The microinsurance market in the Philippines has been in the news this year – for all the right reasons. Regarded as Asia’s leading market for microfinance, the insurance market in the Philippines has emerged as a resilient industry attracting a large amount of investments. Higher penetration of microinsurance products, along with sustained economic expansion, are some of the major drivers of the Filipino microinsurance market. According to analysts at Technavio, the market is poised to record a CAGR of over 21% by 2020.
In spite of microfinance being a highly competitive industry, what makes the Philippines a booming market for microfinance products is its solid policy foundation and its connectivity with those at the lowest level of the economy. It is a known fact that low-income households are the main targets of microinsurance products, as these products provide highly customized insurance plans for policyholders at low cost.
Reasons behind the rapid growth of the microinsurance market
The rate of urbanization in the Philippines is one of the key factors behind the growth of the microinsurance market. In 2010, the urban population stood at 46 million, a huge increase in 50 years given that in 1960, it was only around 8 million. With increased urbanization, there is greater need for more comprehensive insurance coverage. This is where life insurance policymakers as well as companies play an important role in strengthening microinsurance vendors. They do so by creating incentives and devoting sufficient resources to regulatory infrastructure. Formulating strategies for different term endowment plans, and using virtual networks and multichannel interaction platforms to build a value chain in the microinsurance business, are the major routes through which the entire regulatory framework is built.
Another major reason behind the immense growth of this industry is the manner in which social media has been leveraged to capture a wider audience. There are several microinsurance companies in the Philippines that make use of social media platforms in order to overcome physical limitations when serving their clients. Social media is also being used to launch new products, educate target audiences on the advantages of various plans, keep track of issues and resolve them at the earliest, and collect customer feedback on services. Social media also helps vendors reach out to the younger segment of the population and understand their specific requirements. Thus, by merging technology with microinsurance products, major companies in the Philippines are bringing a large percentage of the population under the insurance net.
Lastly, with major improvements in regulatory policies, policy makers in the Philippines have aggressively merged financial inclusion programs with microfinance networks. Well-connected policy plans have played a vital role in driving double-digit growth in the Filipino insurance market.
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