New product lines expand microinsurance coverage

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FOLLOWING the monumental growth of microinsurance coverage in the Philippines, the industry is poised to sustain the development of the market with the release of guidelines covering the design and delivery of micro-agri, micro-health and micro pre-need products.

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In October last year, the Insurance Commission adopted the Agriculture Microinsurance Framework that aims to promote the provision of micro-agri products by encouraging private microinsurance providers to “innovate and design products tailor-fitted to the needs of the agricultural clients.”

The framework is in line with the 2011-2016 Philippine Development Plan which seeks to strengthen the agriculture sector through the introduction and improvement of risk-reducing mechanisms such as guarantee or insurance.

The Micro-Agri Framework formally introduced a parametric-based or index-based microinsurance wherein benefits or payouts shall be facilitated by microinsurance providers when predefined parameters or indices are breached.

For instance, with an index-based microinsurance product that covers flood, benefits shall be automatically paid to the insured when a predetermined measure of water level is reached or triggered by an event.

In contrast to a standard indemnity-based insurance, parametric insurance no longer requires an on-site inspection to assess the actual damage to the insured crops or other agricultural products that may be covered by the product. This potentially reduces the cost of insurance that may be provided to farmers and fisher folk.

The Micro Pre-Need Framework, which was also adopted in October 2015, aims to provide the low-income sector access to pre-need products such as memorial, life, education and pension plans.

Following the general guidelines of microinsurance provided in the Amended Insurance Code, the amount of cash or installment payments must not exceed 7.5 percent of the current daily minimum wage of non-agricultural workers in Metro Manila. Benefits should not also exceed 1,000 times the same daily minimum wage.

The Insurance Commission has also assumed supervision of health maintenance organizations from the Department of Health with the issuance of Executive Order No. 192 in November 2015.

This is crucial for the final adoption and implementation of the Micro-Health Framework that shall supplement the existing government healthcare system and make health products and services available to the low-income sector.

The introduction of these new product lines is further strengthened by the Enhanced Microinsurance Regulatory Framework, which allows the bundling of microinsurance products. With this, two or more microinsurance products may be combined, provided that a lead insurer or administrator is identified in the policy contract.

The framework also defines and delineates the roles of brokers, agents and delivery channels to further expand the scope and points of access for microinsurance in the country. Around 170 individuals and entities are now licensed as microinsurance agents, 50 of which are rural banks.

As regular microinsurance agents, rural banks can partner with one life and seven non-life insurance providers. Rural banks typically offer credit life or term life microinsurance products. The opportunity to expand their product offering to their clients is now in place given these innovations in product lines and bundling.

Insurance Commissioner Emmanuel Dooc, in his speech during the Culminating Activity of the Microinsurance Month Celebration last January 29, stressed that everybody is and will be part of the growth of microinsurance in the country.

The tagline “Kasama Lahat” sums it all. The 30 million Filipinos covered with microinsurance in 2015 will continue to increase in the coming years.

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