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.