The Bangko Sentral ng Pilipinas (BSP) has approved the first two applications by rural banks to engage in microinsurance services. These are Bangko Mabuhay (Tanza, Cavite) and Mallig Plains Rural Bank (Isabela).
Microinsurance is defined by the Insurance Commission (IC) as 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. The features of the microinsurance product, which are appropriately designed for the needs and capacity of the low-income sector, include a limitation on the amount of premiums, contributions, fees and charges not to exceed five percent of the current daily minimum wage, or around PhP 20 and a ceiling on the guaranteed benefits not to exceed 500 times the current daily minimum wage, or around PhP 210,000.
The recent approval authorizes the banks to present, market and sell microinsurance products in their branches and offices as provided under Circular 683 (2010). The approval validates the potential of rural banks, with a network of over 2,700 offices nationwide, subject to certain prudential rules and regulations, to serve as distribution points for authorized microinsurance products offered by licensed providers.
At present, there are nearly 50 other rural banks that have signified their interest to provide microinsurance services. The BSP has given the initial clearance for these banks to apply for the necessary provisional license from IC. Once this provisional license is obtained, the BSP will grant the appropriate authorization for these banks to sell microinsurance products during the license validity of one year. These banks will have to amend their articles of incorporation (AOI) to reflect the provision of microinsurance as a secondary activity. The approved amended AOI must be submitted to the IC on or before 30 June 2012, otherwise the IC shall no longer renew the license.
The BSP institutionalized microinsurance regulations as a means to further promote an inclusive financial system. This means that more Filipinos will benefit from a wide range of financial products and services as a means to address their various needs. Insurance is one such product and this is particularly useful as a mitigant to the many uncertainties and shocks.
Recent events like Sendong and other calamities have brought to fore the importance of adequate protection against death, injury, loss of property and other contingent events. This move by the BSP is an important response to this urgent need for microinsurance especially for the poor who are more vulnerable to various risks.