Microinsurance a hot topic at the 2010 RBAP-MABS National Roundtable Conference

Microinsurance was highlighted at this year’s Conference with two panel sessions, one discussing regulatory compliance and the other focusing on how to develop, market and manage microinsurance products and partners.

Vida ChiongVida Chiong, Deputy Commissioner of the Insurance Commission, kicked off the first panel discussion by emphasizing how microinsurance and microfinance are complementary partners in poverty alleviation. Ms. Chiong cited that the recent BSP Circular No. 683 was a major breakthrough for the microinsurance industry as it allows rural banks to offer microinsurance products and services by partnering with commercial insurance providers as licensed microinsurance agents or brokers.

One proposed change to the licensing requirements, Ms. Chiong noted, was that microinsurance agents/brokers are not required to take the licensure examination as traditional agents are. However, microinsurance agents are required to undergo an approved Microinsurance Training Program and pass an examination at the end of that program. One of the prudential requirements for microinsurance agents and brokers defined so far is that rural banks must, at the time of application, have a minimum paid-up capital of P125,000 for agents and P10M for brokers. This automatically qualifies rural banks as microinsurance agents as all rural banks already meet the minimum paid-up capital of P125,000. There are a few steps that rural banks must comply with in order to be licensed as a microinsurance agent or broker and these are now being finalized in detail between RBAP, the BSP and the Insurance Commission.

The Insurance Commission is working on a number of initiatives to strengthen the availability of microinsurance services, including the formulation of performance standards, further support to the insurance industry as they develop microinsurance products and an expansion of financial literacy programs. She discussed the specific requirements to classify a product as microinsurance: 1) the daily premiums/contributions must not exceed 5% of the current daily minimum wage rate and 2) the guaranteed pay-out may not exceed 500 times the current daily minimum wage rate. It should, however, be noted that microinsurance can be sold in units so clients can purchase more than one microinsurance unit to get additional coverage.

The upcoming 6th International Microinsurance Conference in Manila will be hosted by the Munich Re Foundation and the Microinsurance Network and supported by GTZ/BMZ, the Department of Finance of the Philippines and Georgia State University’s Center for the Economic Analysis of Risk.

Gerry ButardoGerry Butardo of the Bangko Sentral ng Pilipinas provided more specifics on the BSP Circular No. 683, which regulates the marketing, sale and servicing of microinsurance products. The BSP gives the authority to rural, cooperative and thrift banks, along with its branches and other banking offices, to sell microinsurance products as agents authorized by the Insurance Commission. Its intention is to ensure that microinsurance products are clearly distinguishable from other bank products and that they are specifically marked with the name of the issuing insurance provider with a clause stating that it is not insured by the Philippine Deposit Insurance Corporation (PDIC) nor guaranteed by the bank. Additionally, it guarantees compliance with the Insurance Commission rules (discussed by Ms. Chiong) and that the insurance provider has a sound consumer protection mechanism.

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Geraldine DesiderioGeraldine Desiderio, the General Manager of Country Bankers Life, closed the first panel session by sharing her vision of a national strategy for microinsurance. Private insurance companies partnered with various distribution channels such as rural banks are expected to take the lead role in providing the poor with increased access to microinsurance products and services while government will support the industry by providing an appropriate enabling regulatory environment. Other parties in this strategy include the intermediaries, or agents/brokers, support institutions and development partners. Similar to Deputy Commissioner Chiong, Ms. Desiderio stressed the importance of the role policy and regulations play in the industry, the need to mainstream informal insurance and the call for institutionalizing financial literacy.

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What are your thoughts on the new opportunities for rural banks to partner with insurance companies to expand microinsurance services across the Philippines? Share your stories and experiences by replying to this post.

Stay tuned for the next blog article on the experiences of rural banks partnering with insurance companies with a focus on how to develop, market and manage microinsurance products and partners.

Until next time, Mabuhay ang Microinsurance!