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Microinsurance

Magpaseguro para Protektado

Microinsurance, as defined in R.A. No. 10607, is a financial product that meets the risk protection needs of the poor where (a) the amount of contributions, premiums, fees or charges, computed on a daily basis, does not exceed 7.5% of the current daily minimum wage rate of a non-agricultural worker in Metro Manila; and (b) the maximum sum of guaranteed benefits is not more than 1,000 times of the current daily minimum wage rate for nonagricultural workers in Metro Manila.
For a reasonable amount, an individual can have the opportunity to enjoy and experience the protection that insurance brings, even though the individual’s capacity is below the minimum wage.

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Microinsurance in a Nutshell

Know more about the basic features of Microinsurance products in accordance with the existing laws in the Philippines, and other regulations issued by the Insurance Commission.

Microinsurance in a Nutshell
How does Microinsurance work?

The Importance of Microinsurance

How does Microinsurance work, and why must you have it? Debunking the myth that insurance is only for the rich. Microinsurance is tailor-fitted for the majority of Filipinos, especially the poor. 

Challenging the Climate Responding to Change

On November 8, 2013, super typhoon Yolanda hit the Philippines. It left more than 7,000 people dead. It changed the lives of millions of people forever.

Microinsurance challenging the Climate

A Glimpse of Microinsurance in the Philippines (Primer)

Ang insurance (seguro) ay napatunayan bilang isang epektibong instrumento na makakatulong na bawasan ang gastusin ng isang indibidwal laban sa mga di-inaasahang pangyayari tulad ng aksidente, pagkawala ng buhay, at iba pang sakuna.  Subalit, hindi lahat ay may kakayahan upang makabili nito.   Ang kahirapan ay isa sa mga matagal ng problema sa  Pilipinas at maraming pinuno na ng bansa ang gumawa ng hakbang upang ito ay mabigyan ng solusyon.

Noong 1997, inilunsad ng pamahalaan ang “National Strategy for Microfinance” na naglalayong itaguyod ng isang matibay at mapapanatiling financial market para sa mahihirap na kung saan ang pribadong sector ay siyang magbibigay ng serbisyong pinansiyal at ang gobyerno ay maglalaan ng mga patakaran upang palawigin ito.   Ang microfinance ay maglalaan ng isang malawak na serbisyong pinansyal (tulad ng pag-iipon, pangungutang, pagbabayad sa bangko at iba pang financial institution, pagpapadala ng pera mula sa ibang bansa, at microinsurance) para sa mga may mabababang sahod.

Bukod sa microfinance, inilunsad din ng pamahalaan ng Medium Term Philippine Development Plan (MTPDP 2001-2010). Dito kinikilala na dapat protektahan ang kapakanan ng mahihirap upang mapagtagumpayan ang kanilang pakikipaglaban sa kahirapan.” Muli ring kinilala ang kahalagahan ng pribadong sector upang maging katuwang ng gobyerno sa pagpapalakas sa mga mahihirap.

Sa taong 2004-2005, ang konsepto ng microinsurance ay ipinakilala upang maging pantulong na daluyan ng microfinance at microentrepreneurship sa pagbigay ng kakayahang pinansyal sa mahihirap. Kung ang microentrepreneurship ay nagtuturo kung papaanong magnegosyo at ang microfinance ay para sa pamumuhunan upang makapagsimula ng negosyo, ang microinsurance ay ang paglalaan ng perang magagamit na pambili na abot-kayang seguro laban sa mga pangyayaring hindi inaasahan.

Noong 2006, inilunsad  ng Insurance Commission ang Insurance Memorandum Circular No. 9-2006 o ang “Microinsurance Regulation and Declaration of Policy Objectives” na itinukoy kung ano ang microinsurance at mga panuntunan sa mga nilalaman ng produkto at mga serbisyo nito.   Marami ang nagkainteres sa programa sa kabila na ang nasabing sirkular ay nakatuon lamang sa Mutual Benefit Associations.

Noong 2010, dalawang mahahalagang dokumento ay nilagdaan at inilunsad: “The National Strategy for Microinsurance” at ang “Regulatory Framework for Microinsurance”. 

Sa National Strategy for Microinsurance, itinukoy ang direksyon at stratehiya ng programa na maaaring sundan upang mapalaganap ang microinsurance.  Ang Regulatory Framework for Microinsurance naman ay ang pagkilala ng mga ligtas at mahusay na patakaran at regulasyon na nagtatalaga kung ano ang microinsurance at naglalayong hikayatin ang pribadong sektor upang mapalago ito.  Taong 2010 rin inilabas ng Insurance Commission ang Insurance Memorandum Circular (IMC) 01-2010 “(Regulations for the Provision of Products and Services ng Microinsurance)”.  Binago at ipinagtibay pa ng IMC 01-2010,  ang nakaraang kahulugan ng microinsurance na nakapaloob sa IMC No. 9-2006 at dinagdagan pa ng mga regulasyon at serbisyo ng mga produkto ng Microinsurance tulad ng  bilang ng araw upang mabayaran ang isang claim sa microinsurance, mga patakaran sa pagsama-sama ng produkto (bundling), at iba pa.

Ang nasabing mga dokumento ay produkto ng kooperasyon ng iba’t ibang ahensiya ng gobyerno, pribadong sector, akademya at multi-lateral agencies.  Pagkabuo ng mga nasabing dokumento, ipinagpatuloy pa ang  kolaborasyon ng iba’t ibang sector upang mabuo ang mga sumusunod:

  1. Performance Standards – mga panuntunan upang sukatin ang kalidad ng serbisyo ng microinsurance providers batay sa sumusunod na kategorya; S-stability, E-efficiency, G-governance, U-understanding of the product by the client, R-risk based capital at O-outreach (SEGURO).  Ang paggamit ng SEGURO bilang sukatan ng pagganap ng mga microinsurance providers ay sinimulang sundin sa pinansyal na operasyon noong taong 2011.
  2. Product Development – Upang matiyak na ang mga produktong microinsurance ay simple at madaling maintindihan, dalawang halimbawa ng microinsurance contracts ang binuo, isa para sa life insurance (buhay), at isa para sa non-life (di-buhay). Ang mga nabanggit na produkto ay maaaring tularan ng mga microinsurance providers.
  3. Financial Literacy on Microinsurance – Ito ay stratehiya upangmatugunan ang mababang pagtangkilik ng insurance sa bansa. Matapos mabuo ang dokumentong “Roadmap to Financial Literacy in Microinsurance”, ang susunod na hakbang ay ang ipatupad ang nabanggit na stratehiya upang maraming tao ang maka-alam tungkol sa mga produktong ito.

Ang kolaborasyon ay nagpatuloy upang paghusayin at pagbutihin pa ang mga regulasyon sa microinsurance. 

Noong 2012, ang Alternative Dispute  Resolution Framework for Microinsurance (ADREM) ay ipinatupad upang sundin ang proseso ng mediation-conciliation bilang isang alternatibong paraan ng kasunduan sa pagtatalo upang maiwasan ang gastos sa paglilitis. Ang Insurance Commission ay naglabas ng mga sumusunod na regulasyon noong 2013:

  1. Procedures  for  Accreditation  of  Mediators-Conciliators in AlternativeDispute Resolution  for Microinsurance (ADREM) –  Ang sirkular  na ito ay tungkol sa mga hakbang na dapat gawin ng mga kwalipikadong indibidwal na gusto maging pribadong tagapamagitan ng Insurance Commission sa mga microinsurance claims.                   
  2. Guidelines for the Implementation of Alternative Dispute Resolution Mechanisms for Microinsurance involving Mutual Benefit  Associations – ito ay ang  proseso ng ADREM na kapag ang nagbenta ng microinsurance ay mula  sa sektor ng MBAs.   
  3. Guidelines for the Implementation of Alternative Dispute Resolution Mechanisms for Microinsurance (ADREM) Involving Cooperative Insurance Societies– ito ay ang proseso ng ADREM kapag ang nagbenta ng microinsurance ay mula sa mga Cooperative Insurance Societies na may mga produkto ng microinsurance. 
  4. Guidelines for the Implementation of Alternative Dispute Resolution Mechanisms for Microinsurance (ADREM) Involving Commercial                Insurance Companies – ito ay ang sumasaklaw sa proseso ng ADREM kapag ang nagbenta ng microinsurance ay mula sa mga Commercial Insurance Companies.

Noong 2013, inaprubahan ng Kongreso ang Republic Act No. 10607.  Isa sa  mga bagong   tampok ng batas ay ang  Microinsurance.   Ang depinisyon ng  microinsurance sa batas  ay isang pinansyal na produkto o serbisyo na matutugunan sa pangangailangan ng proteksyon sa mga mahihirap na kung saan:

(a) ang halaga ng mga kontribusyon, premium, bayad o singil, na nakalkula sa araw-araw, ay hindi lalampas sa pito at kalahating porsyento  (7.5%) ng  kasalukuyang araw-araw na sahod para  sa mga di-agrikultural na manggagawa sa Metro Manila; at 

(b)  ang pinakamataas na kabuuan ng mga garantisadong benepisyo   ay hindi hihigit sa isang libong (1,000) na beses ng kasalukuyang pang-araw-araw na sahod para sa mga di-agrikultural na mangagawa sa Metro Manila. 

Noong 2015, ang mga sumusunod na mga regulasyon sa microinsurance ay inilunsad:

  1. Agricultural  Microinsurance (Micro Agri) – regulasyon na ito ay inilaan   upang maitatag ng isang malinaw na patakaran na seguro para sa agrikultura mula sa  pribadong sektor at upang himukin din ang mga ito na gumawa ng mga produkto na angkop sa mga pangangailangan ng kanilang mga kliyente.  Kasama din dito ang mga pamantayan  batay sa standard indemnity based at parametric  based microinsurance.
  2.  Enhanced Regulatory Microinsurance Framework – Ang regulasyon na ito ay inilaan upang lumawak at palawigin ang maabot ng mga produktong microinsurance at mga serbisyo nito. Kasama din sa regulasyon na ito  ang  mga tungkulin at responsibilidad ng mga broker/ahente, at mga panuntunan sa bundling ng produkto at reinsurance. 
  3. Micro Pre-Need Regulatory Framework – Ang regulasyon na ito ay  binuo  upang magkaroon ng abot-kayang mga produkto ng pre-need plans para sa edukasyon, buhay o pang-alaala na serbisyo, at pensiyon na nagbibigay  ng pangangailangan sa sector na mababa ang kita. 

Noong 2016, ang tatlong  mga regulasyon sa microinsurance  na inilunsad:

  1. Health Microinsurance Framework (MicroHealth) – Ang regulasyon na ito ay inilaan upang madagdagan at umakma sa pangkalahatang programa ng pangkalusugan ng gobyerno sa pamamagitan ng isang produktong manggagaling mula pribadong sektor.   Ang regulasyon na ito ay tinatampok ang mga panuntunan sa mga uri na maaaring magbigay ng mga produkto ng MicroHealth, at mga klase ng produktong maaring gawin na maaaring makapagbigay lunas o dagdag na benepisyo sa pasyente tulad ng pag-ayuda sa pananalapi at pag-ayuda sa gastusin sa gamot.
  2. Microinsurance Distribution Channels Frameworks – Ang regulasyon na ito ay inilaan upang madagdagan at mapalawak ang mga umiiral na regulasyon sa pamamahagi ng mga produkto at serbisyo ngmicroinsurance at micro pre-need.  Binanggit din sa regulasyon kung sino-sino ang maaaring kumontrata sa mga distribution channels, mga maaaring gawing distribution channels, at mga kailangang sundin upang tiyak na ang mga karapatan ng mga mamimili ay protektado.
  3. Enhanced Performance Indicators and Standards for Microinsurance 2016 – Pinaghusay ng regulasyon na ito ang mga panuntunan upang sukatin ang kalidad ng serbisyo ng microinsurance providers.  Binago ang mga panuntunan sa pagsukat sa mga microinsurance providers tulad ng solvency and servicing.  Ang regulasyon na ito ay isusumite ng mga microinsurance providers kada taon sa Insurance Commission.  Inilalarawan din nito ang inaasahang mga pagsunod sa mga bago at mga ipinagtibay pangpamantayan sa pagganap na maaring sukatin sa ilalim ng S-solvency and Stability, E-efficiency, G- governance, U-understanding of the product by the insured, R-rate of growth, and O-outreach (SEGURO).

Sa mga nagawang regulasyon, inaasahang muli ang suporta mula sa mga stakeholders.  Ang mga iba’t ibang alituntunin ay magkasama at pinagsikapang mabuo upang makamit ang isang magandang hangarin.  Ang mga nabanggit ay isang maliit na instrumento na  makakatulong sa mga taong may mababang kita upang magkaroon ng pagkakataon na magkaroon ng isang produkto na mayroong pinansiyal na seguridad sa panganib na haharapin ng kanilang buhay, ari-arian, at kabuhayan.

Insurance has been proven, time and again, as an effective tool in mitigating an individual’s cost and expenses in unforeseen events like accident, loss of lives and the occurrence of natural catastrophes. However, one issue on insurance is its affordability. Poverty has been a recurring problem in the Philippines and through the years, country leaders have sought remedies to address it.

In 1997, the government launched the National Strategy for Microfinance which articulates the vision of a viable and sustainable micro financial market for the poor where the private sector plays a major role in the provision of financial services to the poor and the government provides a supportive policy environment to the market. Microfinance is generally defined as the provision of a broad range of financial services (i.e., savings, credit, payment transfer, remittances, and microinsurance) to the low-income sector.

Thereafter, the Medium-Term Philippine Development Plan (MTPDP 2001-2010) was introduced and recognized the need to provide risk protection for the poor.  It emphasizes that “protecting the poor and the vulnerable groups is imperative in winning the battle against poverty” and reiterates the need “to involve the private sector in the provision of services and other assistance to poverty areas identified by government using innovative and sustainable models.”

Sometime in 2004 to 2005, the concept of microinsurance was introduced as a complementary vehicle to microfinance and micro-entrepreneurship.   While micro-entrepreneurship provides lessons on business how-to’s and microfinance provides access for small business investment funds, microinsurance provides accessibility to affordable insurance to cover for losses when contingencies strike.

In 2006, Insurance Memorandum Circular (“IMC”) No. 9-2006 entitled “Microinsurance Regulation and Declaration of Policy Objectives” was issued by the Insurance Commission. The IMC defined the features of a microinsurance product and set basic policy provisions on microinsurance products.   The IMC drew much interest despite the fact that focus was given on Mutual Benefit Associations as microinsurance providers.

In 2010, two important documents were signed and issued, i.e., The National Strategy for Microinsurance and the Regulatory Framework for Microinsurance.

The National Strategy for Microinsurance defines the vision, objectives, roles of the various stakeholders and key strategies to be pursued in enhancing access of the low-income sector to insurance products and services.  On the other hand, the Regulatory Framework for Microinsurance establishes the policy and regulatory environment to encourage, enhance, and facilitate the safe and sound provision of microinsurance products and services by the private sector. On the same year, IMC No. 01-2010 entitled “Regulations for the Provision of Microinsurance Products and Services” was issued by the Insurance Commission. Said IMC modified the previous definition of microinsurance contained in IMC No. 9-2006 and further enhanced several policy provisions and services of microinsurance products which includes, number of days to settle a microinsurance claim, rules on product bundling, etc.

The above documents were products of cooperation among various government agencies, the private sector, the academe and multi-lateral agencies. After the launch, their collaboration continued through various undertakings such as:

  1. Performance Standards – A set of point scoring system based on six (6) major categories acronymed SEGURO (Stability, Efficiency, Governance, Understanding of the Product by the Client, Risk Management and Outreach) which shall be the basis for evaluating and monitoring the performance of microinsurance players starting calendar year 2011.
  1. Product Development – To ensure that microinsurance products are simple and easy to understand, a prototype life and non-life microinsurance contracts were drafted and subsequently approved by the Insurance Commission, for adoption by microinsurance providers.
  1. Financial Literacy on Microinsurance – A strategy to address the low insurance market penetration in the country. Having crafted a document called the Roadmap to Financial Literacy in Microinsurance, the next step is to utilize the said Roadmap to institutionalize financial literacy among the various stakeholders to microinsurance.

The collaboration continued to polish the existing microinsurance guidelines and further enhanced several matters on microinsurance that materialized into the creation, development and subsequent issuances of several regulations on microinsurance.

In 2012, the Alternative Dispute Resolution Framework for Microinsurance was launched to follow a mediation-conciliation processes as an alternative for dispute settlements, thereby minimizing the expenses of litigation. This paved way for the issuance by the Insurance Commission on the following Circular Letters on 2013:

  1. Procedures for Accreditation of Mediators-Conciliators in
    Alternative Dispute Resolution for Microinsurance (ADREM) – This circular provides for the procedure for qualified individuals who intends to be accredited by the Insurance Commission as a mediator-conciliator on any disputed microinsurance claims.
  1. Guidelines for the Implementation of
    Alternative Dispute Resolution Mechanisms for Microinsurance (ADREM) Involving Mutual Benefit Associations – This circular covers the ADREM processes involving microinsurance providers in the MBA sector.
  1. Guidelines for the Implementation of Alternative Dispute Resolution Mechanisms for Microinsurance (ADREM) Involving Cooperative Insurance Societies – This circular covers the ADREM processes involving Cooperative Insurance Societies offering and selling microinsurance products.
  1. Guidelines for the Implementation of Alternative Dispute Resolution Mechanisms for Microinsurance (ADREM) Involving Commercial Insurance Companies – This circular covers the ADREM processes involving Commercial Insurance Companies offering microinsurance products.

In 2013, Republic Act No. 10607 was enacted. One of the new features of the law is the provision on Microinsurance. As it now stands, microinsurance is defined as a financial product or service that meets the risk protection needs of the poor where:

(a)   the amount of contributions, premiums, fees or charges, computed on a daily basis, does not exceed seven and a half percent (7.5%) of the current daily minimum wage rate for non-agricultural works  in Metro Manila; and

(b)  the maximum sum of guaranteed benefits is not more than one thousand (1,000) times of the current daily minimum wage rate for no-agricultural works in Metro Manila.

In 2015, the following microinsurance frameworks were also issued:

  1. Agricultural Microinsurance (Micro Agri) – This framework is intended to establish a clear-cut policy on agriculture insurance in the private sector and to encourage providers to innovate and design products tailor-fitted to the needs of their clients. It covers both standard indemnity-based and parametric-based microinsurance.
  1. Enhanced Regulatory Microinsurance Framework – This framework is intended to further deepen the outreach and expand accessibility, and provide the mechanism for sharing of risks faced by microinsurance providers particularly in the face of catastrophic and disastrous events. This circular also provides for the roles and responsibilities of brokers/agents, rules in product bundling and reinsuance.
  1. Micro Pre-Need Regulatory Framework – This framework is developed to have affordable pre-need products for education, life or memorial services, and pension which cater the needs of the low income sector.

In 2016, the three microinsurance frameworks issued were:

  1. Health Microinsurance Framework (MicroHealth) – This framework is intended to supplement and complement the Government’s Universal Healthcare Program through a viable and sustainable products from microinsurance providers. The framework features the rules on the types of entities that can provide MicroHealth products, the types of MicroHealth products it can make which focuses on fully or partially covering curative case benefits in in-patient and out-patient settings and offering benefits such as cash assistance and medicine expenses.
  1. Microinsurance Distribution Channels Framework – This framework is intended to supplement and expand existing regulations on distribution channels for micro risk protection products and services. The framework also enumerates who can contract with distribution channels, the allowable functions of distribution channels and several requirements to follow which will ensure that the rights of consumers are protected.
  1. Enhanced Performance Indicators and Standards for Microinsurance 2016 – This framework amended the 2011 circular on the Performance Standards for Microinsurance Providers. The enhanced performance indicators and standards modified the performance indicators in various areas such as solvency and servicing. The indicators are to be calculated by microinsurance providers and submitted periodically to the Insurance Commission. It also describes the expected performance standards measured by the new and improved indicators as S-Solvency and Stability, E-Efficiency, G-Governance, U-Understanding of the Product by the Insured,  R-Rate of Growth and O-Outreach (SEGURO).

With the above accomplishments, it is hoped that support from the stakeholders will be carried on.  The various regulations are joint efforts to achieve a unified vision. These are but small steps in the realization that microinsurance is an important tool in helping the low income group to have access in products offering financial security in the face of diverse risks that confront their lives, property, and livelihood.