Microinsurance gets rolling in rural areas

Microinsurance gets rolling in rural areas

AS most rural residents, which comprise a near majority of the population, are still without the benefit of insurance coverage, the potential of the micro insurance business is boundless. But what is needed is an earnest effort from both the government and the private sector for an education drive in the countryside.

The Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC) recently released the guidelines for the provision of micro insurance through the rural banking system to take the place of mostly informal insurance schemes in rural communities.
An ironic situation exists in the country where the most vulnerable to natural calamities are the least insured. The government is mandated to provide insurance coverage to those who have the least means to obtain them but it does not have enough resources for such service, thus the need for the private sector to lead in the microinsurance market. Even counting the informal schemes such as the so-called paluwagan among mostly cooperatives, the penetration of insurance services in the rural areas is very low.

IC data showed only 13.9 percent of the population last year was covered by some form of insurance. Among the poor, only 2.9 million of the 27.6 million Filipinos below the poverty line have some form of cover for their future. Since most of the clients of rural banks are farm workers and are considered the most susceptible to weather changes—they being the most in need of ample insurance cover—banks in the countryside would be the best conduits for microinsurance.

With the recently released guidelines, rural banks can now offer microinsurance services to all borrowers and depositors including their family members as dependents. Rural bank clients qualify for microinsurance services if they have a savings account with an average daily balance of P15,000 or below that would cover majority of depositors among rural banks. Estimates made by the BSP showed the microinsurance service can raise P2.5 billion annually even on premiums of as low as P1 a day with potential client base of seven million rural bank depositors.

Microinsurance is an integral service that protects not only the insured rural folk but also the availability of lending since banks will have less to worry about with the radical shifts in weather affecting farm businesses and loan exposures.

Crop insurance, as an example, provides farmers affected by natural calamities the seed money to restart their businesses. The new IC circular states that all insurance firms, cooperatives, and mutual benefit associations licensed by the commission may sell microinsurance products, which may consist of one type or several products—life, nonlife and health—bundled together.

It also requires microinsurance agents to be licensed by the commission. These agents, however, need not take the regular licensure exam but must undergo a special training program and pass a qualifying exam. To get the ball rolling for microinsurance, the Department of Finance (DoF) and the IC have launched a campaign to promote microinsurance awareness in the country.

The collaboration between the national government and local government units (LGUs) is seen as a key move to promote risk protection in the rural areas. Aside from the government initiative, the United States Agency for International Development (USAID)-backed Microenterprise Access to Banking Services (MABS) program of the Rural Bankers Association of the Philippines (RBAP) held series of forums to propagate the microinsurance business in the countryside primarily through the training of its bank members.

RBAP-MABS seminars and workshops provide rural banks with information on initiating the process to become licensed microinsurance agents. The RBAP has partner-insurers for its member banks established insurers AA International, Country Bankers Life Insurance, Philippine Prudential Life, PhilAm Life, Pioneer Insurance, Malayan-Grepalife and MicroEnsure Philippines.

The propagation of microinsurance would only redound to the benefit of majority of Filipinos but a serious effort must be made to convince them that insurance is not only for the rich.

A private-public partnership is needed towards this end.

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