What is microinsurance?
Microinsurance is also insurance as we know it. When a person buys insurance cover, he shells out a certain amount to pay for his premium (or dues/contributions in the case of Mutual Benefit Associations and cooperatives) and he gets a guaranteed benefit when a contingency takes place. Microinsurance is insurance intended for the low income earners.
In a nutshell, microinsurance is a type of insurance with lower premiums and guaranteed benefits.
Typically, the amount of premium or contribution per microinsurance policy ranges from less than P1 to P19 per day. This means that the premium on a microinsurance product can be as low as P25 per month. In any case, the amount of microinsurance premiums (or dues or contributions) computed on a daily basis, should not exceed five percent (5%) of the current daily minimum wage for non-agricultural workers in Metro Manila, which means, under today’s minimum wage rate, monthly premium for microinsurance should not exceed P570.
The maximum sum of guaranteed benefits for microinsurance products should not be more than 500 times the daily minimum wage rate for non-agricultural workers in Metro Manila, or in actual current rates, should not exceed P190,000.
Under the framework, the guaranteed benefit of one (1) microinsurance policy shall not exceed P190,000. It is estimated that for a poor family, this amount can already provide 16.5 months (or 500 days) of lost income resulting from a contingency.
Microinsurance should be simple. Contract provisions should clearly state the face amount, benefits and terms of insurance coverage. Contracts should be written clearly, in simple terms, and with no fine prints. Contract provision should be easily understood by the clients and printed in English and/or Filipino.
Microinsurance should be accessible. Application should not require too many documentations. Microinsurance should follow a non-restrictive claims settlement process. Settlement of claims shall be within 10 working days upon receipt by the provider of complete documents.
8. Is microinsurance limited only to life products? No. As long as they comply with the basic concepts of microinsurance, providers may design and provide any form of microinsurance products such as life, non-life or health insurance products.
Microinsurance products shall only be provided by entities registered and licensed by appropriate government regulatory bodies. These entities shall include but are not limited to any of the following:
– Commercial Life Insurance Companies – Commercial Non-Life Insurance
– Mutual Benefit Associations (MBAs) – Cooperative Insurance Societies – Insurance/Service Cooperatives – Pre-Need Companies – Health Maintenance Organizations (HMOs)
The government will not provide any direct subsidy in mainstreaming informal insurance providers. Instead, the government shall create a special regulatory space for informal insurance providers that plan to formalize their insurance and/or insurance-like activities.
This includes, among other things, lower capital requirements for entities wholly engaged in microinsurance. The government, however, needs the support of development partners in building the capacity of informal insurance providers to mainstream and formalize their operations. Assistance from development partners, may include, among other things, the following: innovations in developing appropriate insurance products for the poor; development of the appropriate database; financial literacy.
Can they provide direct subsidies for their constituents? LGUs are expected to support the development of the microinsurance market by collaborating with the private sector in ensuring that their local constituents have access to microinsurance. LGUs are important for the establishment of support mechanisms [linkages, information and public assistance desks, financial literacy campaigns, etc] that will increase public awareness and access to microinsurance products and services by the poor. LGUs could also provide help desks to assist their constituents in choosing the right microinsurance products. LGUs may also provide direct subsidy for their constituents through PhilHealth. PhilHealth is mandated by law to provide universal coverage, which includes indigents.
What 1s the agricultural sector included in microinsurance? What is the role of the Philippine Crop Insurance Corporation (PCIC)? The low-income households in the agricultural sector may avail of microinsurance products and services. Innovative insurance products that cater to the needs of the low-income households in the agriculture sector may be developed by the private sector [e.g. weather-based insurance products]. PCIC may partner with private insurance providers in developing and distributing index-based insurance products.
Financial literacy is important to raise awareness on how insurance for the low-income households works and how it can benefit them. Financial literacy will help create a consciousness and understanding on the importance of microinsurance. It will enjoin and encourage providers to design microinsurance products appropriate to the needs of the informal sector and the lower segments of society.