EFFECTIVE public-private sector collaboration has been successfully demonstrated in the development and expansion of microinsurance business in the Philippines.
A report recently published by the GIZ-RFPI Asia Program cited the efforts of the government in formulating an enabling regulatory environment that encourages multi-sector participation in opening access to risk protection for the poor.
With the adoption of the National Strategy for Microinsurance and the Regulatory Framework for Microinsurance, three key strategies have been highlighted: 1) enabling the MBAs (mutual benefit associations) to offer microinsurance; 2) opening the microinsurance market to commercial and cooperative insurers; and 3) formalizing initiatives for institutional agents, such as the rural banks, as intermediaries.
The private sector, on the other hand, has been responsive to the challenge of expanding their traditional insurance business to the low-income sector. The MBAs continue to be the dominant players in the industry, contributing 44 percent of total lives covered and 56 percent of microinsurance premiums in 2014. In addition, the number of commercial insurers, both from the life and non-life companies, has been gradually increasing, resulting in a total of 162 approved microinsurance products in 2014.
When the Bangko Sentral ng Pilipinas issued Circular 683 on the Marketing, Sale and Servicing of Microinsurance Products in 2010, it provided the thrift, rural and cooperative banks the necessary regulatory space to formally engage as distribution channels for microinsurance products. This enabled the transition of rural banks, which were previously managing informal insurance schemes mainly for the low-income market, into microinsurance delivery channels through their partnership with licensed insurance providers such as commercial insurers, cooperative insurance societies and mutual benefit associations.
As a result of this partnership, credit life products have been enhanced to expand coverage to the clients’ household dependents, protect their business and properties, and extend assistance to those affected by natural calamities.
The providers are continuously challenged to further expand coverage through the development of additional products that would cover risks in agriculture and health.
There are now 48 rural banks granted with institutional licenses to act as microinsurance agents. As agents, these rural banks have been authorized to actively present, market and sell microinsurance products to their existing and potential clients, hence, making microinsurance an effective tool to keep these banks competitive in their respective markets.
The circular also provides an option for the banks to simply service microinsurance products as collection and payment agents.
The response of the rural banking industry to the challenge of providing microinsurance products to their clients may have been slow but there has been steady growth in the number of players since the issuance of the landmark BSP circular.
The coverage of community banks grew from 543,508 by the end of 2012 to 1.94 million by the end of 2014. A number of rural banks are also still in the process of completing the licensing process to become institutional agents.
The Rural Bankers Research and Development Foundation, Inc. continues to provide microinsurance training to the rural banks. This year, a total of 227 rural banks have already completed the required basic microinsurance course.
The licensing process may seem onerous and the value may not be seen immediately, but compliance to regulations is essential in enhancing the capacity of the rural banks to effectively serve the risk-protection needs of their market.
With the issuance of the Enhanced Microinsurance Regulatory Framework and the development of micro-agri, micro-health and micro-pension products, the room for growth of the microinsurance business of rural banks continues to expand for new players.