Bangko Sentral ng Pilipinas (BSP) Governor-in-Charge Nestor A. Espenilla Jr. said they are reviewing expanding rural banks microinsurance products to complement the range of microfinance services already offered by small banks.

Espenilla said one of the proposals is to allow rural banks to form partnerships with insurance companies however this is not the same as the bigger banks bancassurance policy.

“We’re studying different modalities not exactly bancassurance (but microinsurance) is something that we’re trying to get off the ground as soon as possible,” he added.

BSP is considering allowing rural banks to sell or market to their customers several simple insurance products such as mortgage redemption and protection of farm equipment or service vehicles, including health insurance. “At the end of the day the ability of an individual to pay is dependent on his health. So there is synergy here,” said Espenilla.

Banks offering microfinance already have housing microinsurance and micro-agri. But BSP still had to work around the legality of allowing rural banks to expand their marketable insurance products. A microfinance policy has a maximum coverage of P150,000 for individuals and about P250,000 to P350,000 for enterprise-related insurables. “We believe that this is an important piece in ensuring the sustainability of the structurally vulnerable microfinance clients. (We now) have found a formula for doing this and we will soon be presenting our proposals to the Monetary Board (of the BSP),” Espenilla said. There are 221 banks involved in microfinance with clients numbering 900,000 microentrepreneurs. These banks have outstanding loans of over P6 billion.

Last July, there were proposals from some banking sectors to revise the existing policy on bancassurance but BSP has thumbed down this request. Based on documents submitted to the Monetary Board, the central bank wants to maintain a status quo on the existing BSP policy on bancassurance or the cross-selling of insurance products of a bank’s subsidiary and affiliates.

BSP requires all banks and their subsidiaries and affiliates to submit for approval the sale or offer of insurance products to the Monetary Board.

BSP Circular No. 357 provides the guidelines governing the use of the head office and/or any or all branches of universal banks and commercial banks as outlets for the presentation and sale of financial products of their allied undertakings. Under the law, banks are allowed to sell insurance products at their branches but only if they acquire an insurance company. These transactions are called bancassurance.

The BSP said that before a local bank is allowed to engage in bancassurance or insurance cross selling, they have to first acquire equity in an insurance company or own at least five percent of shares. This would effectively attach the insurance entity as a subsidiary, not just a mere affiliate.