What qualifies as microinsurance in the Philippines?

Insurance involves pooling risk over a large number of similar units such as households, persons, or businesses. It protects people and businesses against financial loss by spreading their risk among large numbers, and is similar to the concept of “bayanihan.”

Insurance is not an investment. You are not after financial gain. It is for protection against financial losses and involves exchanging the uncertain prospect of large losses for the certainty of small, regular premium products.

Term life is benefits paid to beneficiaries upon death. It is typically recommended for the breadwinners or those with dependents. Disability insurance is benefits paid to beneficiaries upon disability. Credit insurance ensures that loan principal and interest is paid by the insurance company upon death, rather than your estate.

Crop insurance offers protection against poor crop yields as well as recovery benefits from natural disasters. It is mainly utilized by farmers. Health insurance covers medical costs for illnesses and injuries. Property insurance covers damage, destruction, and theft of household assets. Business owners can also insure inventory and equipment at their stores and warehouses.

According to the Republic Act 10607 Amended Insurance Code, microinsurance is defined as meeting the risk protection needs of the poor. The “micro-” places emphasis on the fact that those with smaller incomes are the target policy holders. OFW’s can purchase microinsurance for loved ones back home so that the burden of having to personally absorb risk when loved ones are exposed to risks.

Furthermore, the premiums, fees, and charges of microinsurance do not exceed 7.5% of the policyholders’ current daily minimum wage. This means that for a daily income of PhP 570, the premium will not exceed ~PhP 15,600 for the year. The current benefits will not exceed x1000 the daily minimum wage, equivalent to PhP 570,000 to continue to be called a microinsurance.

Formal insurance is insurance provided by insurance corporations and co-operations and are regulated by the insurance commission. Although both corporation and co-ops are “for profit’ setups, co-ops are owned by the members. Rapisura recommends Mutual Benefit Associations (MBAs) or cooperative insurance, as it prioritizes the welfare of the people over the generation of profits.

Informal insurance refers to collectives such as damayan-based schemes, where insurance is a non-profit community endeavor. Hybrid insurance is a combination of formal and informal insurance. Public insurances are the social safety nets provided by the government such as the Universal Health Care Act and PhilHealth.

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