This Insurance Policy Only Costs ₱70 A Month!
Do you know how many Filipinos were covered by microinsurance 10 years ago? Less than three million! Fast forward to 2019 and that figure has grown to 38.9 million.
According to the Department of Finance (DOF) Undersecretary Gil Beltran, he wants 50 million Filipinos to have microinsurance coverage by 2022 as part of the government ongoing initiative on financial inclusion.
Globally, microinsurance premiums and contributions indicate an upward trend; the International Labor Organization’s Impact Insurance Facility said that microinsurance covers about 500 million risks all over the world.
The number of Filipinos covered by any form of insurance, whether it is traditional insurance products or the newer financial models that include microinsurance has been shaped by the nation’s economic reality. A 2018 survey by Sun Life Financial Philippines Inc. (SLFP) on life insurance penetration revealed that 71 percent of the middle- to upper-class Filipinos knew about insurance but only 16 percent actually owned life insurance products.
With such a low insurance penetration rate in the country, a more affordable and easily accessible insurance option such as a microinsurance can help boost awareness and coverage among Filipinos.
According to Melvin Juruena, BIMA Philippines’ Country Manager, “Microinsurance plays a vital role in society. With a low insurance penetration rate, the people are at risk of having no protection and security in case of unfavorable events”.
What is microinsurance and why is it necessary?
First regulated in the Philippines in 2009, microinsurance is a subset of microfinance that, like its name denotes, offers insurance products to cover the risks that come with certain life emergencies. However, it is specifically tailored towards low-income households or individuals who will otherwise not have easy access to the financial markets.
Microinsurance premiums cannot go beyond 7% of the current daily minimum wage, while their benefits can cover up to 500 times the daily minimum wage. For example, if the daily minimum wage is ₱600, premiums cannot cost more than ₱42, while its coverage can go as high as ₱300,000.
Like traditional insurance, microinsurance comes in several forms to cover a range of risks. These include health and property risks, such as livestock or cattle insurance, death insurance, crop insurance, and natural disaster insurance. But unlike traditional insurance, microinsurance comes with its own specific characteristics.
How is microinsurance different from a traditional insurance product?
Unlike traditional insurance which provides very broad insurance coverage to the policyholder (from accidents and health to even assets) microinsurance only provisions a single item from that whole package.
Basically, a person who wants to get insured can pick and choose only those coverage which he or she deems as necessary. In turn, microinsurance is a more affordable insurance option that can give a person more flexibility in ensuring only those aspects which is more crucial for him or her.
|Affordable premium (Less than a hundred pesos)||Expensive premium (Could reach to a few thousand)|
|Insurance coverage is specific depending on the provider (ex: personal accident coverage, hospitalization, etc.)||Broad insurance coverage (could cover different types of insurance in one policy)|
|Minimal documents (a valid ID and a mobile phone will suffice for some) for application.||A handful of documents and forms to fill up for application.|
|Claims are given within 10 business days from the submission of documents||Claims are given within 10 to 14 business days from the submission of documents.|
Another factor that helps boost the take up of microinsurance among the underserved communities is the government’s move to allow mobile applications in the distribution of insurance products. This helps break the barriers that keep the uninsured population from getting a policy, providing even those without a bank account the capability to apply for insurance via SMS to make it more inclusive, coupled with a very affordable premium.
Among the vendors for microinsurance in the Philippines is BIMA Personal Accident Insurances. They offer personal accident insurance for as low as ₱70 a month and their policy is delivered by Pioneer Insurance.
Contracts must be written in simple terms in Filipino or English and must clearly define its face amount, benefits and coverage terms. If the product is a life microinsurance product, the insured has up to 45 days from the due date of the premium payment throughout the effectivity of the contract, and the contestability period is one year.
So far, so good. So, do you need it?
Who should get microinsurance?
It is recommended that any minimum wage worker get microinsurance, as should people who belong to low-income households.
Those employed in the informal sector, such as sidewalk vendors, are also encouraged to apply for coverage through any one of its many insurance products.
Beside low-income households, micro-, small-, and medium-sized enterprises (MSMEs), which form the bulk of businesses in the Philippines should also seek microinsurance coverage.
Unlike traditional insurance providers where insurance application takes a long process and a handful of paperwork, getting a microinsurance is extremely easy. Microinsurance providers like BIMA Personal Accident Insurance only require SMS registration and then deduct your monthly premium from your mobile credits. Meanwhile, some can easily be purchased online with your debit or credit card.
Benefits to the low income and informal sector
There are several benefits that come from microinsurance, especially to the low income and informal sectors. First off, it helps provide a viable financial vessel that can help policyholders deal with unfortunate emergencies or other untoward events. Crises that result in serious injuries, damage to property, and death will incur expenses – and microinsurance policies can help you tide over such eventualities.
In addition, microinsurance can bridge the gap that exists between financial products for the traditionally employed and for those in the low income and informal economies, which are usually underserved by those providing mainstream financial services.
Microinsurance is specifically designed to cater to the low income and informal sectors. This means that you are assured of finding policies that are regulated and designed to make coverage as convenient and comprehensive as possible for you and your family. Traditional insurance products do not offer this convenience, and even if they can, they usually come at higher premiums.
The government’s role in microinsurance provision
If you are interested in taking advantage of microinsurance products, there has never been a better time than now. The government intends to cover as many as 50M Filipinos through microinsurance by 2022, which means there are 11 million more Filipinos who can benefit from it over the next four years. According to DOF Undersecretary Gil Beltran, their department plans to utilize farmers insurance by transforming the Philippine Crop Insurance Corporation or PCIC into a reinsurer, which will help make the private provision of farmers insurance to be more competitive.
Additionally, the National Strategy and the Regulatory Framework for Microinsurance exists to help make sure that government policy will be geared towards the effective creation and of thrusts and measures to deliver microinsurance products to those who need them. By working closely with the Insurance Commission, which is tasked with approving each microinsurance product before it is offered, those in the low income and informal sectors can look forward to finding sustainable and efficient coverage against many of life’s calamities.