Microinsurance Initiatives Powerpoint Presentation   Diamond Hotel 01 27-12
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Microinsurance Initiatives Powerpoint Presentation Diamond Hotel 01 27-12

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Highlights current microfinance initiatives undertaken by the Philippine Government to promote access to microinsurance by the low income and informal sectors of society. Presented during the ...

Highlights current microfinance initiatives undertaken by the Philippine Government to promote access to microinsurance by the low income and informal sectors of society. Presented during the Advocacy Seminar on Microinsurance held on January 27, 2012 at the Diamond Hotel, Manila.

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  • In 2011, IC issued two circular letters. The first one adopts the Performance Standards as the microinsurance industry benchmarks in assessing and evaluating the operations of all microinsurance providers starding calendar year 2011 while the other circular letter provides guidelines for the approval of training programs and licensing of microinsurance agents. I will discuss the details of all the circulars in the succeeding slides.
  • IMC 1-2010, defines what a microinsurance product is. According to the circular, MI product is is a financial product or service that meets the risk protection needs of the poor where the amount of premiums, contributions, fees or charges, computed on a daily basis, does not exceed five (5) percent of the current daily minimum wage rate for non-agricultural workers in Metro Manila; and the maximum sum of guaranteed benefits is not more than 500 times the daily minimum wage rate for non-agricultural workers in Metro Manila. The maximum amount of premium and guaranteed benefits shall apply on a per product or per policy basis. In the case of a bundled product, this shall apply to each component of the bundled product.
  • Who then can provide MI. Only entities licensed by the IC are allowed to provide MI products and services to their clients. These include all insurance companies (life and non-life), cooperative insurance societies and mutual benefit associations licensed by the Insurance Commission. They are allowed to provide microinsurance products and services to their clients following prescribed regulatory and prudential requirements. These entities are also allowed to offer bundled microinsurance products (e.g. life, non-life insurance, health and/or pre-need products) provided that the bundled product comprise only of microinsurance products, that each of the components of the bundled product is underwritten separately by the entities concerned and that ; and that the contract specifies that the liability for the bundled MI product is assumed by the lead microinsurance provider.
  • Who can sell MI products. MI products can be sold and distributed by MI agents and brokers. Agents are Individuals or entities licensed by the IC to obtain or solicit microinsurance on behalf of a duly licensed insurance entity while brokers are individuals or institutions licensed by the IC to solicit, negotiate, or procure the making of any microinsurance contract on behalf of clients. IC has relaxed its rules for MI agents and brokers. MI agents are not required to take the regular licensure examination agents. They shall only undergo an approved microinsurance training program and pass a qualifying examination after. A regulatory space was also provided for MI brokers. The required capitalization for MI brokers is only half of what is required for regular brokers.
  • License of MI agents and brokers only covers the solicitation of MI products. With an MI license, they are only allowed to sell MI products. Individuals or entities such as MFIs (rural banks, cooperatives and NGOs) can be licensed as MI agent.Those, however with regular license are allowed to sell and distribute MI products. They need not get an MI license since the regular license for agents and brokers covers microinsurance as well.
  • As I mentioned earlier, the IC in collaboration with SEC and CDA defined the government poiicy on informal insurance. This came about because there are a number of organization that provides insurance or insurance-life products without any license from the Insurance Commission. A number of them claims that they came up with the product because their clients were asking for it. Recognizing the risks faced by both the institution and the client, government policy on informal insurance was formulated as provided for in JMC 1-2010. The circular defined what should be regulated and what need not. When individuals or groups of individuals voluntarily pledge and contribute a certain amount of money to a fund and the benefits are not pre-determined but are contingent to the amounts collected, these scheme need not be regulated. In cases like this, membership to the fund is voluntary and the total amount collected are given to the individual upon the occurrence of an unforeseen or contingent event. This scheme is called damayan or abuloy as we know it. However, when Contributions/premiums are regularly collected prior to the occurrence of a contingent event; and the guaranteed benefits are provided upon the occurrence of a contingent event, this should be regulated. Any entity providing this kind of product or scheme to its clients or members should get a licensed from the insurance Commission.
  • So if it is no longer allowed to provide informal insurance, what should those entities do. JMC 1-2010 and JMC 3-2011 requires the termination of informal insurance or insurance-like activities by December 31, 2011. Entities engaged in informal insurance or insurance-like activities are given two options. They can either enter into formal arrangement with authorized insurance providers or they can organize into an insurance provider either as an insurance company, a cooperative insurance society or a mutual benefit association.
  • Aside from the circlars defining what an MI product is and what is required of institutions providing MI, IC has also developed a set of performance standards tha shall be used in evaluating the MI operations of licensed insurance providers. This set of performanc standards is also called SEGURO, each letter describing a a group of indicators. S stands for solvency, E for efficiency, G for governance U for understanding of the product by the client, R for risk based capital and O for outreach. These indicators shall be used by IC as an early wartning system to identify insurance providers with concerns. MI entities are required to submit annually (starting 2012) resulting indicators using the set of PS and the corresponding AS.
  • Aside from the circlars defining what an MI product is and what is required of institutions providing MI, IC has also developed a set of performance standards tha shall be used in evaluating the MI operations of licensed insurance providers. This set of performanc standards is also called SEGURO, each letter describing a a group of indicators. S stands for solvency, E for efficiency, G for governance U for understanding of the product by the client, R for risk based capital and O for outreach. These indicators shall be used by IC as an early wartning system to identify insurance providers with concerns. MI entities are required to submit annually (starting 2012) resulting indicators using the set of PS and the corresponding AS.
  • As mentioned in the AVP….Malakiangmaaasahangkaunlaranngbayankapagangnakararami ay protektado at nakaseguro. KailangannanatinangMicroinsurance. Magtulungantayonglahat!!! Kamisa Insurance Commission ay kasangganyosapagsulongngMicroinsurance…

Microinsurance Initiatives Powerpoint Presentation   Diamond Hotel 01 27-12 Microinsurance Initiatives Powerpoint Presentation Diamond Hotel 01 27-12 Presentation Transcript

  • Microinsurance: Current Initiatives, Rules and RegulationsADVOCACY SEMINAR ON MICROINSURANCEManila Diamond Hotel, ManilaJanuary 27, 2011
  • The Philippine Insurance Market (2010) Relatively small • 78% from the life insurance sector (34 companies)Insurance industry • 18% from the non-life sector with P613 (87 companies) billion assets • 4% from MBAs sector (26 MBAs) • 12% of the banks’ total deposits of P5.1 trillionTotal Industry Assets • 5th largest asset in the ASEAN insurance markets (10 countries)
  • The Philippine Insurance ……• Total Industry Premium Volume - P98 billion  Life Sector - P71 billion (72% share)  Non-Life Sector - P23 billion (24% share)  MBA Sector - P 4 billion (4% share)• Total Industry Premium Volume - 5th largest in the ASEAN insurance markets
  • The Philippine Insurance …… • Insurance Consumption  Insurance Penetration - 1.08% of GDP (ratio of premium volume to GDP)  Insurance Density (amount of premium Low per capita) insurance  Life Insurance - P798 take up  Non- Life Insurance - P245 • Estimated life insurance coverage - 19% of the population of 94 million (18 million)
  • The Philippine Insurance …… • Insurance Penetration - 5th highest in the ASEAN insurance markets • Insurance Density  Life Insurance - 6th highest in the ASEAN insurance markets  Non- Life Insurance - 7th highest in the ASEAN insurance markets
  • Low Market Penetration• Lack of appreciation of the importance and benefits of insurance• Insurance products mostly cater to the middle and upper income market• Insurance products are unaffordable , not accessible and not tailor-fitted to the risk protection needs of the poor• Insurance is an additional financial burden to the poor• Insurance contracts are long, complex and contain provisions that are too complicated to the poor
  • Low Income Sector - A Potential Insurance Market About 26.5% of the population of 94 million are below the poverty line (25 million) Of the 25 million Filipinos, only 2.9 million have some kind of risk protection. Of those provided, about 50% were covered by informal insurance schemes. They are most vulnerable to illness, physical Injury, accident or death, natural calamities. Thus, they need risk protection.
  • Circulars Issued by the IC on Microinsurance (MI)Insurance Memorandum Circulars (IMC) 9-2006 & 1-2010) MICROINSURANCE Daily Contributions/premiums not more than 5 percent of the current daily minimum wage rate (P20.00) Guaranteed benefits not more than 500 times the daily minimum wage rate. (P200,000.00)
  • Key Distinctions Between Conventional Insurance and Microinsurance Common Provisions for Traditional Microinsurance Products Individual/Group Insurance Insurance Products (IMC 1-2010) Plans Maximum No 5% of the current daily Premium Limitation minimum wage rate in Metro Manila Maximum No 500 times the daily Benefit Limitation minimum wage rate in Metro Manila Policy Contract Full of complex conditions Simple and easy to understand Frequency of Premium Monthly, Quarterly, Semi- Daily, Weekly, Monthly, Collection Annual, Annual Quarterly, Semi-Annual, Annual
  • Key Distinctions………. Common Provisions Traditional Microinsurance for Individual/Group Insurance Products Insurance Plans Products  Grace Period 31 days from 45 days from premium due date premium due date  Contestability Maximum of Maximum of Period 2 years from date of 1 year from date of issue or last issue or last reinstatement of the reinstatement of the policy policy
  • Key Distinctions……….Common Provisions Traditional Microinsurancefor Individual/Group Insurance Products Insurance Plans Products Suicide Clause Maximum of Maximum of 1 year 2 years from date of from date of issue or issue or last last reinstatement of reinstatement of the the policy policy Claims Within 60 days after Within 10 days after Settlement submission of submission of complete documents complete documents
  • Key Distinctions………. The contract for microinsurance product shall bear the microinsurance logo.
  • Who can provide MI – (IMC 1-2010) • Life insurance Companies All entities • Non-life insurancelicensed by Companies the • Mutual Benefit Insurance AssociationsCommission • Cooperative Insurance Societies
  • Who can sell MI products (IMC 1-2010 and CL 6-2011) Microinsurance agents Microinsurance brokers• Individuals or entities • Individuals or institutions licensed by the IC to obtain licensed by the IC to solicit or solicit microinsurance on microinsurance products behalf of a duly licensed on behalf of clients insurance entity.• Not required to take the regular licensure examination agents• Shall undergo an approved microinsurance training program and pass a qualifying examination
  • Who can sell ………. License only covers the solicitation of microinsurance products. Individuals or entities such as MFIs (rural banks, cooperatives and NGOs) can be licensed Those with regular license are allowed to sell and distribute MI products
  • On Informal Insurance – Joint Memorandum Circular (JMC) 1-2010 WITH REGULATION NO REGULATION• Contributions/premiums • Individuals voluntarily are regularly collected pledge and contribute a prior to the occurrence certain amount of of a contingent event; money to a fund and • Benefits are not pre-• Guaranteed benefits determined but are are provided upon the contingent to the occurrence of a amounts collected. contingent event. (e.g. Damayan/ Abuluyan Scheme)
  • What should be done by unregulated entities – (JMC 1-2010 and JMC 3-2010)TerminateTerminate informal insuranceinsurance- informal insurance or like activities by December(JMC 3-2010) activities by December 31, 2011 31, 2011 JMC 1-2010Formal Arrangements with Organize into an insurance authorized insurance provider and seek providers appropriate authority from the Insurance Commission
  • What should be done by unregulated entities (JMC) 1-2010) • Partnership with commercial insurance companies Formal • Membership in anarrangements existing  Mutual Benefit Association (MBA)  Cooperative insurance provider
  • How will MI operations be evaluated (CL 5-2011)All licensed entities with MI operations shall be evaluated usingthe set of performance standards called SEGUROMeasures the following: Solvency, Efficiency, Governance,Understanding of the Product by the Client, Risk Based Capitaland OutreachSEGURO shall be used as an early warning system to identifyentities with concernsMI entities to submit annually (starting 2012) resulting indicatorsusing the set of PS and the corresponding AS.
  • Regulatory Space for Microinsurance Providers/Intermediaries Lower guaranty fund requirement for MBAs wholly engaged in microinsurance. Lower capitalization requirements for MI agents and brokers .
  • Market Response to date…….15 Microinsurance (MI) MBAs licensed18 Rural Banks licensed as MI Agents72 Individuals licensed as MI Agents59 MI products approved (40 life and 19 non-life)
  • Market Response to date…….19 Insurance Companies and 15 MBAs with approvedMI products3,177,732 MI policies/certificates issued by the MI MBAs966,681 MI policies/certificates issued by the insurancecompanies
  • Malaki ang maaasahang kaunlaranng bayan kapag ang nakararami ayprotektado at nakaseguro.Kailangan na natin angMicroinsurance. Magtulungantayong lahat!!!
  • Thank you!!!