This document discusses the formalization of informal insurers in the Philippines. It begins by describing common informal insurance activities like cooperatives and NGO programs. The motivations for beginning and continuing informally are then outlined, such as less regulation. The advantages of formalizing are presented in three steps. Step 1 notes issues with the status quo like lack of accountability. Step 2 details benefits such as stronger customer protection and competitive rates. Step 3 explores reasons for resisting change such as perceived higher costs. Finally, the vision for 2020 of insurance protection for every Filipino is stated. The regulations issued to encourage formalization through partnerships are summarized. Statistics on microinsurance growth from 2010 to 2015 are provided. Action plans for further

1. +
Formalization of Informal
Insurers
Shayne Rose R. Bulos
Insurance Commission - Philippines

2. +
Informal Activities
 Cooperatives offering informal insurance
 NGOs with self-insurance activities
 Organizations with Microfinance operations
 Government programs

3. +
What are their motivations to begin?
Members’
welfare
Additiona
l Income
Stream
Protection
of credit
portfolio
Dynamic
Business
Activities

4. + Informal Insurance

5. + What are their motivations to continue
informally?
No regulatory submissions
No consequences on failures
No guaranty/security fund requirement

6. + Regulator’s responsibilities
 Level the playing field; and
 Promote good governance, transparency and efficiency.
Protect the premiums
and contributions
of the clients
Ensure that
insurance claims
are delivered when
due
Ensure viability and
sustainability of
microinsurance
providers

7. +
1st
regime
2nd
regime
3rd
regime
IMC 9-2006
Microinsurance
Regulation &
Declaration of Policy
Objectives
IMC 01-2010
Regulation for the
Provision of
Microinsurance
Products and
Services
IMC 2015-54
Regulation for the
Provision of
Microinsurance
Products and Services
3.1 MILLION
(2010)
31.1 MILLION
(2014)
Landscape of Microinsurance in the
Philippines

8. +
Four-box model

9. + Step 1 – What is wrong with the status
quo?
Less
Accountability
Lack of risk
management
expertise
Lack of
managerial
expertise
Limited
geographic
scope

10. +
Fraud
Mismana
gement
Unsound
financial
practices
Insolvency
Step 1 – What is wrong with the status
quo?

11. + Step 2 – Advantages of Formalization
 Stronger Customer Protection
(Access to Regulatory Support)
 More efficient claims
management
 Competitive Premium Rates
 Reservation Requirements
 Existence of Guaranty Fund
 Equity Value at a certain age
 Individual Growth

12. +
Step 2 – Advantages of Change
 Professionalized
Management
 Availability of trainings and
access to best practices
 High perceived value
(reputation)
 Performance Standards

13. +
Step 2 – Advantages of Change
 Increased target market
 Client Intimacy
 Lower marketing and
administrative costs

14. +
Step 2 – Advantages of Change
 Financial inclusion
 Value of insurance
becomes more apparent in
societies
 Peace of mind

15. +
Step 3 – Why are we resisting
Change?

 Unclear juridical cover
 Lack of knowledge on how to formalize
 Additional Cost
 Resistance to having partnerships
 Less freedom on product bundles

16. +
Step 3 – Why are we resisting the
Change?

 High actuarial valuation cost
 Perceived higher admin cost
 Perceived losses
 Branding

17. +
Step 3 – Why are we resisting the
Change?

 “Why fix it if it’s not broken”
 Limited resources
 Regulations may create barriers to entry and
expansion/continuity

18. +
Step 4 – What will remain?
 Proportional regulations
 Freedom to design own products based on
needs of members

19. +

20. +
The Vision
By 2020, to provide
an opportunity for
every Filipino to
secure insurance
protection.

21. +
What was done
 Formalization Circulars Issued
 Lower entry-level capitalization requirements for
mutuals and cooperatives
 Liberal licensing requirements for microinsurance
agents and brokers to include microfinance
institutions (rural banks, cooperatives and NGOs)
 Relaxed KYC requirements
 Formulation of the Performance Standards (being
revised)

22. +
Regulations Issued
JMC 01-2010 options for formalization:
Partnership with Commercial
Cos.
Mutual Benefit Association
Cooperative Insurance Society

23. +
Regulations Issued
JMC 01-2010 excluded:
“individuals or group of individuals
voluntarily pledge and contribute a certain
amount of money to a fund and the
benefits are not predetermined but are
contingent to the amounts collected.”

24. +
Regulations Issued
IC-CDA-SEC Memorandum Circular 02-2010:
“Pool of funds” collected by informal insurers in their
transition to formalization - utilized as premium
payments for those transitioning to formal insurance
and as contributions for those transitioning toward
licensed MBAs.

25. + MICROINSURANCE DEVELOPMENT
(2010 I 2012 I 2015)
2010 2012 2014
Coverage 3.1 million individuals 19.8 Million 31.1 million
Products Mostly credit life 119 MI products (69
life, 50 non-life)
162 registered
products (81 life
81 non-life)
Mi-MBA licensed 6 18 22
Commercial Companies with
Mi Business
Few commercial insurance
companies with
Microinsurance products
52 insurance companies 42 insurance
companies (18 life
and 24 non-life)
Mi Agents No MI agent category 125 (26 RBs, 96
individuals)
170 (48 RBs, 122
individuals)

26. +
Action Plans 2016 - beyond
Step 1
Data collection
Designed template
Number of
formalized providers
List of non-
formalized providers
Step 2
Evaluation and
Analysis
Explore possible
formalization
options and
partnerships
Step 3
Assistance on
Formalization to
be provided by
IC, CDA and SEC

27. +
End of presentation.