Study for national micro-insurance program gets funding from Germany

MANILA, Philippines - A technical cooperation grant, extended by the German Ministry of Economic Development and Cooperation worth three million euro, will be used to craft a national micro-insurance strategy, mount a consumer education campaign, and launch pro-poor insurance products and services in the local market.

The national strategy will be a four-year Microinsurance Innovations Program for Social Security (MIPSS) that will be designed to extend viable insurance coverage – from life to health and calamity insurance – to millions of disadvantaged Filipinos and informal microenterprises that have limited access to government social protection systems.

Among the key proponent agencies behind MIPSS are the Department of Finance (DOF) through the National Credit Council (NCC), the Insurance Commission (IC), Department of Health (DOH), Philippine Health Insurance Corp. (PhilHealth) and the German technical cooperation arm or GTZ.

The program will also work closely with private insurance groups, mutual benefit associations (MBAs) and the microfinance sector. German reinsurance firm Munich Re is being eyed as the risk carrier for a possible crop insurance product.

MIPSS project manager Antonio Malagardis noted that during contingencies and catastrophic events, the country’s uninsured poor households and microenterprises rely on help from family members, prohibitive credit, encashment of savings, or do away with expenses for basic needs that only worsen their impoverishment.

“By foregoing medical treatment in times of illness, the illness becomes both a consequence and cause of their poverty,” Malagardis said. “That’s why insurance systems have become a key component of poverty reduction in many developing countries. Microinsurance schemes in particular have gained importance.”

Malagardis disputes the perception that poor sectors cannot afford insurance premiums.

Microfinance experience in the Philippines and globally proves that microentrepereneurs can save and can pay their loans on time,” he said. Some microfinance institutions (MFIs), in fact, already offer insurance-like schemes to their members.

“Microinsurance can therefore adopt a similar concept of small amounts of frequent payments – weekly for example –to make premiums affordable and according to their cash flow capacity,” he added.

A draft national microinsurance framework by the NCC estimates that microinsurance premiums should not exceed five percent of the current daily minimum wage rate, while the maximum sum of guaranteed benefits would not be more than 500 times of the daily minimum wage. The draft framework states that microinsurance policies or contracts should be printed in both English and Filipino for better understanding of clients. Furthermore, documentation should be simplified and collection schemes should not be onerous. 

Meanwhile, GTZ country director Jochem Lange said that the program will collate the lessons from both public and private sector microinsurance approaches to come up with affordable and reliable insurance products.

GTZ has wide experience in assisting developing countries with microinsurance schemes, many of which have been integrated into national or regional social protection systems. Acting on behalf of Germany’s Ministry for Economic Development and Cooperation, GTZ contributes policy advisory, planning support, feasibility studies, social health protection systems introduction and reforms, trainings in financial risk management and health insurance scheme evaluation.

GTZ has also been assisting the Philippine Health Insurance Corp. (Philhealth) in expanding and sustaining membership among informal economy workers. It supported the launch of KASAPI or “Kalusugang Sigurado at Abot Kaya sa Philhealth Insurance,” an innovative program enabling informal workers to avail of PhilHealth benefits through partner MFIs. Under the scheme, MFIs advance the annual premium then negotiate flexible monthly or weekly payments with each individual member.                 – Ted Torres