Rural banks to serve more Filipinos with increased microinsurance benefits


The havoc created by Typhoon Yolanda in the Visayas late last year underlines the value of having security against unexpected hazards. Fortunately, the realization has snowballed into the implementation of measures that seek to increase the coverage of microinsurance.

Under the new Insurance Code, benefits that may be derived from a microinsurance policy have been raised to up to 1,000 times the minimum daily wage of non-agricultural workers in Metro Manila or up to P466,000. Premium, meanwhile, is now computed at 7.5 percent of the same daily wage.

The Bangko Sentral ng Pilipinas likewise issued BSP Circular 841 to reflect the change in the maximum amount of premiums and benefits in the manual of regulations for banks.

The increase in the cap of microinsurance benefits expands protection while ensuring that products remain affordable to the low-income sector. To illustrate one of its benefits, a microinsurance credit life product may now be linked to a client’s loan amounting to P300,000. In case of death of the client, the family will not be burdened with the payment of the loan balance.

The same can be said of a microinsurance product linked with a bank’s micro-deposit account. To encourage clients to save more, a microinsurance policy is tied up to the client’s savings account and the amount of insurance benefit may be computed based on the average daily balance of the deposit.

Noteworthy at this point are previous BSP issuances increasing the amount of loan to microenterprises and small businesses through Microfinance Plus and the average daily balance of microfinance savings account from P15,000 to P40,000.

To increase insurance coverage in the country and to provide the low-income sector access to insurance products, rural banks have been allowed by regulators to market and sell microinsurance products to their clients.

Strategically located nationwide, rural banks are seen as effective distribution points in providing protection to the most vulnerable sector of the society. In fact, rural banks with offices and branches in provinces hit by Yolanda contributed to the relief efforts in the aftermath of the deadly typhoon.

Industry reports show that by end of 2013, there were 40 rural and cooperative banks licensed as microinsurance agents, serving about 1.3 million Filipinos with active microinsurance policies.

Microinsurance is seen as vital in providing protection in the agriculture sector where farmers and fisherfolk are most vulnerable to natural calamities.

An average of 20 typhoons hit the Philippines annually and experts predict stronger typhoons as a result of climate change. When Yolanda struck the country last year, it incurred $13 billion in economic losses but only $1.5 billion insurance losses due to the fact that the areas hit by the typhoon had very low insurance penetration. With measures such as the increase in benefits, we can expect that microinsurance will gain ground even more.


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