Business World
March 30, 2010
AN international investment fund specializing in microinsurance is looking for local partners, noting the country’s large untapped market and the government’s promotion of the low-cost insurance product.
In a briefing last week, Stephane Chatonsky, principal of microinsurance fund LeapFrog Investments, said the firm has identified the Philippines as one of its key markets, and is willing to invest up to $25 million of the $110 million raised from various investors in the country.
Mr. Chatonsky said LeapFrog, founded in Luxemberg and maintaining offices in Australia and the US, chose the Philippines because of its attractiveness as investment destination.
“We chose the Philippines because of the stable macroeconomic environment and good potential for growth,” he said.
“The government has also realized [mi-croinsurance] is a good tool for poverty alleviation and it is pushing hard to get commercial insurers and non-profits to develop it.”
Mr. Chatonsky said LeapFrog is looking at investing in large insurance companies and developing their microinsurance products.
It may also invest in smaller firms that sell microinsurance, or tie up with microfi-nance institutions, church groups or telecommunication firms that serve as distribution channels for the products.
Mr. Chatonsky noted that 70% of Filipinos could be classified as “low-income” but can afford to buy insurance so the potential market for microinsurance is “huge.”
LeapFrog, in its website, claimed it is the “world’s first microinsurance fund.” It said it aims to bring financial services to poor people in India, Kenya, Ghana and South Africa, aside from the Philippines.
Its investors include the International Finance Corp. of the World Bank Group, the Soros Economic Development Fund of billionaire investor George Soros and Accion, one of the world’s largest micro-finance institutions.
Insurance Commissioner Santiago Javier Ranada welcomed the development.
“This will help low income groups. We appreciate them helping because as of now there is low coverage for the D and E income groups, especially in rural areas,” he said in a telephone interview yesterday. “Now, they can get insurance for business, life and health.”
Mr. Ranada hopes LeapFrog’s interest in the Philippines signals the start of investments into the local microinsurance industry.
“[Getting investors in the industry is really] the idea behind the release of rules on microinsurance, since people will be more willing to invest if they know the rules of the game,” he added.
Microinsurance, he pointed out, is a potential multibillion-peso industry, given the number of Filipinos belonging to the D and E classes who are without the protection insurance provides.
In January, the Insurance Commission (IC) issued a circular that amended Insurance Memorandum Circular (IMC) 9-2006, the previous order that governed the microinsurance industry.
The new circular states that all insurance firms, cooperatives, and mutual benefit associations licensed by the IC may sell microinsurance products, which may consist of one type, or several -- life, non-life and health -- bundled together.
It also requires microinsu-rance agents to be licensed by the IC, but they do not have to take regular licensure exam. Instead, they must undergo a special training program and pass a qualifying exam.
The circular also redefines microinsurance as those whose amount of premiums, contributions, fees or charges, computed on a daily basis, does not exceed 5% of the current daily minimum wage rate for non-agricultural workers in Metro Manila.
The maximum sum of guaranteed benefits should be not more than 500 times the daily minimum wage rate for non-agricultural workers in Metro Manila.
Mr. Chatonsky said that aside from providing funding, LeapFrog can provide expertise to help develop the country’s microinsurance industry.
“The big challenge is the distribution channel. It has to be really efficient. You have to reach the poor in a very cost effective way and... some insurers don’t know how to do it,” he said.
“We have done it in India and Africa. It was difficult but we have done it so we are bringing that expertise to the Philippines.”
Mr. Chatonsky said that while microinsurance is good business, it also benefits the poor.
“By providing microinsurance, we give people the opportunity to get out of poverty. This will allow them to manage risks through affordable and quality insurance policies so if something bad happens to them, they can continue to live their lives and accumulate assets,” he said. -- Don Gil K. Carreon
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