INSURERS INTERESTED IN 'THREE-IN-ONE' MICROINSURANCE
February 8, 2011 by Microfinance Africa
BY Diane Claire J. Jiao, Business WOrld Online -
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.
