Filipinos who believe in the importance of life insurance were surely ecstatic at the recent passage of Republic Act 10001, which reduced taxes on insurance premiums and made it more affordable for them to invest in their future.

Life insurance, as most of us know, financially prepares policy holders and their families for eventualities such as illness and death.

However, this law would probably fail to resonate among the poor and marginalized, who could not afford to pay thousands of pesos in annual insurance premiums.

In this light, the Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC) have found what could be an answer to this predicament by making insurance readily available to the poor.

The BSP’s Monetary Board recently approved the marketing, sale and servicing of micro-insurance products by rural, cooperative and thrift banks through BSP Circular No. 683. This is in line with BSP’s inclusive finance policy to provide services to the previously “unbanked” sector.

According to Ms. Pia Bernadette R. Tayag, who heads the Inclusive Finance Advocacy unit of the BSP, thrift, cooperative and rural banks were previously prohibited from selling insurance to their clients. Only the big universal banks with equity stakes in insurance companies were allowed to do so.

This approval presents a huge potential of allowing the network of nearly 3,500 rural, cooperative and thrift banking offices to serve as distribution points for authorized micro-insurance products offered by licensed insurance providers.

Since many of these banks have existing relationships with microfinance clients, they have the capacity to deliver a full range of financial services to them.

Thus the banks could now offer micro-insurance products to their microfinance clients, collect insurance premiums and dispense benefits in the event that they are needed.

Micro-insurance, as defined by the IC, 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.

For example, the microinsurance product’s premiums, contributions, fees and charges should not exceed five percent of the policy holder’s current daily minimum wage. If the worker’s daily minimum wage is P369, he should only contribute a maximum of P18.45 in insurance premiums.

Another limitation is the ceiling on the guaranteed benefits of the micro-insurance product, which should not exceed 500 times the current daily minimum wage. Despite the ceiling, the insurance proceeds are deemed sufficient to meet the normal burial, hospitalization and other insurance-related expenses of the insured.

With micro-insurance complementing micro-finance, the needs of the poor are now better served.

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