Banks capitalizing on microinsurance

Banks capitalizing on microinsurance

THREE BANKS have applied for licenses while others have signified interest after the central bank allowed cooperative, rural and thrift banks to sell microinsurance.
“So far, there have only been three applicants but many are preparing to apply,” Bangko Sentral ng Pilipinas (BSP) Deputy Gov. Nestor A. Espenilla, Jr. said in a text message yesterday.He declined to identify the three banks.

The BSP issued Circular 683 on February 23, 2010 that allowed cooperative, rural and thrift banks to either sell microinsurance or serve as collection and payment agents.

The circular noted that the sale of microinsurance will complement banks’ microfinance business, and as such, microinsurance is considered a “financial product of an allied undertaking” under Section 20 of the General Banking Law.

The big banks, on the other hand, must have a 5% stake in insurance firms in order to engage in bancassurance or the sale of insurance within bank premises.

Circular 683 complemented issuances in 2010 by the Insurance Commission (IC), which set the regulatory framework for microinsurance and ordered informal insurance or insurance-like schemes to close.

The IC has since then set the performance standards that microinsurance providers must comply with and the guidelines for training programs for microinsurance agents.

On March 18, the BSP came out with Memorandum No. 2011-15 to remind banks that only those authorized “are allowed to engage in the presentation, marketing, sale and servicing of microinsurance products.”

“The memo to all banks is for the purpose of reminding and informing the banks of the Insurance Commission requirements before a bank can act as an agent for microinsurance,” Mr. Espenilla said.

According to the memo, banks must choose insurance providers authorized by the IC. They themselves must also be licensed by the IC, and for this, they need to attend a microinsurance training course, pass the test at the end of the course and amend their articles of incorporation.The amended articles of incorporation should be submitted to both the IC and the BSP.

But since it takes the BSP a long time to evaluate amended articles of incorporation, it will issue a “No Objection” notice to banks in the meantime when it sees they have no “serious supervisory concerns.”

The “No Objection” notice shall serve as basis for the IC to issue banks their licenses.

“Unauthorized conduct of microinsurance as well as other insurance-related activities shall subject a bank and/or responsible directors and/or officers of the bank to the applicable sanctions and/or penalties under existing banking laws, rules and regulations,” the memo further read.

In a telephone interview yesterday, Deputy Insurance Commissioner Vida T. Chiong said banks are required to undergo training to ensure their future clients will be protected. “There should be at least one employee to be trained,” Ms. Chiong said.

“Moreover, it should be spelled out in (banks’) articles of incorporation they are a micro-insurance agency. It is part of their business, otherwise they cannot engage in micro-insurance activities,” she added. -- ASOA

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