Poor need to understand microinsurance very well

THE POOR may need microinsurance, but they will not buy just any product that’s presented to them.

They need to clearly understand what they are paying for and what they are getting, said Craig Churchill, team leader of the International Labour Office’s (ILO) Microinsurance Innovation Facility.

Moreover, insurers must make sure they provide the assistance promised the moment it’s needed.

“At the end of the day, the best way for people to understand how insurance works is for claims to be paid,” Mr. Churchill said at the sidelines of the Microinsurance Innovation Forum at the Asian Institute of Management yesterday.

“They have to see this is real, that insurance is going to do what it promised to do.”

The resulting “positive experience,” he said, will entice more poor people to buy microinsurance.

At the same time, insurers, for whom microinsurance is a new venture with enormous potential, will increase sales.

“Insurers have to make good on their promises,” Mr. Churchill said.

“If they say claims are released in two weeks, then they must make sure they do.”

Any “negative experience,” he warned, will affect how the poor perceive the product.

The Microinsurance Innovation Facility organized the Microinsurance Innovation Forum to gather the organizations, including two from the Philippines, which received grants or technical assistance to either develop new microinsurance products, chart new ways to deliver microinsurance to a large number of the poor or embark on programs to educate the poor about the usefulness of this microinsurance.

The forum usually provides a venue for grantees to share experiences and learn from one another.

An annual undertaking, the forum usually takes place before the International Microinsurance Conference, co-hosted by the Munich Re Foundation and the Microinsurance Network that Mr. Churchill also heads. The sixth conference begins today in Makati City.

The facility is calling for new proposals; Mr. Churchill said projects should focus on scale and efficiency. “The challenge is how to keep costs low but deliver in large volumes,” he explained.

Philippines-based Pioneer Life Inc. and the Rural Bankers Research and Development Foundation, Inc. of the Rural Bankers Association of the Philippines (RBAP) have received grants totaling $95,000 and $100,000, respectively, from the facility.

Lorenzo O. Chan Jr., president and chief executive officer of Pioneer Life, agreed with Mr. Churchill that while microinsurance represents a new business for insurers, the fact that clients are poor makes it a “challenging” one.

“At the ‘buy’ stage, the contract must be clear and easy to understand. The ‘claims’ stage must be easy, convenient and quick,” he said at the sidelines of the forum. “In other words, everything must be simplified.”

He said that for microinsurance to be a successful venture for the country’s insurers, they need to “adapt” to the requirements of the market.

Pioneer Life’s OFW Savers and Wellness Club targets the families of overseas Filipino workers. Members pay a fee, part of which is set aside as savings and to cover accident and burial assistance. They also attend financial literacy programs.

The Club presently counts around 2,000 members from 900 at the time Pioneer received the grant in July last year.

RBAP’s foundation, meanwhile, is working on improving the partnership between rural banks and insurers and between rural banks and the regulators.

Rural banks, through rules approved by the Insurance Commission and Bangko Sentral, can act as agents or brokers of the insurers and sell insurance policies within their premises.

John V. Owens, chief of party of the Microenterprise Access to Banking Services, which is helping RBAP come up with new products and services, said the foundation is helping insurers come up with products that are “properly designed.”

“Procedures, especially for claims, must also be simple and quick,” he added.

The foundation also wants to help rural banks get authority from the Insurance Commission and the central bank to act as agents and brokers.

“This involves a lot of paperwork,” Mr. Owens pointed out, adding that the foundation will facilitate applications.

In the Philippines, Munich Re estimates that only about 14% of the 92-million popu-lation have life insurance. — Judy T. Gulane, Businessworld