INSURANCE is commonly viewed as a financial tool that safeguards only the rich as the poor and marginalized sectors of society cannot afford to have one. As a result, in times of calamities and distress which could result in sudden death and devastation of property, the poor may become even poorer and left with almost nothing to recover from the unfortunate incident or to restart their lives.

In a Third World country like the Philippines, development issues like poverty and inequality are addressed through more inclusive policy reforms, which basically means that the reforms or changes should benefit the poor more. One of the inclusive reforms being done in the Philippines is the introduction of microinsurance for the protection of the poor as well as the micro, small and medium enterprises (MSMEs), especially against the risk of financial losses in times of natural calamities.

Introduced in the Philippines in 1997, microinsurance has targeted the low-income sectors. To protect policyholders against informal insurance activities, the Insurance Commission (IC) has been instituting rules and regulations among microinsurance providers since 2006 and is continually developing the regulatory framework to further strengthen and expand the industry. In 2016, the IC already established the guidelines for microinsurance in the agriculture, health and pre-need sectors.Advertisements

On Nov. 8, 2013, Supertyphoon Yolanda struck the Philippines and brought untold destruction to properties and loss of lives, mostly among the poor and marginalized sectors of hardest-hit Eastern Visayas. The devastation also highlighted the role of microinsurance in helping restart livelihoods and repair wrecked homes, filling in the gaps when assistance from the government or NGOs was lacking.

Claims paid relating to Supertyphoon Yolanda have amounted to P532 million; the average claims payout was P4,777. Because of this, many have come to realize the importance of microinsurance and are now asking for more information about it.

Microinsurance is a type of insurance product or service that meets the risk protection needs of the poor. In order to allow affordability for the targeted sector, the law decrees that the amount of daily contributions, premiums, fees or charges should not be more than 7.5 percent of the current minimum wage rate for nonagricultural workers in Metro Manila. To illustrate, the microinsurance premium could be any amount less than P37.50 to P40.28, or 7.5 percent of P500 to P537, which is the range of the daily minimum wage rate in Metro Manila in effect since November 2018, according to the National Wages and Productivity Commission. Meanwhile, the law allows for a maximum amount of guaranteed benefits of not more than 1,000 times of the prevailing wage rate. Thus, the maximum benefits could be up to P500,000 to P537,000.

Furthermore, to allow for more inclusivity and better accessibility among its target sector, the law also made mandatory the simplicity and clarity of a microinsurance policy contract. In contrast with the usually lengthy and complex contents of a regular insurance policy, the law requires that the provisions of a microinsurance contract should be easily understood by the insured (the poor, marginalized or MSME owners) and may be printed in either English and/or Filipino. The required documents should also be simple. Collection of premiums, contributions, fees and charges should not be difficult, and its frequency should be flexible enough to match the timing of the insured’s cash flows, which could be daily, weekly, monthly, quarterly, semi-annually and annually, whichever is applicable. The contract should also clearly state in simple terms the face amount, benefits and terms of insurance.Advertisements

Once the first premium, contribution, fees or charges have been fully paid, the microinsurance policy becomes immediately effective. In case there are claims against the microinsurance, they should be settled within 10 working days from the day the insurance provider has received the complete set of required documents. This is much shorter compared to the settlement period for regular insurance policies, which is generally 30 to 90 days after submission of complete documents.

As opposed to the regular insurance policy whose grace period is 30 days or a month from the premium due date, microinsurance provides more allowance for its clients. For life microinsurance policies, the maximum grace period in paying the premium is 45 calendar days from the due date and the insured may contest or question the microinsurance contract within one year. As for non-life microinsurance policies, the insurance provider should send notices to the policyholders at least 45 calendar days before the expiration of the contract. The notice should indicate clearly whether the contract may be renewed or not as well as any changes to be made in case it will be renewed.

Before availing of microinsurance, one should make sure that the provider is a duly licensed insurance company. The IC-authorized insurance provider should also include the microinsurance logo in all microinsurance policies.

The author is deputy commissioner for legal services of the Insurance Commission. He may be contacted at rb.escolango@yahoo.com.

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