Microinsurance: Current Initiatives,

Rules and Regulations

ADVOCACY SEMINAR ON MICROINSURANCEManila Diamond Hotel, ManilaJanuary 27, 2011

The Philippine Insurance Market(2010)

Relatively small Insurance industry

with P613 billion assets

• 78% from the life insurance sector (34 companies)• 18% from the non-life sector (87 companies)• 4% from MBAs sector (26 MBAs)

Total Industry Assets• 12% of the banks’ total deposits of P5.1 trillion• 5th largest asset in the ASEAN insurance markets (10 countries)

• Total Industry Premium Volume - P98 billion

Life Sector - P71 billion (72% share)

Non-Life Sector - P23 billion (24% share)

• Total Industry Premium Volume - 5th largest in the ASEAN insurance markets

The Philippine Insurance ……

MBA Sector - P 4 billion (4% share)

Lowinsurance

take up

• Insurance Consumption

Insurance Penetration - 1.08% of GDP

(ratio of premium volume to GDP) Insurance Density (amount of premium per capita) Life Insurance - P798

Non- Life Insurance - P245

• Estimated life insurance coverage - 19% of the population of 94 million (18 million)

The Philippine Insurance ……

• Insurance Penetration - 5th highest in the ASEAN insurance markets

• Insurance Density

Life Insurance - 6th highest in the ASEAN insurance markets

Non- Life Insurance - 7th highest in the ASEAN insurance markets

The Philippine Insurance ……

Low Market Penetration

• Lack of appreciation of the importance and benefits of insurance

• Insurance products mostly cater to the middle and upper income market

• Insurance products are unaffordable , not accessible and not tailor-fitted to the risk protection needs of the poor

• Insurance is an additional financial burden to the poor

• Insurance contracts are long, complex and contain provisions that are too complicated to the poor

Low Income Sector - A Potential

Insurance MarketAbout 26.5% of the population of 94 million are

below the poverty line (25 million)

Of the 25 million Filipinos, only 2.9 million have some kind of risk protection.

Of those provided, about 50% were covered by informal insurance schemes.

They are most vulnerable to illness, physicalInjury, accident or death, natural calamities.

Thus, they need risk protection.

Circulars Issued by the IC on Microinsurance (MI)

MICROINSURANCE

Daily Contributions/premiums not more than 5 percent of the current

daily minimum wage rate(P20.00)

Guaranteed benefits not more than 500 times the daily

minimum wage rate.(P200,000.00)

Insurance Memorandum Circulars (IMC) 9-2006 & 1-2010)

Common Provisions for Individual/Group Insurance Plans

Traditional Insurance Products

Microinsurance Products

(IMC 1-2010)

Maximum Premium

No Limitation

5% of the current daily minimum wage rate in

Metro Manila Maximum Benefit

NoLimitation

500 times the daily minimum wage rate in

Metro Manila Policy Contract Full of complex

conditionsSimple and easy to

understand

Frequency of Premium Collection

Monthly, Quarterly, Semi-Annual, Annual

Daily, Weekly, Monthly, Quarterly, Semi-Annual,

Annual

Key Distinctions Between Conventional

Insurance and Microinsurance

Common Provisions for

Individual/Group Insurance Plans

Traditional Insurance Products

Microinsurance Products

Grace Period 31 days from premium due date

45 days from premium due date

Contestability Period

Maximum of 2 years from date of issue or

last reinstatement of the policy

Maximum of 1 year from date

of issue or last reinstatement of

the policy

Key Distinctions……….

Common Provisions for

Individual/Group Insurance Plans

Traditional Insurance Products

Microinsurance Products

Suicide Clause Maximum of 2 years from date

of issue or last reinstatement of

the policy

Maximum of 1 year from date of issue or last reinstatement

of the policy

Claims Settlement

Within 60 days after submission

of complete documents

Within 10 days after submission of

complete documents

Key Distinctions……….

The contract for microinsurance product

shall bear the microinsurance logo.

Key Distinctions……….

Who can provide MI – (IMC 1-2010)

•Life insurance Companies

•Non-life insurance Companies

•Mutual Benefit Associations

•Cooperative Insurance Societies

All entities licensed by the

Insurance Commissi

on

Who can sell MI products

(IMC 1-2010 and CL 6-2011)Microinsurance

agents • Individuals or entities

licensed by the IC to obtain or solicit microinsurance on behalf of a duly licensed insurance entity.

• Not required to take the regular licensure examination agents

• Shall undergo an approved microinsurance training program and pass a qualifying examination

Microinsurance brokers

• Individuals or institutions licensed by the IC to solicit microinsurance products on behalf of clients

License only covers the solicitation of microinsurance products.

Individuals or entities such as MFIs (rural banks, cooperatives and NGOs) can be licensed

Those with regular license are allowed to sell and distribute MI products

Who can sell ……….

On Informal Insurance – Joint Memorandum Circular (JMC) 1-

2010 WITH REGULATION

• Contributions/premiums are regularly collected prior to the occurrence of a contingent event; and

• Guaranteed benefits are provided upon the occurrence of a contingent event.

NO REGULATION• Individuals voluntarily pledge and contribute a certain amount of money to a fund

• Benefits are not pre-determined but are contingent to the amounts collected. (e.g. Damayan/ Abuluyan Scheme)

What should be done by unregulated entities – (JMC 1-2010 and JMC

3-2010)

Terminate informal insurance or insurance-like activities by

December 31, 2011

Formal Arrangements with authorized

insurance providers

Organize into an insurance provider and

seek appropriate authority from the

Insurance Commission

Terminate informal insurance activities by December 31, 2011 (JMC 3-2010)

JMC 1-2010

What should be done by unregulated entities (JMC) 1-2010)

Formal arrangemen

ts

• Partnership with commercial insurance companies• Membership in an existing

Mutual Benefit Association (MBA) Cooperative

insurance provider

How will MI operations be evaluated (CL 5-2011)

All licensed entities with MI operations shall be evaluated using the set of performance standards called SEGUROMeasures the following: Solvency, Efficiency, Governance, Understanding of the Product by the Client, Risk Based Capital and Outreach

SEGURO shall be used as an early warning system to identify entities with concerns

MI entities to submit annually (starting 2012) resulting indicators using the set of PS and the corresponding AS.

Regulatory Space for Microinsurance

Providers/Intermediaries

Lower guaranty fund requirement for MBAs wholly engaged in

microinsurance.Lower capitalization requirements

for MI agents and brokers .

Market Response to date…….

15 Microinsurance (MI) MBAs licensed

18 Rural Banks licensed as MI Agents

72 Individuals licensed as MI Agents

59 MI products approved (40 life and 19 non-life)

19 Insurance Companies and 15 MBAs with approved MI products

3,177,732 MI policies/certificates issued by the MI MBAs

966,681 MI policies/certificates issued by the insurance companies

Market Response to date…….

Malaki ang maaasahang kaunlaran ng bayan kapag ang nakararami ay protektado at nakaseguro. Kailangan na natin ang Microinsurance. Magtulungan tayong lahat!!!

Thank you!!!