The nonlife insurance players are deterred from exploiting opportunities in the microinsurance space for a number of reasons, chief among them the punitive minimum capital requirement, the Philippine Insurers and Reinsurers Association (Pira) said.
Pira trustee Michael F. Rellosa said industry members are open to the idea of selling microinsurance, but pursuing the business is difficult due to a number of factors.
“Pira members at present are going through difficult times. The main reason for this is the high capitalization they need to comply with among others,” Rellosa said.
This pertains to the Amended Insurance Code of the Philippines requiring new insurance firms to have P1 billion in paid-up capital, while existing insurers need at least P250 million by June 2013, P550 million by December 2016, P900 million by December 2019 and P1.3 billion by December 2022.
Rellosa said raising P1.2 billion is no longer feasible because industry appetite for risk is not that big.
He pointed out that an addendum to the National Regulatory Framework for Microinsurance is in order, placing a provision of reduced capital requirement proportional to the the size of microinsurance business of the insurance companies may work.
Nonlife insurers are also taxed at 27.5 percent even as life insurers are levied only 5 percent. This dampens the incentive to offer microinsurance products, according to Rellosa. He argued nonlife and life insurers should be taxed the same.
The flat premium rate imposed on microsinsurance products should also be reviewed, with the government keen to a sharing scheme with the private sector, providing subsidies for high-risk areas in the country,
“Premiums are regulated by the government [for microinsurance]. Thus, insurance companies cannot charge higher premiums on clients who face higher risks. This is not sustainable,” Rellosa said.
Rellosa, who is also president and COO of Fortune General Insurance, said the Philippines could learn from the rice-farming scheme in Thailand, where premiums are low because the government shoulders half of the rate. Insurance claims in Thailand are also partially subsidized.
Pira helps its members by holding consultations with its stakeholders and the Insurance Commission (IC).
The IC has acknowledged local insurers have some of the highest capital requirements in the Asean, and agreed to reevaluate the capital buildup mandate as a result.
The agency previously reported the microinsurance industry expanded primarily on the basis of premium sales generated by mutual benefit associations as at the end September 2017.
According to Insurance Commissioner Dennis B. Funa, the continued growth of the microinsurance segment as measured by premium and contributions totaled P5.17 billion in the first nine months of 2017, representing growth of 30 percent compared to only P3.97 billion in the same period in 2016.
The life-insurance sector reported P1.73 billion in premium generated as of end September 2017, up 27.84 percent compared to only P1.36 billion in the same period in 2016. The premium production of the nonlife sector also increased by 25.8 percent to P52 million, from P41 million in 2016.
According to Microinsurance Acting Division Manager Juan Paolo P. Roxas, the IC is optimistic of the growth in microinsurance this year as Filipinos have more disposable income set aside for insurance due to the recent passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
“We are optimistic that [the growth in microinsurance] will be stable [this year]. There is a possibility that the purchasing power of the public could increase because of TRAIN. It’s just a manner of informing the public on how to use their money,” Roxas told the BusinessMirror.