Draft microinsurance standards, product OK’d

BusinessWorld
Finance
Posted on 09:33 PM, January 04, 2011
BY PRINZ P. MAGTULIS, Reporter

STANDARDS for the nascent microinsurance industry as well as the prototype of a non-life product may be released by the Insurance Commission (IC) at the end of the month, after these were approved by an interagency committee.

“Yes, we approved them. They are now with the IC,” Finance Undersecretary Gil S. Beltran, who headed the committee, told BusinessWorld last Thursday.

Joselito S. Almario, deputy executive director of the National Credit Council, said in a separate phone interview last Thursday that “circulars will be issued on Jan. 31” in time for the “start of a financial literacy campaign to educate insurers” about the developments.

“Deputy [Insurance] Commissioner (Vida T. Chiong) decided to wait for the new commissioner to take over. He will be the one to issue the circulars,” he explained.

Mr. Almario oversaw the work of three technical working groups that worked on the standards, the prototype and the roadmap for the financial literacy campaign. The groups made draft circulars that were then forwarded to the steering committee for review.

The groups and the committee were composed of representatives from the IC, the Securities and Exchange Commission, the central bank, the Cooperative Development Authority, and insurance groups Philippine Life Insurance Association, Inc. (PLIA) and Philippine Insurers and Reinsurers Association (PIRA).

The draft circulars have been submitted to IC for final approval.

Emmanuel L. Dooc was appointed Insurance Commissioner last Dec. and will assume office within the month. Ms. Chiong has been acting as IC officer-in-charge in the meantime.

The performance standards will govern microinsurance providers, which include commercial insurers, cooperative insurance societies and mutual benefit associations.

The standards, known collectively as “SEGURO” -- for Solvency and Stability, Efficiency, Governance, Understanding of the product, Risk-based capital, and Outreach -- will evaluate insurers based on their solvency, level of risk-based capital, among others.

Standards will be used essentially “to evaluate a microinsurance firm’s viability and capacity to support future claims,” Mr. Almario explained.

The plan is to have the standards in place starting this year, he said, and for microinsurance providers to report to IC “how they performed against the standards by submitting their financial statements in 2012.”

“The [IC] shall use the performance standards to identify as early as possible entities whose financial conditions and/or performance...are [of] concern and if warranted, recommend appropriate remedial measures,” the draft standards read.

Ms. Chiong, in a separate phone interview last Thursday, said the new standards will provide “regulatory space” to microinsurers as they are now subject to the “higher standards” followed by the big insurance companies.

Insurance Memorandum Circular (IMC) 1-2010 issued in January last year provided the regulatory framework for microinsurance.

The circular defined microinsurance and set a P200,000 maximum coverage with daily premiums “not exceeding 5% of the minimum wage in Metro Manila” or at about P20 at present.

IMC 1-2010 allowed 16 microinsurance products to be registered with the IC, but Mr. Almario said prototype products are being developed for both non-life and life insurers in order to expand the microinsurance market.

Non-life insurers grouped under PIRA will soon be marketing the “three-in-one” product known as “Buhay, Bahay at Kabuhayan” after the prototype was approved by the steering committee.

The product, Mr. Almario said, will allow clients to have a maximum of P30,000 coverage with premiums “depending on the costing to be provided by the company.”

The P30,000 coverage is divided into: P10,000 for beneficiaries in case of death of the insured; P10,000 for a destroyed house; and P10,000 for a damaged business establishment due to natural calamities.

A prototype for life insurers is still being developed.

Mr. Almario added that a financial literacy campaign that will be conducted nationwide will push through by Jan. 31 to “educate insurers and potential clients about the standards and the non-life product from January to June.