Gov’t mulls mandatory disaster insurance pool

BACOLOD — The national government is evaluating a proposal to provide mandatory insurance coverage to households and small businesses to protect them from damage arising from natural calamities, the head of the Insurance Commission yesterday said.

“A model was submitted to us which will provide mandatory cover to protect residential unit owners and small and medium enterprise owners to secure protection against earthquake, fire, typhoons, and flooding induced by typhoons,” Insurance Commissioner Emmanuel F. Dooc said in a briefing at the sidelines of the Asia-Pacific Economic Cooperation (APEC) meetings on Disaster Risk Finance here.

Mr. Dooc said the Philippine Insurers and Reinsurers Association ( PIRA), the umbrella organization of non-life insurers, crafted the proposal with the help of the World Bank and the International Finance Corp. (IFC).

Mr. Dooc said the proposal is currently with the Bureau of the Treasury for review.

“Hopefully, this will take place soon… One feature of this is that we will only be requiring an executive order to fast- track the launch of this disaster insurance pool,” Mr. Dooc said.

“We hope that the proposed executive order, a draft order of which is already prepared...will be with the President hopefully at the end of the year,” he added.

Finance Secretary Cesar V. Purisima said in January the government is working on “viable affordable and sustainable insurance products”, noting the devastation caused by Typhoon Yolanda in November 2013.

MICROINSURANCE

Over 100 delegates from APEC member-economies gathered here to tackle financing options to address disaster risk, particularly through microinsurance. Microinsurance products, based on an IC circular, are those whose daily premiums are less than 5% of the daily minimum wage for non-agricultural workers in Metro Manila.

Guaranteed benefits also do not exceed 500 times the daily wage rate.

Mr. Dooc noted estimates show 34% of the country’s population are now covered by insurance products as of last year.

“I think the Philippines is now widely regarded as a leading country. In fact we are now considered as the model for these insurance initiatives. We are proud of that but we still have a lot of way to go,” Mr. Dooc said.

Michael J. McCord, Chair of the Microinsurance Network, said bottlenecks remain in increasing the market penetration of microinsurance products.

“To some extent, distribution is a bottleneck,” Mr. McCord said in a press briefing.

“On the other hand, education: how do people know that insurance is a good thing. Often times, in microinsurance, we have a problem with trust. People don’t trust that insurers don’t pay,” he added.

Mr. McCord said the government should continue providing support to insurers in growing their markets.

“The broader the group of potential distributors is made on a legal basis, the easier it is for them to expand,” he added.