The Development of the Microinsurance Market in the Philippines Diana Almoro Senior Advisor, GIZ RFPI Asia 16 April 2014 Inclusive Insurance 2014 International Forum Ulaanbaatar, Mongolia company presentation 2012 Page 1
The Philippines MONGOLIA 7,107 islands 96.71 million population USD 1,790 per capita income 25.2% of families in poverty economic drivers: private sector investment, overseas remittances, high government spending Page 2
The Insurance Industry 1.42% insurance penetration of GDP as of 2012 Small industry with assets of USD 19.2 billion Comprises only 7.5% of total resources of PH financial system Regulated by the Insurance Commission, policy direction from the Ministry of Finance Insurance Sector: 115 private commercial companies 33 Life (79%) 82 Non-life (16.2%) 28 MBAs (4.8%) Page 3
Evolution of Microinsurance Offshoot of microfinance development policies of the government 1997 National Strategy for Microfinance as policy foundation in providing formal financial services to the low-income sector Financial Inclusion as an overarching goal articulated through the Medium-Term Philippine Development Plan Of 23.7 million Filipinos living below poverty line, only 2.9 million have some kind of risk protection 2006 start of microinsurance development through public-private partnership with technical support from development organizations Page 4
The multi-stakeholder approach POLICY AND REGULATORY AGENCIES Enabling policy and regulatory environment Measures supportive of financial inclusion Guidelines for mainstreaming informal insurance OTHER NATIONAL AGENCIES Networking and linkage-building with microinsurance providers Inclusion of microinsurance in programs Provision of basic support services LOCAL GOVERNMENT UNITS Collaboration with private sector providers Institutionalization of Redress Mechanisms Public awareness and education Page 5
The multi-stakeholder approach PRIVATE SECTOR Leading product innovations that cater to the low-income sector Deepening the market (channels for distribution and easy claims settlement) Guidelines for mainstreaming informal insurance Promote financial literacy SUPPORT INSTITUTIONS Media, academe, research entities, civil society organizations, donor community Technical assistance for capacity-building, knowledge generation and financial literacy Page 6
Microinsurance policy milestones Page 7
Definition of microinsurance in the Philippines A financial product or service that meets the risk protection needs of the poor Daily contribution/premium is not more than 7.5% of the current daily minimum wage rate Guaranteed benefits are note more than 1,000 times the daily minimum wage rate Page 8
Key distinctions: Traditional vs Microinsurance Provisions Traditional Microinsurance Maximum premium Maximum benefits Policy contract Frequency of premium collection Company dictated Company dictated Complex, long with difficult terminologies Monthly, Quarterly, Semi- Annually, Annual 7.5% of current daily minimum wage rate in Metro Manila 1,000 times of daily minimum wage rate in Metro Manila Short, simple, easy to understand Could also be daily or weekly (recognizes payment abilities of low-income) Claims settlement Within 60 days after submission of completed documents Within 10 days after submission of complete documents Page 9
The Process Formation of Technical Working Group Mapping of gaps and inefficiencies Drafting of policy papers Launching and adoption Industry and public consultations Page 10
Market response Before 2009 End-2012 MI products mostly credit life except for MBA MI products 6 licensed MI-MBA Very few commercial insurance companies with MI No MI agent category 80 MI products approved (54 life and 26 non-life) 17 licensed MI-MBAs 35 insurance companies (17 life and 18 non-life) 124 licensed as MI agents (34 Rural Banks and 90 individuals) Page 11
Key lessons and challenges 1. The government should own and champion the reform measures. 2. The private sector should be engaged in formulating policy and regulatory reforms. 3. Small gains lead to bigger milestones. Page 12
Way forward Document experiences as lessonsgenerating exercise and inputs to enhancement Explore opportunities for thematic microinsurance development Page 13
GIZ Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia Regional program supporting insurance regulators to develop regulatory frameworks, improve capacities, share peer-to-peer knowledge Works with regulators in Indonesia, Mongolia, Nepal, Philippines, Thailand and Vietnam In Mongolia: partnership with FRC on promoting inclusive insurance, capacity-building, exploration of insurance opportunities for MSMEs Page 14
Maraming Salamat! Bayarlala! Thank you! Page 15