More Pinoys now covered by microinsurance

MANILA, Philippines - The Department of Finance has acknowledged the expanding role of microinsurance in the financial safety net framework, especially for the poor who are most vulnerable to natural catastrophes.

In a keynote speech at the UN Conference on Disaster Risk Reduction held recently in Sendai, Japan, Finance Undersecretary Gil Beltran said microinsurance has the potential to reduce the vulnerability of low-income households to natural disasters.

Gil said the untapped potential in the country’s insurance sector is lucrative as these products tend to be very limited in range and target a very limited segment of the country’s population.

“The penetration of insurance in general and microinsurance in particular have to be deepened so as to have universal coverage. Microinsurance as social safety net has to be seen as empowering and capacitating the people cope with unforeseen circumstances and reduce their vulnerabilities to the effects of disasters,” Beltran said.

“As the experience of the Philippines has shown, the market can actually play a major role in delivering such insurance products even to the bottom of the economic pyramid where the government is traditionally seen as the natural provider,” he said.

For microinsurance to reach scale, Beltran said a policy that ensures a level playing field for insurance providers and for claimants to enjoy efficient collection mechanism, must be drawn up.

Insurance services are very essential for the low income households to cope with uncertainties and emergencies.

Microinsurance can help combat poverty by providing low-income households, farmers and entrepreneurs with rapid access to post-disaster liquidity, thereby protecting their livelihoods and providing for reconstruction.

“In the aftermath of Typhoon Yolanda, some P700 million was claimed by those covered with microinsurance. These claims were instrumental in helping survivors rebuild their lives. Thus, beyond accomplishing goals of financial inclusion, microinsurance plays the role of social safety net for the vulnerable segments of the population,” Beltran said.

Formal insurance services are not accessible to the poor because of high premiums and complicated procedures.

Microinsurance offers a variety of products which includes life insurance, coverage from losses due to natural disasters and other unforeseen events.

Beltran urged insurance providers to develop microinsurance and other instruments (including microhealth,  microhousing and agricultural risk insurance)  to reduce risks of natural disasters on low-income households.

Aside from continuously developing products targeted at the low end of the market, Beltran said insurance companies must also provide infrastructure insurance to enable governments to start rebuilding efforts and restore connectivity which is crucial to economic recovery.

“While microinsurance operates at a personal or household level, the cost of reviving the macro-economy is a daunting task, which includes, among others, restoring damaged infrastructure, the very tools with which the economy gets active again. Rebuilding over and over again, however, will lead the economy nowhere. As such, better engineering technologies, better warning signals, stricter zoning are needed for reduced vulnerability, more resilient infrastructure, better emergency systems,” Beltran said.

For as low as P25 a month, a low-income Filipino can avail himself of insurance.

From a coverage of three million in 2008, the number has grown to nearly 28 million by the end of the year, representing about  28 percent of the population, the highest penetration rate in Southeast Asia.

Microinsurance has the potential to encourage investment in disaster prevention if insurance firms offer lower premiums.