Microinsurance Momentum in the Philippines

Dear Kate
In the midst of over heated deliberations on the institutional issue pertaining to MFI and micro credit services and its credibility for achieving the ultimate goal of MF – poverty reduction in a given market condition in CGAP- MF Blog, it is very much refreshing to look at the values of Micro Insurance (MI) another important ( often neglected ) component of Micro finance services which provides more value services to the poor than micro credit, in terms of economic protection and social security to livelihood and the life (health related) as well.. Thanks to CGAP for timely intervention..
In the context of poverty reduction being the main goal of MF, it is for the countries like Philippines and India with significant number of poor to protect them first from vulnerabilities ( both idiosyncratic and co variant risks) by providing suitable product and services matching to their needs . As poor people is willing to pay for MI as pointed in this posting is worthy noting and calls for inclusive insurance through right insurance literacy. ‘
Regarding responsible inclusive micro finance for poverty reduction , following three ingredients are required. for India’s road map for inclusive insurance .
a) Sequencing the MF inputs – sequencing the micro financial services inputs such as micro savings and micro insurance for graduating the poorest in the bottom layer of poverty pyramid.
b) Integrated services – For inclusive microfinance first MF need to be inclusive of all MF services not micro credit alone. Every micro credit product to the target poor therefore need to be integrated with micro insurance component besides savings
( e.g. India- crop insurance with crop loans, Livestock insurance (Master policy) for cattle loan, insurance linked farm equipment loans, In Malaysia- Savings linked insurance Patriot Muda for children, Patriot Remaja for adolescents, insurance linked paddy credit of BPM , In Indonesia- life insurance linked KUPEDUS credit scheme of BRI , BARC/ GB integrated MF services )
c) Coordinated Endeavour – If single institution could not provide this integrated services, the concerned institutions may jointly endeavor to ensure the needed services reach the target clients.. Here unfortunately most of the so called MFIs confine to micro credit only which may not be adequate for the ultimate goal. These MFIs need to coordinate with insurance agencies and the government agencies who also provide free premium insurance to the poor as in India –( Rajive Arogya sri Bima yojana by central government , In Tamilnadu state viz., Kalaignar Insurance Scheme for Life saving treatments for people living below poverty line aims at providing specialist treatment up to one lakh for 51 life threatening diseases. Rashtriya Swasthya Bima Yojna:in kerala and Rajasthan states
It is immaterial which institution deliver these integrated services, what is important ultimately the deserving poor should get all MF services for their sustainable upliftment
Hope CGAP’s chapter for the forthcoming new version of the Micro-insurance Compendium would be useful guide for the players in Micro finance including MFIs in particular.
I honestly emphasize that the coverage of Micro insurance in CGAP MF blog need to occupy continuously more space to create ‘The insurance is not just for the rich ‘ mind set among the players on MF arena.
In fine, while poor is made credit worthy thanks to Prof. Yunus, they should also be equally made insurance deserving in the process of poverty reduction. Hope it will not be an exaggeration, latter activity may also certainly attract the attention of Nobel prize committee since micro insurance has more potential to make dent in poverty canvas than micro credit which yet to prove its mettle.

V. Renkarajan — Thanks for your reply to the micro-insurance post. You make many excellent points concerning the potential value of micro-insurance to the poor, its sequencing with other financial (and non-financial) services, and the role that partnerships could play (and do play) in extending reach and value-add more cost-effectively.

One interesting point I have heard made by Vijay Mahajan of BASIX-India is that it is actually not responsible to lend for assets such as cows without being able to provide affordable insurance cover as well, since the likelhood of loss of the asset is relatively high and with predictably quite negative consequences for the borrower (and the household). In this regard, I am encouraged by some developments in micro-insurance markets such as Kenya (e.g., Equity Bank), where affordable asset insurance is becoming available.

This is quite different from typical credit life insurance, which in my view can hardly be considered a product for the customer (vs. the provider), since the value proposition is usually so poor (premiums vs. likely pay-out). I wonder what your views are on this issue and whether there has been much of a dialogue in the Indian market about making credit life insurance more responsible. Thanks again for your reply.

Kate

Thank you Kate for your response.
One basic fact first to be appreciated in MF operation for poverty reduction, is that when the pro poor micro financial services ( micro savings, micro insurance, micro credit, transfer services and other supporting non financial services ) are clearly identified for the said task, our focus should be more on demand side perspectives to search how to innovate and deliver them holistically to the target group for achieving the declared goal. In the process, there may be hurdles but one should not throw out ‘ the responsibility ‘ in the bidding corner. My argument is that after so many years of trials , it came to light that the poor could be bankable. On similar account the poor should be made insurable . The question of affordability is debatable .However, the fact on willingness of the poor to pay for insurance and affordable product in Kenya’s market as pointed out in your posting , is encouraging.. Aggressive insurance literacy on the values of insurance and suitable insurance product and services. are necessary for breaking the ‘myth’ of the poor community, If an institution ( although called Micro financial institution) .is not able to provide this MF product , coordinated endeavour among the development partners may ensure the effective outreach after all the poverty reduction task is common to all at the field..
Regarding the paradox ‘premium vs. pay off’ again. I feel, it is a subjective one. And the value proposition depends on how it is approached. That is looking it from commercial point is different to the perception from demand side social perspectives. In case of cow’s mortality, the insurance may facilitate the survival and continuity of the income generating livelihood of the concerned poor there by giving a confidence to the poor for a rejuvenated livelihood instead of falling in debt trap.(in the case of inability to repay the cow loan ) . Here the likelihood of gaining confidence for revival of livelihood and hope for effective management of risk at the time of crisis are the two factors , to me , which are very highly valued ones from the poverty reduction point of view. Further in the field, even one case of a beneficiary with such ‘a pay off’ will have a demonstration effect and multiplier implication as well particularly in poor community. This is good for the ultimate task
In this regard I wish to share my experience as an advisor to an NGO. For effective out reach of insurance product to the target poor, selected SHG leaders have been trained through seminor /workshop to function as insurance agents with the tie up with the leading insurance companies. With the local feel and culture these women leaders of the group easily convinced their members and subsequently many of them are covered under insurance schemes. Later they gained confidence in coping with the risk as they revealed in subsequent evaluation.
In fine the outreach of the product to the target group convincingly with their social acceptance is vital for the said task .The means of reach .and likely pay off appear to me immaterial . Further in the context of availability of free premium insurance for life from government in India as I referred to in my posting for the poor may very well go together credit insurance products . Coordinated effort is needed for this and it may not be difficult task , I feel, since the MFI turned NGOs who have expertise in social mobilization can do the said task since after all their own poor borrower clients are also benefitted . So to say in a way the provision of social protection by insurance to the asset created out of micro credit of the MFI benefit both the supplier and the borrower as well since the productivity of the credit is protected from the risk/vulnerability there by ensuring income generation at client level and recovery at MFI level are not getting choked. . Here what is required mind set for social venture in the battle against poverty- Thanks

Thanks a lot Kate. Now i know that the micro-insurance here in our country is growing to help low-income earners but i have question.. Can you give at least top 5 or 10 microinsurance institution in the Philippines. I couldn't find further detail to my concern. Thanks for positive response