THE Aquino administration will not subsidize micro-insurance products to widen coverage among the poor, saying the initiative to fight poverty should be taken by the private sector.

Finance Undersecretary Gil Beltran said over the weekend that that the government’s subsidies to the poor will be limited to the conditional-cash transfer (CCT).

“The idea is that most of these [micro-insurance] programs should be private sector-oriented. We should avoid subsidies, and limit subsidies to the CCT, that’s the reason why the CCT was set up as we want to limit all the subsidies there, so that it’s more manageable and we can limit the fiscal cost,” Beltran added.

He said the government is only avoiding what happened in the past, during the 1970s to 1980s, when most government departments carried out microfinance credit programs to help the country’s poor. The programs included micro-insurance products for the poor.

The credit programs, such as the Masagana 99, offered loans at low or zero-interest rate to the poor. But since the agencies had little knowledge in managing the credit programs, the programs went bust after the borrowers failed to pay their debts back.

Some non-profit groups have been urging the government to consider subsidizing micro-insurance products to help more people living below the poverty line, or those who earn less than P57 a day.

The government of India gives subsidies to various micro-insurance products to help more poor people. India is the only country that has an advanced micro-insurance program in the world aside from the Philippines.

Micro-insurance products are those that meet the needs of the poor for risk protection and relief against distress, among others. Some companies offer such products for as low as P1 a day.

Existing regulations require that the amount of contribution or premium should not exceed 5 percent of the current minimum daily wage while the maximum guaranteed benefit is not more than 500 times the daily wage rate.

According to the Insurance Commission, private firms sold some 4 million micro-insurance certificates as of 2011, covering about 7.8 million individuals. The government said the coverage is way much larger than those in the previous years but is still a low ratio as there are about 23 million out of more than 90 million Filipinos living below the poverty line.

According to Antonis Malagardis, program manager of German non-GIZ Microinsurance Innovation for Social Change, the Philippines has a more advanced micro-insurance program compared with other countries such as India, but that more needs to be done to help the poor.

“Right now, there are no community-based organizations that advocate and sell micro-insurance products in the grassroot,” Malagardis said during last week’s micro-insurance summit.

He added that Philippine regulators should study the merit of pushing the micro-insurance products that protect the farmers especially in times of calamities such as heavy rains and typhoons.

According to data, only 3 percent of Filipino rice farmers are insured by the state-owned Philippine Crop Insurance Corp. (PCIC).

“If you look at PCIC, it’s not private sector, it’s the government. But is it the best way of protecting the farmers? Is it cost-effective? These are the questions that should be asked as there might be other ways of doing it [helping the poor],” Beltran said.

SOURCE: Business Mirror, Philippines.