THE GOVERNMENT no longer pushed through with its plan of coming up with
a prototype microinsurance product combining life protection and
savings, choosing instead to leave it up to market players to design it.
Rino C. Asuncion, senior adviser at the German Agency for International
Cooperation (GIZ), said the government "called off" the plan after
holding focus group discussions with representatives of the life
insurers' association, Philippine Life Insurance Association, Inc.
(PLIA), and microfinance institutions (MFI) last February.
In January, the Department of Finance, the National Credit Council,
along with the Asian Development Bank and GIZ, announced they were
developing a prototype product combining microinsurance and savings,
with insurance premiums to be deducted from savings accounts. The
product, as well as a non-life microinsurance product called "Buhay,
Bahay at Kabuhayan," was envisioned to give a boost to the nascent
microinsurance industry.
"The result of the FGDs made us decide to not pursue with our plan to
create a prototype product that would combine life insurance and
savings," Mr. Asuncion said.
PLIA, during the FGDs, asked to "leave the product specifications to
them" as some life insurers already offer a life insurance product with
a savings component.
"PLIA wanted the freedom to construct the savings component of the
product. It was just a matter of adjusting their existing products with
a savings component to fit the microinsurance market," Mr. Asuncion said.
PLIA also pointed out the difficulty of administering the savings
component of the product.
"Aside from working as an insurance company, they would have to work as
a 'bank' because of the savings component. So it would require insurance
companies to either work with a bank or buy a new system or invest in a
technical support group, which would be costly for them," he said.
MFIs, meanwhile, opposed a microinsurance product combining life
protection and savings as this would "directly compete" with their
savings products.
MFIs are composed of rural banks, cooperatives and nongovernment
organizations.
Mr. Asuncion said PLIA and MFIs instead asked the GIZ and the other
institutions to come up with a simplified and standardized contract for
a life microinsurance product, so a consumer could easily understand the
product he or she was purchasing.
Contracts that covered insurers' existing products were long and
complicated.
"We came up with a contract and PLIA submitted it to the Insurance
Commission (IC) for approval," he said.
The contract was approved "months ago," he said.
For his part, National Credit Council Deputy Executive Director Joselito
S. Almario, in a phone interview, said: "We decided to leave to the
insurance providers the decision to come up with a microinsurance life
product with savings."
"We didn't want the industry players to have the impression we were
dictating to them what product to sell. We didn't want that," he said.
Insurers at present are allowed to design their products in line with
their target market's demand and their products are considered
microinsurance products as long as they comply with the IC's definition
for such products.
According to IC's Insurance Memorandum Circular 1-2010, microinsurance
products are those whose daily premiums do not exceed 5% of the current
daily minimum wage rate of non-agricultural workers in Metro Manila.
Furthermore, the maximum sum of guaranteed benefits should not be 500
times the daily minimum wage rate for non-agricultural workers in Metro
Manila.
Fifty microinsurance products have been approved since the circular was
issued in January 2010. Of these, 33 were life products while 17 were
non-life products.
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