Microinsurance

1. Microinsurance The Next Revolution in Financial Services for the Poor Dr. Jaime Aristotle B. Alip AIRDC/AISADC Forum September 7, 2012

2. Poverty and Vulnerability • 4.7 M families live under poverty threshold and 1 out of 3 Filipinos is considered poor (NSCB, 2006) • 44% of the population live on less than US$2 a day and 14% on US$1 a day or less (WB, 2007) • The poor is vulnerable to risks, i.e, life cycle needs and unpredictable risks such as illness, death, theft, natural & man-made disasters (Llanto et al., ‘Microinsurance in the Phils: Policy and Regulatory Issues and Challenges,’ 2007)

3. The Poor has Limited Access to Insurance Insurance Density (Per capita expenditure): PhP 1,000.2or US$ 23.8 • Life - PhP 752.4 or US$ 17.91 • Non-Life - PhP 247.8 or US$ 5.9 Insurance Penetration (Premiums as % of GDP): 1.04% Estimated Life Insurance Coverage: 16.09% (Insurance Commission, 2010)

4. What is Microinsurance? “An activity providing specific insurance, insurance-like and other similar products and services that meet the needs of the low-income sector for risk protection and relief against distress, misfortune and other contingent events.” (Regulatory Framework for Microinsurance, IMC No. 1-2010) Basic Features: • Simple product design • Low amount of premiums/contributions • Policy contract easily understood by clients • Straightforward and uncomplicated documentation • Frequent collection of premium/contribution that coincides w/ the cash-flow of the insured • Fast and timely payment of insurance claims

5. “ MICROINSURANCE PRODUCT ” is a financial product or service that meets the risk protection  needs of the poor where: • the amount of premium computed on a daily basis does not exceed five percent (5%) of the current daily minimum wage rate for non-agricultural workers in Metro Manila. Php 446.00 x 5% = Php 22.30 per day ($0.53) Php 22.30 x 7 = Php 156.10 per week ($3.72) • the maximum amount of life insurance coverage is not more than five hundred (500) times the daily minimum wage rate for non-agricultural workers in Metro Manila. Php 446.00 x 500 = Php 223,000.00 ($5,309.52) (The minimum wage for non-agri cultural workers in Metro Manila is Php 446.00 as of June 3, 2012)

6. Most common types of microinsuranceproducts Credit life Term life/Personal accident Savings life Propertyinsurance Endowment life Healthinsurance Agriculture Degree of Success Degree of Difficulty

7. To whatrisks and economic stresses are low-incomepersonsvulnerable?

9. RIMANSI: Advocating Microinsurance thru MBAs RIMANSIis a regional resource center that aims to help poor households improve their access to affordable yet adequate microinsurance, through microinsurance business support services

10. RIMANSI 2 0 0 5 A regional resource centre (non-profit) based in the Philippines to help rural and urban poor households in Asia and the Pacific improve their access to affordable yet adequate micro-insurance services, through micro-insurance business support services. RIMANSI Founding Members

11. RIMANSI Business Development Support Services Facilitate organization and setting-up of Micro-insurance Mutual Benefit Associations (MI-MBAs)/ Micro-insurance Programs (MIPs) Provide support for MI-MBA/MIP performance management and compliance to regulatory requirements Establish mechanisms for risk pooling and cost sharing Forum for performance-based monitoring and evaluation Advocate for policy and regulatory reform

12. A network of professionally –managed Mutual Benefit Associations owned by the members that provide affordable, comprehensive, quality micro-insurance products and services to poor people in Asia and the Pacific

13. Microinsurance vs Traditional Insurance Source: Mostly taken from PH Training Manual on Micro-insurance Advocacy (2011)

14. Microinsurance vs Traditional Insurance Source: Mostly taken from PH Training Manual on Micro-insurance Advocacy (2011)

15. MI-MBA Model: how does it work? easy access claims@1-3-5 lower premium member mobilization premium collection claims validation & settlement MicroinsuranceMBA Credit, savings MFI Governance Management Fin. Mgt., MIS BACK ROOM FRONTLINE JOINT MBA-MFI micro-insurance program implementation (partner-agent relationship) trust • Value • Resources • Operations • S-formula Member-Owners

16. Product, Price, Benefit Contribution/week* PHP 12 – 30 (USD 0.27 – 0.67) Maximum Benefit* PHP 45,000 – 120,000 (USD 1,000 – 2,667) *for basic life insurance plan; 1USD = PHP 45 MVAH – motor vehicle accident hospitalization BUR – burial MEDRE – medical reimbursement LIFE – basic life insurance plan CLIP – credit life insurance plan HOSP – hospitalization RSF – retirement savings fund Note: All have living benefit (equity value) equivalent to 50% of total paid contributions

17. Outreach (2011) *at least four (4) in a family is covered by the microinsurance certificate

18. PH Contributions, Claims (2007-2011)(in USD) • Retirement Savings Fund • 100% refundable + interest • Credit life insurance contributions 18.88 M amount of claims paid • Basic life insurance contributions • 40.98 M (50%) is refundable Equity Value

19. Summary of Expenses for CDRAP Due to Typhoon Gener, Habagat & Typhoon Helen

20. CDRAP UPDATE As of August 31, 2012

21. DEATH STATISTICS FOR JAN-JULY 2012 SPOUSE 4,411 CHILDREN 1,871 PARENTS 308 MEMBER 2,499 TOTAL DEATH CLAIMS = 9,035 Average death = 1,291/Mo or 43/day As of July 2012 TOTAL DEATH CLAIMS = 7,424 Average death = 1,237/Mo or 41/day As of June 2012

22. Recommendations basis International market practices

23. Recommendations basis International market practices

24. Recommendations basis International market practices

25. Recommendations basis International market practices