Microinsurance is working in the Philippines and increasingly reaching more low-income Filipinos, according to an assessment made by a regional program that is supported by the German Agency for International Cooperation (GIZ).
THE Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) said the number of domestic firms engaged in microinsurance had increased since CARD Mutual Benefit Association was established in 2001. Sixty three of 138 insurers were engaged in some form of microinsurance as of last year from 52 out of 138 in 2012.
“Microinsurance has become an important addition to the insurer’s markets and in 2014 it represented 62 percent of all insurance coverages with a 1.9 percent share of total premiums, up from 47 percent of industry insurance coverage and 2 percent share of total premiums in 2012,” RFPI Asia noted.
The assessment also said MI-Mutual Benefit Associations (MI-MBAs) were the dominant players since the Insurance Commission issued a 2006 circular marking the formal start of microinsurance regulation.
There were 21 MI-MBAs as of the end 2014, from 13 in 2009 and 1 in 2006. It is also noteworthy that MI-MBAs rely almost exclusively on compulsory insurance for their members, RFPI Asia said.
The entry of commercial insurers’ into the market has also been strong since the Microinsurance Regulatory Framework was first introduced in 2010.
The assessment noted that from 2012 to 2014, the MI business of commercial companies grew by an annual average of 34 percent among life companies and 11 percent among non-life companies. Last year, life companies accounted for 37 percent of microinsurance premiums while this was 6 percent from non-life companies.
The number of life companies reporting MI business growth from five companies in 2009 to nine in 2014, it added.
An array of partnership models connecting low-income consumers and insurers has emerged, the assessment noted, with rural banks, cooperatives and non-government organizations having become agents serving millions of borrowers with insurance.
The number of active and licensed MI agents had grown to 170 as of the end of 2014, composed of 122 individual agents and 48 rural banks.
The number and diversity of products has also improved considerably, with 162 products registered in 2014, of which 81 are life products and 81 non-life.
“This is a sharp increase compared to 2009 when only 18 products (eight life products of MI-MBAs, eight life products of commercial providers, which were mostly credit-life products and two non-life products) had been approved under the 2006 circular,” the report said.
Loss ratios, however, are a challenge that the industry must address.
With the exception of the 186 percent loss ratio in 2014 due to claims arising from the impact of Super Typhoon Yolanda, the assessment noted that 2012 to 2013 data showed an average loss ratio of 25 percent for MI-MBAs.
The data, it said, can suggest a lack of claims information, difficult claims procedures, or policies that might be too complicated relative to terms and conditions.