Over the past few years, microinsurance is starting to gain traction in the country, with more people availing of microinsurance policies as an alternative to products offered by more traditional insurance providers. While microinsurance is already here to stay, a lot of people are still unaware that smaller insurance providers do exist. Here are a few things you must know about microinsurance.
What is microinsurance?
By definition, microinsurance is not different from the usual insurance policies we know: you pay premiums for a certain insurance policy and you get the benefits disclosed in the policy in case of contingencies.
However, the thing that separates microinsurance from the standard covers offered by big insurance providers is that the former targets low-income individuals to invest in insurance. With microinsurance, people with income near the minimum wage can still afford insurance because of lower premiums. Aside from individuals, cooperative members like farmers, fishermen, and other workers are also one of the main targets of microinsurance, allowing them to invest in their future without creating a deep puncture in their monthly budget.
With microinsurance, low-income individuals can still afford insurance policies that were previously unavailable to them because of high premiums.
What makes an insurance policy covered under microinsurance?
According to the Insurance Commission, an insurance product is considered microinsurnace when the amount of daily premium does not exceed the five percent of a non-agricultural worker’s minimum wage in Metro Manila. Currently, the daily premium microinsurance providers charge is between PhP 1.00 and PhP 20.00, which means that the maximum monthly premium should not exceed PhP 600.00.
With microinsurance policies, a policyholder can get guaranteed benefits with a maximum amount of PhP 200,000, which is according to the commission’s computations, can sustain a family living under minimum wage for up to 16 months. While microinsurance offers budget-friendly premiums that are affordable even to low-income households, the benefits are not as high as compared to regular insurance products.
What are the insurance products offered by microinsurance providers?
Microinsurance providers offer products that are categorized into three primary labels: life, nonlife, and mutual benefit associations. Aside from the usual insurance policies offered like life, personal accident, there are other products specifically tailored to certain industries such as crop insurance for members who are in the agricultural industry.
What is the goal of microinsurance?
While the primary goal of microinsurance is to provide security to Filipinos that are financially challenged, another benefit of microinsurance is financial literacy. With more individuals embracing low-cost insurance policies, more individuals are learning about the importance of insurance and how it can benefit a person financially in case of unfortunate circumstances. Financial literacy will lead to wiser and more conscious decisions when it comes to money, and microinsurance can be the first step towards real financial freedom even for low-tier income earners.
Relatively, microinsurance is still in its infancy in the Philippines. Although it is still in its early stages, there is already warm reception from both providers and policyholders. According to the case study published by the Insurance Commission, about 7.8 million Filipinos are already covered by different microinsurance products in 2012, which is a huge leap from 3.1 million in 2009. Furthermore, microinsurance providers also soared from a handful of providers to 35 insurance companies within 3 years, with 80 products meeting the qualifications of being classified as microinsurance.
Microinsurance is good news for all Filipinos, especially to low-income earners who want financial security in times of distress. With microinsurance, insurance—which is previously inaccessible to many citizens—is now a dream come true.