Microinsurance in the Philippines: Policy and Regulatory Issues and Challenges

This paper assesses the state of microinsurance in the Philippines, identifies the players and their performances, and the challenges facing the microinsurance development. The paper discusses:

• The demand for risk protection services in the informal economy;
• Coping mechanisms of low-income households;
• The demand-supply gap in insurance for low-income households;
• The strengths and weaknesses of microinsurers;
• The potential of microinsurance and limitations;
• The regulatory environment for microinsurance in the Philippines.

The paper finds that:

• “Home-made” micro-insurance products continue to be provided despite their actuarial weaknesses and lack of financial capacity of the providers because of very strong demand from their membership;
• Given their advantages over commercial insurance companies, the “mutual benefit associations (MBAs)” are the usual vehicles of microinsurance programs.

The paper concludes that:

• There is a need to re-examine the tendency of microfinance institutions (MFIs) to provide microinsurance in view of their lack of institutional and financial capacity;
• Other MBAs should follow the example of CARD MBA in providing viable microinsurance products;
• There is a need to develop a regulatory environment that is supportive of microinsurance operations;
• Inclusive microinsurance operations will enlarge the risk-pool and address the many challenges that micro-insurance faces;
• It is better to have a separate entity that provides microinsurance;
• Client-based measures should be as important as measures of institutional sustainability.