Microfinance Experience in PHL Shows the Poor Can Be Insured

Monday, March 26, 2012

DAVAO CITY—The Philippine success in extending microfinance credit to the poor shows that this sector at and below the poverty threshold could also become worthy of insurance coverage, the Insurance Commission here said.

At present, about 3.1 million poor Filipinos have been covered by the government program on microinsurance since the project was started in 2010, said Emmanuel F. Dooc, chairman of the Insurance Commission, the government supervisory agency.

Microinsurance offers as low as P1 per day worth of buying one of the government-approved 59 microinsurance products, with the government wanting to cover the poor with the basic product BBK, for “Buhay, Bahay at Kabuhayan” (health and accident, house and livelihood), he said.

Or the premium could go higher but should not go beyond 5 percent of the total earning of a policyholder, he added.

A microinsurance policy could have an insurance coverage of P10,000 to as much as P200,000.

Dooc said the commission wanted to cover all the households in the population’s 27 percent below the poverty level. “I may be ambitious but our success in microfinance has told us that even the poor is worth the financial protection it needs.”

An innovation in insurance activity in the microinsurance program was the coverage of properties and livelihood affected by disasters. “Agricultural crops and the stalls of vendors would be covered to provide them extra protection, especially if they live in the most disaster-prone villages.”

The Insurance Commission would be holding 16 regional road shows to drum up support to the program and to spread the information to the target clients.

He said 15 mutual benefit insurance and 19 insurance companies have listed as agents, along with 18 rural banks.

Dr. Joselito Almario, deputy executive director of the National Credit Council of the Department of Finance, said the Insurance Commission has tapped cooperatives and associations to extend the reach of the program.

He said the commission was also studying the experience in Quezon City where it tapped a barangay government to gather its constituents to be covered.

He said the program has simplified the application as well as it sped up the payment “because for the poor, cash is very urgent during disasters and accidents.” He said claims could be paid in a day.

Before, he said, insurance companies shun the poor “but with a 98-percent repayment success in our microfinance, we have shown them that the poor could pay better than their usual clients.” He said that the banking sector could only notch an 85-percent collection rate.

Source: BusinessMirror (link opens in a new window)

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Base of the Pyramid, microfinance, microinsurance