Phl offers huge potential for microinsurance

MANILA, Philippines - The Philippines, along with India and Indonesia, offer the biggest opportunities for the fledgling microinsurance industry, which has a potential market of three billion people, a Reuters report said.

Microinsurance offers coverage for people with low income with products such as life insurance, and is branching into areas such as offering farmers insurance polices against extreme weather.

Over 140 million people, mostly in Africa and Asia, are now covered by affordable insurance premiums, and studies showed the potential market is up to three billion, Reuters said, citing a report by the Munich Re Foundation and International Labor Organization (ILO).

Craig Churchill, head of the global Microinsurance Network, said more than half of microinsurance products are focused on life and health, while less than 10 percent cover farms or crop insurance.

“We’re still at the experimental stage in offering products that could cover agriculture,” he said, adding there is huge potential growth for such products, citing impacts of Typhoons Ondoy and Pepeng in the northern Philippines in late 2009.

Earlier this year, the Bangko Sentral ng Pilipinas (BSP) allowed rural banks, cooperative banks and thrift banks to market microinsurance products through a partnership with a licensed insurance company.

“Banks are ideal insurance distribution channels as they are the trusted financial institutions in the countryside and have a deeper knowledge and understanding of the low income market,” the BSP said.

This can only translate into better-delivered products as well as lower transaction costs, thus benefiting bank clients. The BSP also envisions that this issuance will provide the impetus to eliminate informal insurance schemes as well as put an end to the unauthorized provision of insurance products.

Microinsurance provides specific insurance, insurance-like and other similar products and services that meet the needs of the low-income sector for risk protection and relief against distress, misfortune and other contingent events. 

The features of the microinsurance product, which are appropriately designed for the needs and capacity of the low-income sector, include a limitation on the amount of premiums, contributions, fees and charges not to exceed five percent of the current daily minimum wage and a ceiling on the guaranteed benefits not to exceed 500 times the current daily minimum wage.