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Cooperative Insurance System
Presenter : James D Chua
February 2007
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I. Financial Intermediation Structure
Banks
Financial Intermediaries
Investment
Companies
Contractual
SavingsMutual Funds
Pre-Need InsurancePensionFunds
*Other financial intermediaries include pawnshops, lending investors,finance companies, credit card companies
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II. Where Cooperative Insurance Compete
Commercial Insurance
Insurance Industry
Micro-Insurance
Stock Mutual Coops MBAs
MFI Formal* Hybrid
*refers to cooperatives offering insurance services registered with theInsurance Commission**refers cooperatives offering insurance services but are not registered with
the Insurance Commission
Indigenous**
NGOMFIs
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III. Mutual, MBAs, NGOs & Cooperative Insurance
SIMILARITY : These organizations exist for the purpose of helping theirmembers.
DIFFERENCE : Mutual Benefit Associations are insurance schemes run on
a not-for-profit basis.
NGO MFIs derive funds from donors
In Cooperatives, members contribute to the capital of thecompany by direct investment.
In Mutual Insurance, members do not usually contribute to
the capital of the company by direct investment, but derivetheir right to profits and votes through their customerrelationship relationship.
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IV. Indigenous and Formal Insurance
Attributes Indigenous Insurance Formal Insurance
Origin Traditional risk sharing custom;
Damayan
Insurance sciences
Players Co-ops and NGOs For profit, and MFI-owned
insurance corporations
Technology Social organization, social capital,
social mobilization, community
organizing, indigenous customs
Actuarial sciences, financial
management, reinsurance
Scale Small Large
Regulation None. Unregulated, allows site
specific customization
Insurance Commission - ensures
financial and actuarial soundness,
favors big formal insurance firms
Sense ofownership
High Low
Sense of
Solidarity
High Low
Nature of
Relationship
s
Personal Impersonal
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V. Survey of Cooperative Insurance in the Philippines
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V. Survey of Cooperative Insurance in the Philippines
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V. Survey of Cooperative Insurance in the Philippines
Co-op-Life Mutual Benefit Services Association, Inc.(CLIMBS)
Established in 1971 as an experiment in mutual protection by theSouthern Philippines Educational Cooperative Center (SPECC)
and the Misamis Oriental-Bukidnon-Camiguin Federation of
Cooperative
Registered with the Co-operative Development Authority in 1992 Licensed as a Mutual Benefit Association (MBA) by the Insurance
Commission in 1994
CLIMBS is a member of NATCCO
Number of contributors : over 200,000
Products Offered :
Group Life Protection with Mutual Aid System (MAS)
Co-op Life Savings Plan (CLSP)Co-op Loans Protection Plan (CLPP)
Formal Insurance run by a MBA and organized as a cooperative.
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V. Survey of Cooperative Insurance in the Philippines
Novaliches Development Cooperative, Inc. (NOVADECI)
Founded in September, 1976
Formerly known as the Novaliches Vendors Credit Union, Inc.(NVCUI)
Answer to the growing number of usurers lending money at high
interest rates (e.g. 5/6 lenders)
Membership base of more than 17,000 Registered with the Co-operative Development Authority Schemes Offered :
Health Care Program
Damayan Death Benefit
Gabay sa Katandaan and Disability Benefit
Informal Insurance run by a cooperative.
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VI. Risk Management Practices
Waiting
Periods
Several coops now have policies whereby members are not
eligible for insurance cover until after an initial period of time
Exclusions Policies that exclude coverage for high-risk members, such aspersons over 65 or those with pre-existing conditions
ScreeningTechniques
Requirements to furnish health certificates to be eligible forinsurance for larger policies
GraduatedBenefits
Because of information asymmetries, some MFIs have lowerbenefit ceilings for new members. Once they get to know the
member better, then the maximum benefit increases. Thesegraduated benefits also serve as an incentive for customer
loyalty
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VII. Strengths and Weaknesses
Attributes Indigenous Insurance Formal Insurance
Strength Social capital
Risk-bearing membership
allows ventures into health
insurance
Innovation
Technical skills in Insurance
Large financial base
Professional managers
Low priced insurance compared
to for-profit policies
Simpler than group self-insurance
Weakness Risky insurance design More expensive compared to
group self-insurance
Relative administrative
inefficiency
Weak patronage of co-operatives
Ways of
Overcomin
g
Weaknesses
Access technical assistance in
insurance design
Pool resources for R&D
Focus on products that are
difficult for cooperatives to self
insure
Increase operational efficiency
though closer links with
cooperatives
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VIII. Strategies for the Future
Components Discussion
Web site should include insurance products and practices,
educational materials, marketing materials, premium
rates, and media communications
accessible to customers, agents, and employees so thateveryone can refer to the same source of information
reduces the cost of internal communication and trainingof employees and agents
Customer centric get to know the customer first, before trying to offer any
of its products
Simple products for life insurance, term insurance should be separate
from investment
the protection offered by each product must be definedand explained in simple terms
a fair premium rate based on the cost of claims and
expenses should be charged
the charges for the investment product should be clearlydisclosed
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IX. Strategies for the Future
Just as microfinance has gained widespread acceptance as an
effective development strategy; microinsurance through
cooperatives, too, promises to be a sustainable approach to riskmanagement for the informal sector. Cooperatives are currently
in the best position to provide microinsurance to the informal
sector and should actively experiment and innovate to make the
mainstreaming of microinsurance a reality.
Social security is a universal need and a basic human right. Yet,only one in five people in the world has adequate social security;
half of the worlds population is without any social security
protection.
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