Rural Banks Success Stories: Gains from Microinsurance

This presents the first of the 3-part series of articles about the gains from microinsurance from the perspective of the rural bank microinsurance agents. RBGI, planting the seed of Microinsurance, found a new opportunity to add value to its tree of financial services and operations. Transitioning from an informal to formal provision of MI, RBGI has been given more space to further improve its MI product and services, expanding its market and attracting more bank clients.

Since 2003, Rural Bank of Guinobatan, Inc. (RBGI) became known in providing microfinance products in areas of Albay and Sorsogon. As it strives more to satisfy the financial needs of the low-income sectors and further its willingness to help uplift the lives of these people, RBGI included to its services in-house insurance bundled to microfinance products for its clients and called it “Damayan Fund”. The insurance provided by the bank is fast and efficient in addressing the needs of the clients in times of distress. However, Bangko Sentral ng Pilipinas (BSP) mandated all banks to stop providing in-house insurance to their MF clients as stated in the BSP Circular No. 683.

Instead, RBGI partnered with a competent insurance provider in February 2010 that also delivers fast and efficient claims processing. Known now as “KABUHAYAN Plan”, the bank has become more willing to service it for it is more reliable in responding to the MF Group loan clients’ need for adequate financial protection in times of distress, misfortune or other contingent events. Moreover, the premium is more affordable and payment is more convenient for the clients. It does not only cover the clients’ life and loan but also covers dismemberment and the lives of family members. The coverage of Borrower’s life is in the amount of 50,000.00 and additional 50,000.00 natural and accidental deaths subsequently.

Mrs. Fe Clutario of Lourdes,
Tiwi, Albay received the benefit
from the loss of her husband.

On the other hand, the bank also benefits from it, as it lowers the risk of non-payment of loan in case the clients experience misfortune from a loss of a family member or their own death. Furthermore, clients manage to stay in the program because of the benefit they get from MI, thus helping RBGI achieve client retention. In fact, drop-out rates lowered to 15% (45% in 2011 to 30% in 2012).

Since the third quarter of 2012, RBGI has enrolled a total of 9,563 borrowers, 7,084 spouses, 20,101 dependent children and 143 dependent siblings and has already served 77 claims for the year 2012. As MI has boomed up until today, RBGI has continuously promoted it by distributing flyers as promotional material, and the partner insurance provider has given visual aids to be used for client orientation. Moreover, the staff managed to inform well the clients of the terms and provisions by giving re-orientation during the release of loan. Every branch also managed to process the claims for a short span of time when all the needed documents for the claims are ready.

But its implementation is not at all times perfect. RBGI faced some problems in servicing microinsurance that needs to be addressed. On clients’ part, it is in completing the information sheets that shall be encoded in the system. However, it can be addressed by constant follow-up lectures on clients and making them understand more of the policy and procedure of the insurance and importance of providing the right and complete personal information. The challenge now is how to maintain the benefits MI offers to the clients and know what other ways the bank can do to address whatever predicaments might occur.

Presently, RBGI is offering MI to the microfinance individual loan product clients. The bank is motivated to offer MI to individual loan borrowers because before, the insurance offered to them only covers risk protection of their loans with the bank. And so, in order to provide the same benefits MF group loan clients have, we now bundled it with comprehensive insurance coverage just like the “KABUHAYAN Plan”. Moreover, RBGI is more inspired to be of great service to the people and shall continue to find ways on how to improve its products and services to satisfy the needs of its clientele.

Alex L. Fajardo was employed in 2006 as an MF Account Officer. By June 2009, he was promoted as MF Supervisor and was assigned in Tiwi, Albay branch. Currently, he is the Operations Officer of the bank’s Microfinance Program.