such as illnesses, injuries, or even death of family members, loss of property or natural catastrophes could happen to anybody -- but low-income families have to cope even harder with these risks because the effect on their limited financial possibilities could be fatal,” Mr. Portula said.

He said GIZ has been assisting the government capacitate insurance providers. -- Sarwell Q. Meniano

Thursday, August 18, 2011

Philippines: Eight life insurers consider forming "super brokerage"

Asia Insurance Review

Eight life insurers in the Philippines are jointly seeking a permanent solution to their capitalisation problem which is to increase their minimum paid-up capital to PHP125 million (US$2.95 million) each as required by a ruling of the Insurance Commission and the Department of Finance.

To meet this target, these insurers are considering forming a "super brokerage", according to the Philippine Star. While the "super brokerage" will be a single entity, the individual stakeholders will still write their own policies. Another option is to consolidate through mergers and acquisition (M&A) among two or three insurers.

The eight insurers comprise one major player ranked between sixth and 10th in the industry in terms of premium income last year, two medium sized life insurers ranked from 11th to 20th, and five smaller companies.

The stakes for them will rise further because by the end of the year, the minimum paid-up capital requirement for an insurer will be PHP175 million. The capital increase programme started in 2006 and will culminate in a PHP250 million minimum paid-up capital level by 2015. By then, the Asean Free Trade Agreement (AFTA) will take effect, breaking down barriers for doing business among Asean member nations.

At present, Philippine insurers are seen as being at a possible disadvantage because they rank second lowest, if not the lowest, among their Asean counterparts in terms of capital. Of the 32 players in the Philippine life insurance industry, the top 10 players, which are mostly foreign-controlled and account for nearly 80% of total premiums, have already exceeded PHP1 billion in terms of capital.

Saturday, July 30, 2011

The movement for microinsurance

(The Philippine Star) Updated June 13, 2011 12:00 AM Comments (0)

MANILA, Philippines - As microinsurance gains more ground in mainstream banking and finance circles, more and more organizations have now taken strides to provide products that are affordable and accessible to members who need it the most. Pioneer Life, recently the first to be granted approval by the Insurance Commission for their microinsurance programs has found partners in organizations such as NGOs, microfinance associations, banks, cooperatives and direct selling companies for various tailor-fitted needs. Whether it’s accident, life or property coverage — safety and protection is now well within their reach.

“We have always strived to produce savings and insurance products that are affordable and easy to acquire. This is in line with our vision to become a model Filipino enterprise,” shares President and CEO of Pioneer Life Lorenzo Chan, Jr. “In order to do that, we have to go beyond serving the standard A-B and corporate markets. For us, microinsurance is a natural progression to bring a useful product to people who need it most.”

One of the biggest microfinance institutions in the country, GM Bank sealed its partnership with Pioneer Group for the provision of Property Insurance Coverage, including fire, flood, and earthquake assistance, as well as Personal Accident Insurance to its many associates and members. GM Bank, Inc. is composed of two of Nueva Ecija’s most respected rural banks; Munoz Rural Bank, Inc. and Community Rural Bank, Inc. The Protektahan program was specifically designed for the needs of not just GM Bank associates but their clients and members as well.

A direct selling marketing company has gained ground for various products that promote personal health and wellness – the 7-in-1 Vera Coffee, and V7 Grape Seed Oil Extract. It’s only fitting that the officers, staff and members of Vera7 be protected for their financial wellness too. This is the partnership agreement signed between Vera7 and Pioneer where a special savings and wellness program was developed for the coverage of Personal Accident with Accidental Death and Disablement Benefit (ADDB).

Providing insurance coverage for eligible bank borrowers under a Group Credit Life Insurance Policy, Cantilan Bank is another big name in the field of rural banks that have decided to give their trust to Pioneer. The specialization of the bank includes banking and countryside development services in the northern and southern part of Mindanao.

World Kitchen Workers Service Cooperative, made up of some 80 kitchen workers and individuals part of the food service industry and other restaurants, has signed up for protection with Pioneer. Eligible borrowers of the cooperative will automatically be covered under a Group Credit Life Insurance Policy as well as Tr3asure Principle Accumulator Program, another Business Development initiative that implements a savings component, too.

Through these various partnerships, Pioneer Life aims to strengthen its foray into microinsurance and take a step closer in the end goal that is transforming every Filipino into a saver. In partnership with NGOs and institutions offering microfinance, Pioneer’s offerings of microinsurance programs meet the peculiar needs of this market and tailorfit to the requirements of a group. This early, the claims made by beneficiaries have helped keep kids in school and widows get back on their feet. “Microinsurance is an opportunity for us to reach out to more people regardless of where they are or what they do,” says Pioneer Life VP for Microinsurance Geric Laude. “We develop our programs only after we truly understand what their needs are.”

Friday, July 29, 2011

Philippines: Life market to spurt ahead this year

Philippines: Life market to spurt ahead this year
The Philippine life insurance sector expects to grow significantly this year, citing positive economic indicators suggesting an increase in demand for insurance products.

Mr Mayo Jose Ongsingco, President of the Philippine Life Insurance Association (PLIA), says: "In 2010, our first-year premiums grew by 59%, while total premiums grew by 23%. We expect that the growth this year will be close to that." PLIA data show that the industry's total premium income increased by 23.5% to PHP70.7 billion (US$1.7 billion) while first-year premiums rose by 59.4% to PHP34.28 billion last year.

"The economic fundamentals of the country are very strong. Inflation is in check, the fiscal deficit is under control. Despite all the troubles in the Middle East and North Africa, remittances are also strong," he points out. With favourable economic conditions, people have more personal disposable income to purchase insurance, he says.

The debt crises in the United States and Europe have also boosted the Philippine insurance industry by pushing capital to emerging markets. These have buoyed bond and equity markets, increasing insurers' yields on investments. However, Mr Ongsingco also warns that a US default would send ripples to markets across the globe, similar to the global financial crisis in 2008.

Currently, the penetration rate of insurance is still small in the Philippines, Mr Ongsingco says. At present, insurance premiums collected by the industry are equivalent to just 0.75% of the country's gross domestic product. He says that the ratio could substantially increase through the promotion of micro insurance.

Thursday, June 16, 2011

Nonlife insurers urged to lobby for tax breaks

BusinessWorld
Finance
Posted on June 12, 2011 09:54:47 PM

THE INSURANCE Commission (IC) has urged nonlife insurers to lobby for the removal of taxes on its policies to make these more affordable for consumers.
“We will support any move of the nonlife insurance industry to lower or eliminate the taxes on their policies,” Insurance Commissioner Emmanuel F. Dooc told BusinessWorld at the sidelines of a Commission on Appointments hearing at the Senate on Wednesday.

Nonlife policies are levied an array of taxes, including a 12% value-added tax (VAT), 12.5% documentary stamp tax, 2% fire service tax and between 0.15-0.75% local government tax.

Mr. Dooc compared this to the life insurance industry, which was able to successfully lobby for a reduction of the premium tax to 2% from 5%.

The amendment to the National Internal Revenue Code of 1997 was carried out through Republic Act No. 10001 enacted in Feb. 2010.

“[The life insurance industry] enjoyed a good 2010 and a good first quarter this year. This is the impact of the benefits of tax relief,” he said.

“Premiums have gone down, and there are more people who are interested because [policies] are more affordable. Almost all companies have restructured their premiums after the taxes were lowered,” Mr. Dooc added.

The IC chief rued that the nonlife industry, led by the Philippine Insurers and Reinsurers Association (PIRA), did not join the Philippine Life Insurance Association when it appealed for tax breaks in Congress in 2009.

“Nobody thought the bill could be passed so quickly,” he pointed out.

The law also provided that no tax on life insurance premiums would be collected by 2015, right in time for the lowering of trade barriers in the Association of Southeast Asian Nations (ASEAN), that will enable the free flow of goods and services, including insurance, among member nations.

“The nonlife industry could face a lot of competition in 2015, especially with other ASEAN countries enjoying better tax regimes,” Mr. Dooc pointed out.

PIRA general manager Mario C. Valdez earlier stated that Philippine nonlife insurers shoulder a 26.5% tax burden on premiums. In comparison, Singapore charges only a 7% VAT for every policy, while Thailand charges only 3.9% for personal accident policies and 7.4% for all other types. Indonesia charges 0.4%. -- Diane Claire J. Jiao

Saturday, May 28, 2011

Micro-insurance seen picking up

Manila Bulletin
Business Option
By FLOR G. TARRIELA
May 26, 2011, 12:22am

MANILA, Philippines — “We can cheat death once or twice but we cant get out of this world alive.” Tatay Andro and his wife are engaged in dress-making business.

On September 26, 2009, Andro drowned while crossing a wooden bridge somewhere in Pasig at the height of typhoon Ondoy. Last July 2010, Luningning Cruz, a mother of 4, engaged in the rag making business, was hit by a motorcycle, suffered head injury and died upon reaching the nearest hospital.

Anthony Samson, eldest in a brood of 11 children of Elenor Samson, was devastated when his parents died in an accident while doing business last January.

Under ordinary circumstances, the Batuampos, Cruzes, and Samsons would have very little savings to draw upon in order to settle funeral expenses, much less, cope with the loss of livelihood because of the untimely death of the family breadwinner.

But because they had earlier decided to participate in a micro-insurance program, their families received substantial benefits that allowed them to cope with the loss more graciously.

What is micro insurance? From the Insurance Memorandum Circular 1-2010 issued by the Insurance Commission, micro-insurance is an activity providing specific insurance, insurance like products and services that meet the needs of the low income sector for risk and relief against distress, misfortune or other contingent events.

The minimum capital requirement is P5 million. To date the Insurance Commission has approved the establishment of 16 micro insurance Mutual Benefit Association (MBAs). It has also approved 4 regular insurance companies to offer micro-insurance. The Bangko Sentral ng Pilipinas (BSP) has granted approval for rural banks, thrift banks and cooperatives to sell micro-insurance.

In the above particular cases, they had enrolled in the micro-insurance program of TSPI MBA TSPI (Tulay sa Pag-Unlad Inc.) is a Christian micro-enterprise NGO involved in micro-lending and micro-insurance. In the case of Tatay Andro, TSPI MBA awarded his family P180,000 in benefits.

Currently, Tatay Andro’s wife, Nanay Liza and their 3 children continued what the head of the family previously started. With the help of her co-members in TSPI, Nanay Luningning’s claim was filed, documentary requirements were completed and within a week, benefits amounting to P165,000 were given to her beneficiaries.

As for Anthony, he was somehow comforted when he received benefit claims amounting to more than P100,000. The sadness that he and his siblings experienced from the loss of both their parents was lessened because of the help that TSPI extended to them through micro-insurance.

As can be seen from the above incidents, the poor are very vulnerable to risks such as death caused by illness or accident, disability and property losses; especially when it is the death of the family’s breadwinner. In the past, life insurance would be available only to the middle and upper levels of society. The poor have little to save.

However, the creation of micro-insurance products has provided a tremendous blessing to the poor.

With micro-insurance, the poor can set aside as little as P5 per week to pay for their insurance premiums, which, depending on the offering of the micro-insurance provider, can pay out natural death benefits of P40,000 or more.

There are many institutions that are now offering micro-insurance, many of the pioneers being associated with those who already offer micro-lending services to the poor.

Such is the case with the TSPIMBA. While serving the poor by offering them a variety of enterprise and livelihood loans, TSPI desired to extend more services and assistance to their clients. They saw micro-insurance as a feasible and viable service that the clients desired.

TSPI MBA was set up in order to extend financial assistance in the form of death benefits, loan redemption assistance, disability benefits and other services to the borrowers of TSPI and their immediate family members.

Becoming a member of the TSPI MBA will cost the member a fee of only P240.00 per year. This entitles a member to death benefits for the member, spouse and 4 qualified children, accidental death and dismemberment benefits for the member and his/her spouse, total and permanent disability for the member and equity value also for the member.

Moreover, if the member is also a borrower of TSPI, subject to an additional premium of P1.00 per thousand of loan availed, the member is also entitled to loan availment benefit package composed of death benefit, accidental death benefit, accidental dismemberment, credit life and funeral assistance.

It has only been 4 years since TSPI MBA started its micro-insurance operations. it now has more than half a million members as of December 2010. Micro-insurance is relatively new. Already it is showing to be a viable and promising business proposition. And clearly a big help to the poor.

* * *

Ms. Tarriela is Chairman of Philippine National Bank. She is a director of TSPI NGO and TSPI MBA. She was formerly Undersecretary of Finance and Vice President Citibank N. A

Saturday, May 21, 2011

Microinsurance Can Help Poor Prepare for a Better Future - Experts Say

News Release
Asian Development Bank
6 May 2011

Panel discusses how to promote microinsurance in Asia

HA NOI, VIET NAM- Microinsurance is a key tool to help the world’s poor cope with unexpected setbacks, a panel of experts said today.

The panel, speaking at the Asian Development Bank’s (ADB) 44th Annual Meeting of the Board of Governors here, said microinsurance provides a prime opportunity for private sector insurers to help a large, underserved customer base and still make a profit. The seminar was titled “Protecting the Bottom Billion the Private Sector Way.”

Many of the world’s poorest remain mired in poverty because a sudden illness or death in the family, crop failure, or natural disaster causes an unexpected loss of income or large expense. Others can be pushed back into poverty by these same events. Microinsurance -- low-cost insurance for low-income people – can help the poor cope in such times of difficulty, allowing them to plan for a better future.

President Bill Clinton, founder of the William J. Clinton Foundation and 42nd President of the US delivered an introduction to the seminar via video.

Microinsurance is not yet available to the vast majority of the nearly 2 billion who live on less than $2 a day in Asia and the Pacific. In part that is because regulation and supervision, where it exists, does not support insurance products aimed at the poor. Private insurers have been slow to provide microinsurance given the regulatory uncertainties and the difficulties of delivering policies and paying small claims on such a vast scale.

Those companies already offering microinsurance, by contrast, report strong demand and predict growth in the sector. That suggests there is interest in using such products when regulatory circumstances allow. Low-income clients also look for policies that are offered at a price they can afford and in a way they can understand and use, the panel said.

“There is a huge untapped market for microinsurance for lower-income households. The commercial sector will drive the dramatic expansion of the industry, but we will have to address it in a systemic way across the value chain,” said Michael McCord, President of the Microinsurance Centre.

ADB has, in recent years, spent $4.4 million to promote microinsurance in Sri Lanka, Bangladesh, the Philippines, and elsewhere. In 2010, it allocated $750,000 to help develop the nascent microinsurance markets in the People’s Republic of China and Mongolia where there are over 200 million potential clients.

The panel was moderated by Dean Karlan of Yale University, a noted evaluation expert on tools for access to finance, and, as well as Mr. McCord, comprised Doug Barnert, Executive Director of the Group of North American Insurance Enterprises; Evangeline Crisostomo Escobillo, Advisor to the Board of Phil Plan Inc. and former Insurance Commissioner of the Philippines, Tilman Ehrbeck, Chief Executive Officer of the Consultative Group to Assist the Poor; and Andrew Kuper, Founder and President of LeapFrog Investments.

Wednesday, April 27, 2011

Wider coverage expected due to microinsurance

Business World
Finance
Posted on April 25, 2011 11:51:19 PM



A FIFTH of the population could be insured by the end of the year as insurers gear up to answer a pent-up demand for protection among the country’s poor.

“Microinsurance is getting a lot of attention. Everybody is interested.”

IC Chief Insurance Specialist Reynaldo M. Vergara told BusinessWorld in a phone interview last Wednesday.

“We could have 20% of the population insured by the end of 2011.”

According to the latest IC data, only 13.90% of the population was insured in 2009. The insurance penetration rate -- total premiums as percentage of gross domestic product -- was a mere 1.02% that year.

The microinsurance market is growing because there are small, medium and large providers of the low-cost insurance products now, Mr. Vergara explained.

Four insurers -- Pioneer Life, Inc., Philippine Prudential Life Insurance Company, Inc., Asian Life & General Assurance Corp. and Manila Bankers Life Insurance Corp. -- as well as 12 mutual benefit associations (MBAs) are just some of the providers that have submitted microinsurance products for the IC’s approval, he said.

“Manulife (Manufacturers Life Insurance Co.) and Philam Life (Philippine American Life and General Insurance Co.) have also expressed interest and have made courtesy calls to us to inquire about microinsurance,” Mr. Vergara added.

The government’s push for microinsurance -- designed to protect the poor who are most vulnerable to personal or natural catastrophes -- began with the release of the National Strategy and the Regulatory Framework for Microinsurance in January 2010.

The IC then came out with Insurance Memorandum Circular 1-2010 that defined microinsurance. Together with the Securities and Exchange Commission and the Cooperative Development Authority, it issued another circular closing down informal insurance or insurance-like activities.

The Bangko Sentral ng Pilipinas also came out with a circular allowing rural, cooperative and thrift banks to market and sell microinsurance products within their premises.

In January, the IC approved the performance standards governing the microinsurance industry.

Insurers will be evaluated and monitored according to standards or indicators grouped under the acronym SEGURO, which stands for: solvency and stability; efficiency; governance; understanding of the product by the client; risk-based capital; and outreach.

The IC and the Department of Finance last week wrapped up training for IC personnel on how to monitor the performance of microinsurance providers.

“We need to train the regulator because it is the first time we are using these performance standards. But our experience in monitoring insurance products will help us,” Mr. Vergara said.

The training of the IC will then be followed by training for the life and nonlife insurers, as well as MBAs.

The performance standards will be applied to insurers’ 2011 performance, as reflected in their 2012 annual reports.

Mr. Vergara added that as training is being conducted, the nationwide financial literacy campaign to bring insurance education to barangays would be rolled-out.

The campaign seeks to teach low-income Filipinos the basics of insurance, the responsibilities of insurers and the benefits entitled to clients.

Earlier, the IC also approved a prototype product for nonlife microinsurance dubbed “Buhay, Bahay, Kabuhayan.”

The product is designed to give P10,000 worth of coverage against death from accidents or damage to property/business from natural calamities. Consumers can buy up to three units for a total coverage of P30,000. A Buhay, Bahay, Kabuhayan contract is good for a year.

For life insurance, on the other hand, the government is already developing a prototype product that would combine life protection and savings for clients.

With all the preparations being completed to promote the microinsurance industry, Mr. Vergara said he was optimistic a significant expansion would be created. -- Diane Claire J. Jiao

Thursday, March 31, 2011

BSP: Not all banks can issue microinsurance

Business
GMA News TV
Posted March 28, 2011

Not all banks can engage in the business of microinsurance, the Bangko Sentral ng Pilipinas (BSP) said Monday, noting that only "trained and documented" financial institutions should do it.

In a recent advisory to banks, BSP Deputy Gov. Nestor Espenilla Jr. said only authorized banks are allowed to engage in the "presentation, marketing, sale and servicing of microinsurance products."

He said banks can act as microinsurance agents only of insurers authorized by the Insurance Commission. Banks passing a qualifying exam and prescribed training course may act as microinsurance agents, and their articles of incorporation (AOI) should be amended to reflect this fact, Espenilla said.

"In view of the latter requirement, applicant banks shall amend their articles of incorporation by including a secondary purpose of acting as a microinsurance agent, and shall submit simultaneously the amended AOI to the BSP and Insurance Commission," he said.

The central bank will only issue a "No Objection" notice after banks have complied with the requirements, according to the BSP official.

The notice is a requirement by the Insurance Commission before issuing a license to engage in microinsurance, the official said.

The licensed bank shall submit the approved AOI on or before June 30, 2012, otherwise, the license shall no longer be renewed, according to Espenilla.

The "unauthorized conduct of microinsurance as well as other insurance-related activities shall subject a bank and/or the responsible directors and/or officers of the bank to the applicable sanctions and/or penalties under existing banking laws, rules, and regulations," according to the BSP.

Microinsurance is an important advocacy started by former BSP Gov. Rafael Buenaventura that BSP Gov. Amando Tetangco Jr. is now pursuing.

It is a highly regulated business as it impacts on the financial welfare of small borrowers whose trust and confidence in the system forms the bedrock of banking, especially in the countryside, the central bank said.

Wednesday, March 30, 2011

Caraga solon claims creation of micro-insurance for Filipinos timely, badly needed

SURIGAO CITY, March 29 (PNA) -- There is a need to establish a micro-insurance system in the country that would make insurance accessible and affordable to all particularly in rural and poor communities.

Surigao del Norte Second District Representative Guillermo Romarate Jr. on Tuesday said that the establishment of micro-insurance in local government units is now very timely to protect lives and properties especially the poor which suffer the biggest brunt during the onslaught of unpredictable disasters.

Romarate, chairman of the House Committee on Insurance and member of the House Committee on Banks and Financial Intermediaries, recently conducted a committee hearing with private insurance company officials including former Central Bank Governor Jose Cuisia, who is now Philippine American (PhilAm) Life Insurance president, and the officials of the Insurance Commission here.

Insurance Commission Commissioner Atty. Emmanuel F. Dooc, Deputy Commissioner Atty. Vida Chiong and lawyers from the Insurance Commission were also present at the committee hearing.

The Insurance Commission met with bigwigs of the insurance industry to discuss possible amendments on the Insurance Code that will be relevant with the needs of the times.

Romarate said that despite of the great need to insure farms, life and properties at times affected by disasters, only 12 percent are now insured according to statistics.

Romarate said many think that insurance on farms, properties and even lives is an additional expense, attributing the apprehensions especially the marginal poor to the high cost of premiums.

“That is why there is a need to establish a micro-insurance system in this country to make provision of insurance accessible and affordable that will allow cheaper insurance premiums available to all," Romarate said.

On his part, Dooc said the clamor for establishment of micro-insurance in the country have been increasing over the years.

“The Quezon City Government is a great example who gave greater importance on micro-insurance for their constituents under the leadership of former Mayor Sonny Belmonte now Speaker and now Mayor Herbert Bautista. The Q.C. government has taken the lead for local government units to provide insurance through micro systems for their constituents” Dooc told the PNA in an interview.

Romarate said he will study the Quezon City Government experience on micro-insurance on how they partnered themselves with private insurance providers in providing very cheap premiums.

“We will duplicate this Quezon City experience to our LGUs in Surigao del Norte under my district,” Romarate said. (PNA)
DCT/LAM/BS/mec

Thursday, March 10, 2011

IC issues rules for microinsurance agents

BusinessWorld
Finance

Posted on March 07, 2011 08:35:27 PM

THE INSURANCE Commission (IC) has come up with looser licensing requirements for microinsurance agents in a bid to boost the nascent microinsurance industry.
IC released Insurance Memorandum Circular No. 6-2011 dated February 15, but uploaded to its website only last week, exempting microinsurance agents from the required regular licensure examination for insurance agents.

“The applicant for agent’s license shall, in lieu of the examination, undergo an approved and prescribed microinsurance training course and pass the qualifying examination at the end of the course,” the circular said.

IC issues licenses to agents before they can sell products, and this is renewed yearly. Insurance agents are required to pass a written examination by the insurance regulator.

Microinsurance agents, however, will just have to take a course designed by the microinsurance provider, Deputy Comissioner Vida T. Chiong explained to BusinessWorld in a phone interview yesterday.

The training course must cover basic concepts such as the importance of insurance, product types, standard policy provisions and obligations of insurance companies and agents, such as market conduct, claims settlement and the revocation of licenses.

The president of the insurance company and the trainer shall jointly submit to IC a list of those who passed the examination, within five working days after the conduct of the microinsurance training course.

The regulator relaxed the requirements because microinsurance only deals with limited premiums and limited coverages, IC Chief Insurance Specialist Reynaldo M. Vergara told BusinessWorld in a phone interview yesterday.

Insurance agents, in contrast, have the power to charge unlimited premiums and provide unlimited coverage, and therefore are covered by more stringent rules.

The new policy could also act as an incentive for more players to venture into microinsurance.

“[The policy] will encourage microfinance institutions ­ rural banks, cooperatives and nongovernment organizations -- and other community-based institutions to be delivery channels for microinsurance products,” National Credit Council Deputy Executive Director Joselito S. Almario told BusinessWorld in a text message yesterday. “Even civic-oriented groups and sari-sari stores can join the fray!”

With more microinsurance providers, the poor would have greater access to these products, he added.

More microinsurance providers could also bring down delivery costs and consequently reduce premium costs. -- Diane Claire J. Jiao

Tuesday, March 8, 2011

Manulife eyes mutual funds, microinsurance

By TPT (The Philippine Star)
Updated March 01, 2011 12:00 AM Comments (0) View comments

MANILA, Philippines - The Manulife Financial Philippines is opening two new business sectors as part of its aggressive organic growth in the Philippine market.

First, it has launched its first micro-insurance operations areas in Mindanao.

Second, it launched a study on the feasibility of putting up its own asset management firm to manage mutual funds.

“We will create pilot areas in one or two provinces in Mindanao, to be spearheaded by the Philippine operations with the help of Manulife’s regional office,” David Wong, Manulife Financial senior vice president and regional executive for Malaysia, Philippines, Thailand and Vietnam, said.

Wong described the microinsurance market in the Philippines as “informal” as compared to other nations in the Asia Pacific region. But he said that the country was a leader when it comes to mandating microinsurance, under the so-called Regulatory Framework for Microfinance.

Leading the country’s microinsurance parade are the mutual benefit associations (MBAs), while the life and non-life insurance industry are still looking for the right formula.

MBA cater to the under-banked, un-banked and the lower segment of society.

“We would encourage a new and formal system of microinsurance, but we will pilot test these first,” Wong said, adding that each economy had its own peculiarities and culture.

However, the challenge for microinsurance is not so much the micro-products but the distribution and the collections of premiums processes. MBAs are by itself both the distributors and users of microinsurance.

Life and non-life insurance companies are tapping the banking sector to reach out to the microinsurance sector, since rural banks have already been catering to the microentrepreneurs.

Microfinance institutions (MFIs) as well as cooperatives and non-government organizations (NGOs), all cater to the same market for microinsurance.

In fact, the Bangko Sentral ng Pilipinas (BSP) has already allowed thrift and rural banks to help market microinsurance.

Meanwhile, Wong also admitted that they have formed a review team looking up the feasibility of putting up an asset management firm. Asset management companies put up mutual funds for the retail investors as well as investments of the insurer.

The leading asset management firms with huge mutual funds are lead by life insurers.

The Bank of the Philippine Islands (BPI) and the defunct Ayala Life Assurance Co. manages the ALFM mutual funds. Sun Life Financial has an asset management subsidiary called Sun Life Asset Management Co. (SLAMC).

Regulator approves Pioneer microinsurance programs

Manila Bulletin
March 6, 2011, 12:54am

MANILA, Philippines – The Insurance Commission recently approved Pioneer Life’s micro-insurance programs – Group Credit Life Microinsurance and Group Personal Accident Microinsurance (long and short scale). Pioneer was one of the first to receive approval based on Insurance Memorandum Circular 01-2010, which emphasizes “the need for microinsurance, promoting its importance, defining its features and implementing regulations to ensure the safe and sound provision of microinsurance products to the poor.”

Pioneer has been spearheading industry efforts to make insurance available to the mass market, creating programs that are within reach of low income workers. It began conducting financial wellness sessions in 2006, to groups of both adults and the youth, sharing basic concepts of saving and investment. By 2008 Pioneer introduced savings and insurance products that are affordable and easy to acquire. Microinsurance was the logical next step. “Our vision is to become a model Filipino enterprise,” shares President and CEO of Pioneer Life Lorenzo Chan Jr. “In order to do that we have to go beyond serving the standard A-B and corporate markets. For us, microinsurance is a natural progression to bring a useful product to people who need it most.”

In partnership with NGOs and institutions offering microfinance, Pioneer has been offering microinsurance programs that meet the peculiar needs of this market such as the need to be covered for accidents, fire and flood. This early, the claims made by beneficiaries have helped keep kids in school and widows get back on their feet. “Microinsurance is an opportunity for us to make the customer our universe,” says Pioneer Life VP for Microinsurance Geric Laude. “We develop our programs only after we truly understand what their needs are.”

With the Insurance Commission’s approval of its programs, Pioneer is set to move fast forward towards a sustainable microinsurance business

Friday, March 4, 2011

Aquino proposes adoption of new microcredit tack

BusinessWorld
Top Story

Posted on March 04, 2011 12:15:17 AM

BY DIANE CLAIRE J. JIAO

THE AQUINO administration wants to reverse the existing state policy on microfinance, saying government agencies should stay away from direct lending to the poor as this could be exploited for political purposes.

"We will work to institutionalize the National Strategy for Microfinance that was formulated in 1998. We will also make sure that microcredit will not be used as a tool for political patronage," President Benigno S. C. Aquino III said in a speech last week.

Asked if this meant drafting a microfinance law, Sec. Ricky A. Carandang of the Presidential Communications and Development Strategic Planning Office said: "We will wait first for the recommendations from the Cabinet."

The Palace could also draft its own Executive Order or push for a bill from Congress, National Credit Council (NCC) Deputy Executive Director Joselito S. Almario told BusinessWorld.

The NCC is the arm of the Department of Finance focused on creating a credit policy framework that will improve the delivery of financial services to the low-income sector.

In 1998, then President Joseph E. Estrada issued Executive Order (EO) 138 setting the National Strategy for Microfinance. It was in reaction to the government’s experience with direct lending programs to the poor, which resulted in many defaults.

EO 138 limited microfinance programs to government financial institutions (GFIs) such as the Development Bank of the Philippines and the Land Bank of the Philippines that lent wholesale to microfinance institutions (MFIs) such as rural banks, nongovernment organizations and cooperatives.

The directive, however, was repealed in 2006 by Mr. Estrada’s successor, Gloria Macapagal-Arroyo, through EO 558. Amid the public outcry that followed, she issued EO 558-A that allowed the Department of Social Welfare and Development (DSWD) to carry out their own microcredit programs in unserved areas. Government non-financial agencies state firms could also launch their own microcredit initiatives with the approval of the Office of the President.

"This is open to political patronage because these loans can be given to the poor as dole-outs," PinoyME Foundation President and CEO Danilo A. Songco told BusinessWorld.

Mr. Aquino made his statement in last week’s 5th anniversary of PinoyME, a non-stock, non-profit organization that provides funding and training to microfinance institutions. It was founded by his mother, former President Corazon C. Aquino, in 2006 along with business and academic leaders.

Messrs. Almario and Songco agreed with making EO 138 permanent via a law. "[Senator Teofisto D. Guingona III] filed a microfinance bill as a congressman, and we are hoping that he can do the same now in Senate," Mr. Songco said. Mr. Almario said he sent a proposed microfinance bill to the office of then-Senator Aquino in 2008, adding this could be used as a reference for Malacañang’s initiatives.

"An EO will be more expedient and will set the policy direction of the government. But, we have seen how easy it is to revoke an EO, so we also need a microfinance framework made permanent through a law," he said.

Industry players stressed the importance of a national strategy, saying GFIs are the best providers of credit programs for the poor. "In the past, when all government agencies had their own lending programs, they suffered from low payback rates," said Benel P. Lagua, president of state lender Small Business Corporation. The government is effectively creating a deficit by "throwing money to unproductive programs," NCC’s Mr. Almario added.

Mr. Aquino said during his speech that his administration would consolidate remaining credit programs for the poor under "more competent branches of government" to make them more efficient.

In an e-mail, meanwhile, Social Welfare Secretary Corazon J. Soliman told BusinessWorld that their Self-Employment Assistance Kaunlaran (SEA-K) lending program had a national repayment average of 72-75%.

According to the department’s 2009 annual report, SEA-K released a total of P189.452 million to more than 1,600 livelihood projects nationwide, benefitting more than 35,000 families.

The DSWD also provides lending windows for the poor in far-flung areas where microfinance institutions cannot enter, Undersecretary Celia C. Yangco told BusinessWorld.

But NCC’s Mr. Almario argued that these areas had bigger problems that lending alone cannot solve. "They try to go to regions without banks and cooperatives, like the uplands. But the reason why there are no microfinance institutions there is because there is no infrastructure, no market, no economic activity," he said.

The government has to come into these areas not to lend money to the poor but to create an environment where economic activity can thrive first, Mr. Almario said. "We need farm-to-market roads in the uplands. We need peace and order in Mindanao," he said. "When we have these, MFIs will naturally enter these municipalities."

GFIs also oppose the lower interest rates used by government credit programs, saying they are unable to compete. "The subsidy is disguised in the lower interest rates," the NCC’s Mr. Almario explained. "This distorts the market because people think, ‘Why is this interest rate lower than the others? I’ll just borrow here instead’."

Moreover, subsidized credit isn’t sustainable, PinoyME’s Mr. Songco said.

The DSWD’s Ms. Yangco said GFIs and the private sector were pricing themselves out of the market but the NCC’s Mr. Almario argued that high interest rates were not obstacles, citing the prevalence of loan sharks.

"The most effective way of helping the low-income sector is not by bringing down interest rates, but by making credit accessible to them," he said. "GFIs can focus on the lending, and the government can focus on creating the best environment for microfinance to thrive. It’s a partnership."

Monday, February 28, 2011

Insurers adapt to changing climate

BusinessWorld
Posted on February 28, 2011 10:57:18 PM
BY DIANE CLAIRE J. JIAO

AMID forecasts of a stormy summer, the insurance industry is gearing up to provide the public with better protection from typhoons and floods after the devastation wrought by Ondoy and Pepeng in 2009.

"We are more prepared than before because we’ve already gone through very strong typhoons," non-life insurer Federal Phoenix Assurance Company, Inc. President Ramon Y. Dimacali told BusinessWorld yesterday.

"It’s a common practice now for the protection from acts of God to be automatically costed into the premiums of insurance products," he explained. "Then, it is up to the consumers if they want to opt out of it."

Non-life insurance typically only provides coverage from accidents and theft for cars and fire and lightning for property. Protection from damage caused by natural disasters such as typhoons, floods and earthquakes, which are considered acts of God, is not included.

An estimated 75% of all property losses caused by typhoons Ondoy and Pepeng were uninsured for acts of God, Lacson & Lacson Insurance Brokers, Inc. managing director Salvador L. Lacson said in a text message yesterday.

Since then, awareness has spiked, Mr. Lacson said.

"For our company, all our insured have coverage for natural disasters," he said. "Brokers also make it a habit to advise the insured about the importance of acts of God coverage."

Banks have also began to require acts of God coverage for property acquired through housing and car loans, Mr. Dimacali said. Companies are also insuring their car fleets against natural catastrophes.

But this awareness may be short-lived given the additional costs, warned Mario C. Valdez, general manager of the non-life group Philippine Insurers and Reinsurers Association (PIRA).

While rates may vary among different insurers, annual premiums usually cost 1% of the value of the property. Acts of God coverage costs an additional 0.5%, he said. A car worth P1 million would effectively be charged P15,000 in premiums per year.

"Filipinos are very aware now, but after two or three years of paying premiums, they could think, ‘Forget it.’ They could think that typhoons [as strong as Ondoy] only come once every 10 years," Mr. Valdez said.

Awareness could also wane in areas which don’t experience many disasters, he added.

"It’s more economics than awareness. At 0.5% per year, it can be quite expensive," Mr. Valdez said.

Mr. Lacson said customers who approach him have also expressed the reluctance to shell out so much money. However, he said he asks them, "For every peso you save in premiums, how much do you lose in potential claims?"

Disaster-prone

According to the German Agency for International Cooperation’s (GIZ) Study on Demand of Insurance for Natural Catastrophes, the Philippines is one of the countries most prone to natural disasters. An average of 25 typhoons hit every year and Ondoy and Pepeng racked up an estimated P30 billion in overall damage.

Global reinsurance leader Munich Re also singled out Asia as the region most vulnerable to losses caused by natural catastrophes.

"Weather-related catastrophes worldwide and in Asia have tripled since 1980, and the loss potential is rising," Francis Savari, Munich Re Singapore head of client portfolio management, said in an e-mail on Friday.

According to Munich Re data, 32% of the 19,500 loss events from 1980 to 2010 happened in Asia. The region also had 51% of the 2,275,000 disaster-related fatalities during the 30-year period.

Moreover, Asia had an estimated $1.140 trillion in overall losses from natural catastrophes during the 1980-2010 period but insured losses only totalled $66.6 billion.

Major factors for the increasing losses are a rise in population, higher value concentration in extremely exposed regions and climate change, Mr. Savari said.

Reinsurance

To help insurers deal with the destruction caused by natural catastrophes, many industry players have begun seeking partnerships with reinsurance companies abroad.

Reinsurance is insurance for insurance companies, or a practice of spreading the risk to other parties.

Federal Phoenix’s Mr. Dimacali explained: "Most companies don’t usually get reinsurance. But Ondoy sunk entire warehouses, factories, and shopping malls. That is a very big pay-out, more than one insurer can absorb."

Insurance companies are now striking agreements with reinsurers abroad by paying them a portion of the premiums they receive. In return, the reinsurer helps pay for the obligation when a large claim needs to be settled.

"We’ve also began getting reinsurance for car claims, which are usually very small. But when a disaster hits, it’s not just one car that gets damaged. It could be all the cars in the Marikina and Cainta area," Mr. Dimacali said. "The industry probably paid P2 billion in car claims alone after Ondoy."

Broker Mr. Lacson added that the ability of insurers to quickly settle claims -- no matter how large -- would encourage more customers to purchase non-life insurance.

"Ondoy hit Metro Manila in September 2009. By the year-end, we were able to settle all motor claims. Also, 95% of all property claims were settled," he said.

Munich Re’s Mr. Savari did not disclose figures on the portion of their reinsurance business that comes from Philippine insurers. He admitted, though, that there was a "substantial rise in reinsurance demand and interest over the last years."

"With the rise in natural catastrophes, the higher living standards in the Philippines and the increasing capital requirements we expect this to increase further," he said.

Microinsurance

The low-income sector, meanwhile, remains an untapped market.

"They are the most vulnerable because they don’t have enough capital. Sometimes, their cars and their homes are still being paid off," Mr. Dimacali said.

Reinsurance giant Swiss Re emphasized the need for microinsurance.

"The more pressing challenge is how to protect those who are unable to purchase insurance protection for themselves, but whose lives and properties may be directly affected by natural catastrophes. The government may need to step in here," Swiss Re Vice-President Sandra Capay said in an e-mail.

Last month, the Insurance Commission approved a microinsurance product called Buhay, Bahay, Kabuhayan.

The product is designed to give P10,000 worth of coverage against death from accidents or damage to property/business from natural calamities. Consumers can buy up to three units for a total coverage of P30,000.

A Buhay, Bahay, Kabuhayan contract is good for a year.

In an earlier interview, the PIRA’s Mr. Valdez said eight non-life insurance companies had already expressed interest in offering the product this year.

GIZ and Munich Re have also partnered with the Cooperative Life Insurance and Mutual Benefit Services (CLIMBS), an umbrella organization of cooperatives, late last year to offer a natural catastrophe insurance product to 1,600 cooperatives with nearly a million members.

The product, CLIMBS Weather Protect, insures a portion of a cooperative’s loan portfolio so it remains liquid in the event borrowers, affected by natural calamities such as storms, default.

Eighty cooperatives are already set to insure their portfolios this year, CLIMBS Executive Vice-President Isagani B. Daba has said.

"With our product we strengthen the cooperative’s capacity to offer their members financial relief at that time where it is most needed," Munich Re business development manager Thomas Mahl said in an e-mail on Friday.

Friday, February 25, 2011

Manulife to sell micro insurance to rural Pinoys

Business Mirror
Wednesday, 23 February 2011 19:09
Jun Vallecera / Reporter

THE Manufacturers Life Insurance Co., which earlier partnered with local lender China Banking Corp., plans the sale of micro insurance to rural Filipinos on a scale that is not only sustainable, but commercially viable as well.

It is part of the insurer’s multiyear plan to make the Philippines the center of its microinsurance business in the region.

David Wong, senior vice president and regional executive at Manulife Financial operations within the Association of South East Asian Nations or Asean, said they are about to undertake the pilot testing of the project on the island of Mindanao down the country’s south.

Wong noted that most microinsurance programs tend to focus on urban-based middle classes no matter that in Asia some two billion of the population live below the poverty line and have no cover for the various risks they face on a daily basis.

“A large population in rural Asia has no risk cover and this sector is ignored thus far. We need to go to this segment of the population,” Wong said.

He also noted that while microinsurance programs exist in most countries in the region, only the Philippines and India took the trouble to support them with legislative measures that ensure continued viability and growth.

In the Philippines, Wong said some two to three million benefit directly from microfinance programs extended by such carriers as nongovernment organizations, mutual benefit associations and others looking out for the financial welfare of the less financially endowed.

“We are looking at this market and pilot test a program in one or two provinces in the Philippine south,” Wong said of Mindanao where the poverty incidence is relatively higher than in most parts of the country.

What Manulife learns from the project in the months ahead should be instructive as to the size and scope of the microinsurance program they have in mind, Wong explained.

He ruled out risk protection for farmer crops that some insurers are also pilot testing on Leyte island, saying they are thinking along the lines of health and wellness cover.

This means offering rural Filipinos cover for their hospital bills at premium prices that even the poor can afford to pay.

Wong was not too specific but insurance executives said earlier that an affordable health cover typically involves premium payments of around P300 a year

Thursday, February 24, 2011

Cooperatives eye insurance vs extreme weather events

BusinessWorld
Finance
Posted on February 23, 2011 09:26:43 PM
BY DIANE CLAIRE J. JIAO

EIGHTY cooperatives are eyeing insurance for their loan portfolios to protect themselves against a rash of defaults when their members are hit by natural calamities.
Insurers have come up with various products to provide protection as the number of storms that hit the country each year increases in number or severity. -- AFP
Global reinsurance leader Munich Re and the German Agency for International Cooperation (GIZ) have partnered with the Cooperative Life Insurance and Mutual Benefit Services (CLIMBS), an umbrella organization of cooperatives, late last year to offer a natural catastrophe insurance product to 1,600 cooperatives with nearly a million members.

“We are currently in the process of marketing the product to our member cooperatives,” CLIMBS Executive Vice President Isagani B. Daba said in a phone interview with BusinessWorld yesterday.

“We are still closing the deals, but we expect 80 cooperatives to avail of the product this year.”

The product, CLIMBS Weather Protect, insures a portion of a cooperative’s loan portfolio, so it remains liquid in the event its borrowers, affected by natural calamities such as storms, default on their loans.

CLIMBS will act as primary insurer, and Munich Re, the reinsurer.

“[Natural catastrophes] interrupt the cash flow of cooperatives as member-borrowers can lose their livelihood and assets in a single storm and become unable to repay their loans,” read the GIZ demand study, a copy of which was obtained by BusinessWorld.

CLIMBS Weather Protect was developed after tropical storm Ondoy and typhoon Pepeng successively hit the Philippines in 2009. The two typhoons had an estimated combined damage of P30 billion, according to the Office of Civil Defense.

Cooperatives suffered financially as the homes, properties and crops of their members were destroyed, Antonis Malagardis, program manager of GIZ Microinsurance Innovations Program for Social Security, told BusinessWorld in an interview on Friday.

The GIZ study also noted that the Philippines is hit by an average of 25 typhoons yearly. The country is also vulnerable to floods, landslides, droughts, volcanic eruptions and earthquakes.

“The amount of payout depends on the severity of the natural catastrophe,” said Mr. Malagardis, explaining the product. The severity is measured either through wind speed or rainfall.

“We developed a unique set of weather indices for each of the 1,700 municipalities of the Philippines,” he added, since the geographic profile and vulnerability to disasters differ for every area.

If a storm exceeds the weather index set for that municipality, the cooperative in that area receives a payout. If wind speed or rainfall is the highest recorded in 10 to 15 years, the insurer will pay 5% of the cooperative’s loan portfolio. If the highest in 15 to 20 years, 10%; and in 20 years, 20%.

Mr. Malagardis emphasized the need to cover cooperatives as loan institutions, but he added that individual members also stand to gain from CLIMBS Weather Protect, even though it’s the cooperatives that are directly insured.

“Currently, to offset this risk [of loan defaults], cooperatives lend money at a higher interest rate, posing an additional burden to the member-borrower, especially to low-income households,” the GIZ study explained.

Moreover, cooperatives are required to pass on the benefits of the insurance payout to their members.

“Each cooperative establishes a separate Natural Catastrophe Fund and special lending window that offer interest-free emergency loans from the fund to help afflicted members recover,” the GIZ study said.

“We are also planning to extend benefits to households directly. This can be done through cash advances, loan discounts or a rescheduling of their loan repayments,” Mr. Malagardis added.

Wednesday, February 9, 2011

Life-savings product planned

BusinessWorld
Finance
Posted on January 30, 2011 08:24:24 PM

BY DIANE CLAIRE J. JIAO

THE GOVERNMENT is developing a prototype product combining life protection and savings, in a bid to boost the nascent microinsurance market.
The Department of Finance and the National Credit Council, along with the German Agency for International Cooperation (GIZ, formerly German Technical Cooperation or GTZ) and the Asian Development Bank, have been developing prototype products for the microinsurance industry in the Philippines.

A non-life product dubbed “Buhay, Bahay at Kabuhayan” is up for approval by the Insurance Commission (IC).

“Based on our studies, low-income families want a life insurance product they can benefit from even while they are alive,” GIZ Senior Finance Adviser Dante Portula told BusinessWorld last Friday.

Life insurance products typically pay money to beneficiaries of the policyholder only upon the event of his or her critical illness or death.

“The product we are developing will act like a savings account for the poor,” Mr. Portula said. “They will open an account and deposit money.

The monthly premiums for life insurance will be deducted from this savings account.”

He added it will also allow the poor to withdraw their money at any time, especially in cases of emergency.

GIZ, which conducts the technical studies for the government’s microinsurance initiatives, designed the life-savings plan to suit the poor and their erratic wage patterns.

“One season, farmers earn a lot from a good harvest. The next season, a typhoon can hit their province,” Mr. Portula explained. “They may not always be able to pay their monthly premiums.”

The savings account will act as a stable pool of money to collect premiums from, he said.

Collecting premiums will also be made easier as insurers no longer have to nag customers to pay.

However, GIZ has yet to resolve which institutions will be responsible for managing the savings accounts.

“Will it be the Bangko Sentral ng Pilipinas? Will it be insurance companies who provide the life insurance? Or will it be microfinance institutions (MFIs), where the poor are enrolled in?” Mr. Portula asked.

If insurance companies managed these accounts, he said, the savings will have to be booked as liabilities or financial obligations in their accounting books, just like the collected premiums.

On the other hand, MFIs, which presently extend savings and microinsurance services, are worried their members will no longer tap their services since they can get both life insurance and savings accounts from insurers anyway, Mr. Portula said.

“We will fix these issues first, but we expect the life insurance prototype product to be ready by the second quarter of this year,” he said.

Prototype products serve as the guide for insurance firms, cooperatives and mutual benefit associations that want to venture into microinsurance.

The basic features and the terms of the microinsurance product are outlined, but insurers are free to tweak these in case they want to provide additional services. The pricing is not dictated, though, to give insurers room to compete with each other.

However, the prices set by insurers have to comply with the terms set by the IC for all microinsurance products.

According to the IC’s Insurance Memorandum Circular 1-2010, the amount of premiums computed on a daily basis should not exceed 5% of the current daily minimum wage rate of non-agricultural workers in Metro Manila.

The “Buhay, Bahay, Kabuhayan” product is designed to give P10,000 coverage against death from accident or damage to property/business from natural calamities. One may buy three units for a total coverage of P30,000. A contract is good for a year.

Insurers interested in ‘three-in-one’ microinsurance

BusinessWorld
Finance
Posted on February 08, 2011 09:03:08 PM
BY DIANE CLAIRE J. JIAO

EIGHT non-life insurance companies have expressed interest in the “three-in-one” microinsurance product approved by the government last Monday.
The Philippine Insurers and Reinsurers Association (PIRA), which groups 87 non-life insurers, said this number could still rise, hailing microinsurance as the “next big step” for the insurance industry.

“We are just about to release the circular about the prototype product to our members,” Mario C. Valdez , PIRA general manager, told BusinessWorld in a phone interview yesterday.

“However, five companies have already inquired about it, while three others are looking to expand their existing microinsurance product line.”

Mr. Valdez declined to name the companies, though, as the Insurance Commission (IC) will still have to approve companies’ respective products before these can be offered in the market.

The Department of Finance and the National Credit Council, along with the German Agency for International Cooperation (GIZ) and the Asian Development Bank, have been developing prototype products in a bid to boost microinsurance in the country.

IC approved on Monday the non-life prototype product dubbed Buhay, Bahay, Kabuhayan.

The product is designed to give P10,000 worth of coverage against death from accidents or damage to property/business from natural calamities. Consumers can buy up to three units for a total coverage of P30,000. A Buhay, Bahay, Kabuhayan contract is good for a year.

“Microinsurance is the next big step for our industry. It’s such a large market that we can tap, probably worth P2 billion,” Mr. Valdez said.

The non-life microinsurance market is presently estimated at just P200 million.

He said Filipinos from the low-income sector have realized the value of insurance, especially after tropical storm Ondoy wreaked havoc in Luzon in 2009.

“We are also complementing the prototype product with financial literacy campaigns nationwide, to encourage more people to purchase insurance,” Mr. Valdez added.

While the basic terms and conditions were already set in Buhay, Bahay, Kabuhayan, the government gave room to insurers to price the premiums of the product themselves.

“If they have an efficient business model, they can afford to price the products lower. Usually, companies tie up with microfinance institutions so they can reach more people,” GIZ Senior Finance Adviser Dante Portula told BusinessWorld yesterday. “The pricing is where they will compete.”

He added that insurers could tweak the prototype and add their own features to it, as long as it complied with the terms set by IC for all microinsurance products.

According to IC’s Insurance Memorandum Circular 1-2010, the amount of premiums computed on a daily basis should not exceed 5% of the current daily minimum wage rate of non-agricultural workers in Metro Manila.

“Insurers have to get the approval of the Commission for their new product offerings. However, since the terms and conditions of Buhay, Bahay, Kabuhayan were already pre-approved by IC, non-life insurers can expect faster processing for their microinsurance products,” Mr. Portula said.

The next step now for donor institution GIZ is to support the PIRA members who will venture into microinsurance, he shared.

“We will help link insurers to different distributing partners, like microfinancing institutions, schools, religious organizations and pawnshops,” Mr. Portula said.

Tuesday, February 8, 2011

Amendment to Insurance Code approved

BusinessWorld
Finance
Posted on February 07, 2011 09:41:17 PM

INSURANCE CONSUMERS have to be careful on who they entrust their premium payments to, as they will be held responsible should their brokers fail to remit these payments to insurance companies.
The House banks and financial intermediaries committee yesterday approved a provision in House Bill No. 1502 seeking to amend the Insurance Code. The approved provision stated: “Payment of premiums to brokers is not considered payment of premiums to insurers.”

Brokers are financial intermediaries who find sellers of insurance products on behalf of their clients. They are different from insurance agents who represent specific insurance companies. Payments made to insurance agents are considered payments made to insurance companies.

The Insurance Code provides that “No policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid.”

The approved amendment, however, was contested by Surigao del Norte Rep. Guillermo A. Romarate, Jr. who pointed out this could expose the public to risk.

“They might expect protection, not knowing their payments to their brokers were not received by the insurer,” he said during the hearing yesterday.

But industry players did not want to be held liable for erring brokers either.

“We cannot extend coverage when we have not received a single centavo,” said Fortunato D. Peralta, Philippine Insurers and Reinsurers Association (PIRA) deputy general manager.

He explained that brokers were representatives of insurance clients, unlike agents who have contractual obligations to insurers.

“They are ‘shopping boys’ for the assured, based on industry parlance,” Mr. Peralta explained. “They are not representatives of the insurers.

That’s why they don’t even get commissions, like agents.”

PIRA board member Victoria B. Roman also revealed there was a scheme in the past wherein some brokers allegedly made money by pocketing their clients’ premium payments.

Industry practice usually allows brokers a credit extension or a grace period of 90 days after a policy is issued, before payments have to be made.

“Clients already have an insurance policy in those 90 days. But there are some brokers who would cancel the policy on the 89th day, and then move to another insurance company, and then start all over again,” Mario C. Valdez, PIRA general manager told BusinessWorld in a phone interview yesterday.

Mr. Valdez added that a client could be moved to different insurance companies and effectively earn coverage for an entire year, without premiums actually being paid to an insurer.

Mr. Romarate, however, insisted insurance companies were in the best position to control brokers.

“But if we had a measure of control over them through a contract, they wouldn’t be brokers anymore. They would be agents,” PIRA’s Mr. Peralta said.

So, to strike a balance between the interests of the insurers and the protection of consumers, the House banks and financial intermediaries committee resolved that the provision would instead read, “Payment of premiums to brokers, who are not agents of insurance companies, is not considered payment of premiums to insurers.”

Industry players suggested several measures to help the insuring public protect their premium payments.

“Deal with brokers you know and trust,” PIRA’s Mr. Valdez said. “Always ask for the original receipt of the insurance company, not just the acknowledgment receipt of the broker.”

Consumers often think paying premiums is a nuisance, he added. Once they make their payments, they no longer bother to get proof it has been remitted to insurance companies.

Philippine Life Insurance Association representative Jose L. Cuisia, Jr. also urged the Insurance Commission to regulate brokers, since they are the ones who give licenses to them.

Mr. Valdez was quick to clarify, though, that the scam of pocketing premiums was limited to a few brokers. -- Diane Claire J. Jiao

Tuesday, February 1, 2011

Insurance Commission OK’s microinsurance standards

BusinessWorld
Finance
Posted on January 31, 2011 09:26:37 PM

THE INSURANCE Commission (IC) has approved the performance standards that will govern the microinsurance industry, an official said yesterday.
The performance standards dictate how insurance companies, cooperative insurance societies and mutual benefit associations providing microinsurance products and services will be evaluated and monitored by IC.

“The performance standards are crucial because they will ensure the financial stability of microinsurance providers and, in turn, the protection of the consumers,” Deputy Insurance Commissioner Vida T. Chiong said in a phone interview with BusinessWorld.

She said the IC is readying a draft circular for Insurance Commissioner Emmanuel F. Dooc’s signature.

Insurers will be evaluated and monitored according to standards or indicators grouped under the acronym SEGURO, which stands for: solvency and stability; efficiency; governance; understanding of the product by the client; risk-based capital; and outreach.

According to the draft circular obtained by BusinessWorld, the risk-based capital, solvency and stability indicators will be applied to insurers’ total operations, while the others will be applied only to their microinsurance operations.

Solvency and stability measure the soundness and strength of the microinsurance provider. Insurers must have the capacity to cover all their liabilities or financial obligations, including the claims of clients, in the short- and long-term.

Efficiency, on the other hand, should show how premiums cover not only the benefits promised to the insured, but also operational and transactional expenses like commissions and taxes.

Efficiency also determines how fast clients are paid after the submission of the complete, required set of claims documents.

“A short time to pay-out indicates good service and good value of insurance to the client,” the document read.

The performance standards set a limit of 10 working days for pay-outs.

Moreover, IC monitors the risk-based capital of microinsurance providers. This is the minimum amount of capital needed to support the degree of risks insurers take on in their operations and investments.

In addition to studying the performance of individual insurers, several standards also measure the growth and development of the microinsurance industry as a whole.

One indicator is based on clients’ understanding of the value of microinsurance products.

The renewal ratio compares the number of in-force policies and terminated policies. The number of claims filed by clients that are rejected by insurers can also indicate how well the insured understand the product.

Meanwhile, the outreach indicator determines the extent of the microinsurance business. This is measured by the growth in the number of clients and the growth in collected premiums.

Lastly, the governance indicator determines if the conduct of business complies with the principles of good governance. Insurance providers have to be transparent and educate their clients about the responsibilities of both the insurer and the insured.

“Our higher goal is to increase the penetration of microinsurance in the country and to help our less privileged Filipinos,” Ms. Chiong said.

“It is also the responsibility of microinsurance entities to make sure the industry grows.”

She urged insurers to participate in IC’s nationwide campaign for financial literacy, to encourage more people to purchase microinsurance products.

The performance standards will be used to evaluate the operations of microinsurance providers beginning this year. The standards will be applied to annual statements submitted by insurers in 2012. -- Diane Claire J. Jiao