FROM THE MARGINS

I would like to begin this last article on the best practices of microinsurance mutual benefit association (MBA) by sharing the words of Aristeo Dequito, the managing director of the country’s biggest microfinance network. Highlighting the importance of client empowerment, he said:

“Aside from being the recipients of microfinance and microinsurance services, we believe our client-members have the power to bring about change in their communities. We seek their help in improving our services. We give them control of assets and empower them to manage their MBA so that they can lead their co-members out of poverty. We transform simple ‘nanays’ into members, and later, into community leaders.”

Financial inclusion and empowerment, indeed, are at the heart of microinsurance MBAs.  Fortunately, the Insurance Commission (IC) is supportive of microinsurance, with Commissioner Reynaldo Regalado himself encouraging the development of more insurance products for low-income households.

In previous articles, I advised MBAs to comply with regulations, strengthen relationships with their MFI affiliates and develop products based on actuarial study and members’ needs. I also highlighted the importance of strong leadership and the inclusion of independent observers/members in the board. Here are some more best practices that had been adopted by successful microinsurance MBAs:

1.    Forming board committees. It is important for MBAs to form audit, governance, compliance and risk management, and treasury committees. These should meet at least monthly and be chaired by independent board members with expertise in these areas, as a check-and-balance and for governance strengthening.

2.    Professional staffing. The day-to-day MBA operations should be handled by qualified professionals, like a CEO assisted by trained management teams and staff. The CEO should have at least five years’ experience in insurance/microinsurance, with an IC license. As culture-bearer and face of the MBA, he/she must be competent and known for integrity and commitment to the MBA’s mission. The staff ideally should be college graduates, with degrees in management, accounting, finance, IT and administration.

3.    MBA coordinators. These are members elected by their peers to play a key role in validating and checking microinsurance claims. They must be members of good standing and committed to helping their co-members. Having MBA coordinators is one of the keys to success. They are important channels of products and services, serving as direct links to members on the ground.  They are also community leaders, the ones tapped to assist members whenever there are typhoons and other calamities. Ideally, coordinators should have a maximum tenure of three years, subject to one-term re-election after a one year cooling-off period.

4.    Fast claims payment. With digitalization, MBAs should be able to emulate the 8:24 claims process that a successful MBA has adopted. It pays claims within eight hours, requiring only the simplest documentation (like death certificate), which can be submitted even digitally. Their maximum processing time is 24 hours because the MBA knows that its clients are low-income households. I have always maintained that claims payment should be treated like savings: when clients demand to withdraw, banks are obliged to give their money on demand. It should be the same for microinsurance. 

5.    Internal and external audits. These ensure that resources are properly managed. To avoid abuses, especially in claims payment, and to prevent unnecessary expenses (like travels, equipment, vehicles, etc.), the conduct of internal audit should be led by independent board members. Reputable audit firms should be tapped to do annual external audits. There should be transparency; members have the right to know what is happening in their MBA’s finances.

6.    Capacity-building for the board and staff. To ensure organizational growth, training should be considered as investment rather than expense. There should be a coherent career-ladderized capacity-building program for manpower strengthening and succession planning.

7.    Treasury management. MBA funds must be invested wisely, to ensure the MBA’s financial security.  Normally, 80 to 90 percent of MBA funds should be invested in government treasury, time deposits and other risk-free financial instruments. I have seen cases where MBAs invest too much in real estate, and other assets which are difficult to liquidate when funds are needed. Since members’ claims payments need to be quickly responded to, financial liquidity must always be ensured.

The last thing that I want to highlight is effective communication. There should be training/orientation programs to help MBA members understand their rights and duties and to update them on products/services, claims procedures, among others. MBAs should also maintain good relationships with the community and local officials.

I hope our microinsurance MBAs continue to grow, making insurance accessible to more poor families. I remember what our MBA member Gloria Hernandez shared after getting the benefits from her SAGIP microinsurance plan in the wake of Typhoon Ulysses in 2020: “After the typhoon hit us, I thought we have lost everything. SAGIP helped us to get back on our feet. My co-members saw what microinsurance brought to our table in time of desperate need and they were enticed to apply, too.”

(Dr. Jaime Aristotle B. Alip is a poverty eradication advocate. He is the founder of the Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD MRI), a group of 23 organizations that provide social development services to eight million economically-disadvantaged Filipinos and insure more than 27 million nationwide.)