News25 Jan 2017

Philippines:Microinsurance penetration rate to hit 48% by 2022

25 Jan 2017

The microinsurance penetration rate in the Philippines is expected to increase to 48.7% by 2022, from the 25.4% seen at the end of last September, according to Insurance Commissioner Dennis Funa.

Unveiling some statistics, he said that 26 million Filipinos, or roughly a quarter of the country’s total population of 103.5 million, are protected by a microinsurance product.

“As expected, 59% of the total number of individuals covered by microinsurance, or 15.6 million, were generated by the Microinsurance-Mutual Benefit Associations (Mi-MBAs),” Mr Funa said.

MBAs, as opposed to commercial insurers, remain the dominant players in the microinsurance market as is shown by the sector’s 3Q2016 performance report. MBAs accounted for 56% of the total premium income of the microinsurance sector in the amount of PHP2.20 billion (US$44 million), followed by the life insurance sector with 34% market share in the amount of PHP1.35 billon and the and the non-life sector with 10% market share in the amount of PHP409 million.

Commissioner Funa stressed that the importance of microinsurance is not the amount of premiums generated.

“Wider financial inclusion and maximum social protection is critical in a developing and vulnerable country such as the Philippines,” he said, adding that the country is also the second most vulnerable Asian nation versus natural and man-made disasters.

With the implementation of frameworks that would facilitate and promote the development of a broader range of microinsurance products and the increase in the participation of the private sector, the Insurance Commission is optimistic that the microinsurance penetration rate will increase to 48.7% by 2022.

The regulator recently issued the new framework on distribution channels for microinsurance products and services, enhanced performance indicators and standards for microinsurance providers and regulations on the provision of microhealth products and services.

New microinsurance distribution framework

Under the new framework, the distribution of microinsurance, micro health, micro pre-need and micro-agri products, collectively referred as micro risk protection products, can now be made through non-traditional channels. The new framework provides clear policies, rules and guidelines on the development, utilisation, and conduct of distribution channels.

Under it, a channel contractor may partner with a distribution channel which can perform permissible micro risk protection product delivery activities. A channel contractor could be any of the following:

  1. a duly licensed microinsurance general agent or broker;
  2. a cooperative insurance society or mutual benefit association providing its own products exclusively to its members;
  3. a general agent or broker offering microhealth products and services;
  4. a pre-need company, general agent or broker offering micro pre-need products; or
  5. other persons as may be permitted by the Insurance Commission.

With the framework, even a small to medium-sized business can participate in the delivery of microinsurance products and services to the public, especially to the unserved and underserved sectors, Mr Funa said.

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