• Licensing of rural banks for microinsurance


    Insurance Commission (IC) Circular 2015-20 now provides guidelines in implementation of bancassurance pursuant to provisions of the Amended Insurance Code. Bancassurance, as defined in the circular, refers to presentation and sale to bank customers by an insurance company of its insurance products within the premises of the bank. The circular further clarifies that it does not repeal or amend the provisions of Bangko Sentral ng Pilipinas (BSP) Circular 683, which grants rural, cooperative or thrift banks the authority to market, sell and service microinsurance products.

    In 2010, BSP issued Circular 683 with the subject “Marketing, Sale and Servicing of Microinsurance Products” to address the risk-protection needs of the microfinance clients of rural banks. Microinsurance is recognized as an important financial product that complements existing micro-savings and micro-loan products that rural banks offer to their clients. Furthermore, Circular 683 also outlines requirements for rural banks to gain authorization as microinsurance agents. These include, among others, the bank license from the Insurance Commission as a microinsurance agent or broker.

    To simplify the process of securing necessary authorization from both the Bangko Sentral and the Insurance Commission, RBAP initiated a program to assist the banks comply with the requirements of the regulating bodies. A training program has been implemented since to satisfy the 3-day microinsurance training requirement of the Insurance Commission in lieu of taking the regular insurance agent licensing exams.

    The process of getting authorization as a microinsurance agent, in reality, is simple but may take quite a while to get through completion. The process is divided into four (4) phases: Phase 1 requires rural banks to submit a request for No Objection Notice to the BSP. Phase 2 covers the amendment of a bank’s articles of incorporation to include in its purpose the activity to sell, solicit or market microinsurance products as an insurance agent. This process may be longer for some banks as the Securities and Exchange Commission (SEC) requires them to secure both IC and BSP endorsements to the proposed amendment to their articles of incorporation.

    After completing the registration of their amended articles of incorporation with the SEC, rural banks can already file its application for a microinsurance agent license with the Insurance Commission. The IC would then issue an institutional license to the bank provided that a Soliciting Agent has been identified and appointed by the bank. The said Soliciting Agent should have attended the microinsurance training offered by RBAP or other authorized microinsurance training provider.

    The final step for rural banks to gain authorization as a microinsurance agent is to submit to BSP documents outlined in Circular 683 which include the bank’s license as a microinsurance agent and a certification from the bank president ensuring compliance with regulations.

    Fifty-two rural banks have now completed the registration with SEC of their amended articles of incorporation redefining their purpose to include microinsurance in their activities. Forty-seven rural banks already submitted their application for a microinsurance agent license that are in the different stages of their amendment and license applications.

    There has been a growing awareness among clients, providers and delivery channels of the importance of microinsurance as a component of the broader financial inclusion program of the government. To protect the interest of the clients and to promote good governance among financial institutions, certain parameters are set by the regulators. Compliance with regulations would reflect positively on the position of rural banks as major players in financial inclusion.


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