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
CONGRATULATIONS TO THE MICROINSURANCE TWG! another milestone achieved :)
ReplyDelete... was wondering though if there's any date targeted for the issuance of the circular on MI Agent Training & Licensing. Rural banks have forged ahead with our Basic Microinsurance Training for Bank Officers and Staff just last week in pursuit of regulatory compliance re: Agent licensing & accreditation. We hope the Circular would be issued very soon since it'll be key to RBs and other institutions serving as delivery channels for MI.