MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has given a rural bank in Cavite and another one in Isabela the greenlight to engage in microinsurance services as part of the central bank’s efforts to offer a wide range of financial products to the banking public.
In a statement, the BSP said the Monetary Board has approved the applications of Bangko Mabuhay in Tanza, Cavite and Mallig Plains Rural Bank in Isabela to sell microinsurance products in their branches and offices as provided under Circular 683 issued in 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,” the BSP said.
At present, according to the central bank, there are nearly 50 other rural banks that have signified their interest to provide microinsurance services.
So far, the BSP has given the initial clearance for these banks to apply for the necessary provisional license from the Insurance Commission (IC).
Once the license is obtained from IC, the BSP would grant the appropriate authorization for rural banks to sell microinsurance products during the license validity of one year. These banks, however, should 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 June 30 next year otherwise the IC would no longer renew the license.
Microinsurance is 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 that 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 P20 and a ceiling on the guaranteed benefits not to exceed 500 times the current daily minimum wage or around P210,000.
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,” the BSP said.
Recent events like typhoon 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.