Everything you need to Know about Microinsurance in the Philippines

People with low income are highly vulnerable to health problems and the destruction of their assets, harvest or livestock and homes due to natural and man-made catastrophes. And there is, of course, the looming danger of a sudden accident or death that practically every human being are all at risk.Unfortunately, low income people often do not have insurance coverage to protect them. This does not have to be the case though, as many different types of affordable and accessible microinsurance policies are now available. You can even purchase a microinsurance policy for as low as P20 in a nearby Palawan Pawnshop! Read more to learn about microinsurance and your options.

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What is Microinsurance?

Microinsurance is much like the usual insurance that you know, except that it is designed to cater to low-income people. It is also the ideal option for those who do not have access to the financial markets. You may think of it as a tidbit-sized insurance with affordable premiums.
Under the law, premiums for microinsurance cannot go over 7 percent of the daily minimum wage. The law ensures that most people will be able to afford the policies. The rate and benefits will also not go over 500 times the daily minimum wage, which means that for a minimum wage of P500, the coverage will only go as high as P250,000. Unlike regular insurance options which come with a 30-day allowance, microinsurance requires a 45-day allowance.
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The Industry

The microinsurance industry in the Philippines has grown in leaps and bounds over the past few years. The country currently has one of the world’s most advanced microinsurance markets. Several more individual insurance products have divulged plans to provide micro pre-need products, such as pension and education insurance.

As per the Insurance Commission, approximately one-third of Filipinos are covered by insurance as of 2015. The government expects an uptake of microinsurance, reaching 50 million people after two to three years. This will cover nearly half of the population in the country.

The Philippines is considered a champion of microinsurance, as it is one of the first countries to have determined a clear definition of microinsurance and come up with innovative distribution channels. One key innovation was to allow any establishment to sell microinsurance. The only strict requirement is that their business should be registered. Because of this initiative, microinsurance policies have become more accessible. The bulk of policies are now being sold in sari-sari stores and pawnshops situated all over the country, instead of just in banks or offices. Another innovative idea being considered is selling insurance policies via mobile phones.
 Photo courtesy of Geralt via Pixabay

Its Benefits

Microinsurance is easy to access and to apply for, no wonder it has grown increasingly popular. It is undoubtedly a tool that fosters financial inclusion, as it provides tailored services that are designed to address clients’ specific needs.
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Its Importance

The low income and informal sector should make sure they get insurance coverage, especially now that is has become more accessible as ever. Just like any other person, they are exposed to risks, such as catastrophes, accident, loss of assets, and death. These unfortunate events lead to expenses they simply cannot afford. Having an insurance coverage will help them minimize the impact of these events, at least financially speaking. With microinsurance, those belonging to the low income sector will be better able to recover from the consequences of unfortunate events.
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Common Microinsurance Products

Here is a list of the most common microinsurance products in the market today. More products are expected to be introduced after the government has finalized the regulations.

  1. Life insurance. Microlife insurance products often start with a coverage of P5,000, offered at a premium of around P40 pesos. This would usually cover a period of less than six months. The coverage under a microinsurance can go as much as P250,000.
  2. Accident insurance. A typical assurance plan can start at a coverage of P20,000, offered at a premium of less than P100.
  3. Property insurance. Coverage for losses and damage to your home due to disaster can go from P100,000 to P200,000, with premiums starting at about P100 for a coverage of one year.
  4. Personal property insurance for small businesses. Personal property insurance can include protection against damage to property, as well as losses due to robbery and burglary. The typical coverage is P100,000, offered at premiums of about P1,500-P2,000.
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Accessibility

Microinsurance products are designed to be straightforward so it can be easy for plan holders to understand how to use them. The required documents are also minimal and easy to accomplish, plus restrictions are limited. The premiums are usually paid in cash, but can also be paid through mobile payments, salary deductions, and other ways.
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Where to Avail of Microinsurance Products

Depending on what you need, you can purchase microinsurance products from pawnshops, schools, local government units, convenience shops, and banks. Most of these providers are easy to reach via various communication channels in case you need to file a claim. Often prepaid, microinsurance products are easy to manage and to pay. A convenient option for plan holders, microinsurance eliminates the need to come up with funds to keep up with payments that will keep the plan active.

If you have always been interested in getting an insurance but still do not have one, an affordable and simple-to-process microinsurance can introduce you to the practice. Choose a plan that is suitable for your needs and lifestyle. An accident insurance policy may be more ideal for you than a property insurance coverage. Note that microinsurance products are only effective for a short period of time. It is best to get regular insurance once you are able to pay for higher premiums. When it comes to investing in financial instruments like insurance products, the sooner you get started the better. You simply cannot tell when you will need it.

With the growing microinsurance industry in the Philippines, and a government that fully supports its growth, there is no reason why every Filipino should not have an insurance. Make sure you get one for yourself!

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