Filipino co-op insurers develop new risk management products

Climbs Life and General Insurance Cooperative partnered with the ILO’s Impact Insurance Facility for the project

Two saving and credit co-operatives in the Philippines have partnered with the International Labour Organization (ILO) to support a project on integrated risk management solutions.

The project is run by Climbs Life and General Insurance Cooperative, a network of 4,000 co-operatives. Co-ops taking part include Oro Integrated Cooperative (OIC) and Nabunturan Integrated Cooperative (NICO), based on the island of Mindanao, which has a population of over 25m people.

The Philippines is prone to earthquakes, volcanic eruptions and tropical storms – with as many as 20 cyclones a year, more than anywhere else in the world. Members who are affected by these events usually by taking out a loan.

Climbs aims to support its co-ops and their members by instilling a habit of saving to enable them to have access to their own funds during times of emergency. It has drawn up research, with support from the ILO’s Impact Insurance Facility fellow Preeti Sancheti, which reveals that health concerns and natural disasters are among the main risks identified by members of OIC and NICO.

The research explored the risks faced by members, their coping mechanisms, saving habits and credit behaviour. It included focus group discussions, in-depth interviews with members and staff and an analysis of the current products offered.

Three new products were developed after examining the findings of the research project. The first is a five-year savings product with added health insurance named Health Saver. Launched by NICO, the plan enables members to save a small monthly deposit (a minimum of PHP 500 (US$10) to a maximum of PHP 2,500 (US $50) for five years.

The interest rate is 6% per annum, which is higher than the regular savings interest rate. The insurance provides members a hospital income benefit for themselves and two of their dependents. The member pays for the insurance premium for the first year, after which the premium is deducted automatically from their accumulated savings balance.

Similarly, OIC launched a minimum five-year savings product with added calamity insurance. The Health and Disaster Savings product offers members free calamity insurance once their accumulated balance reaches PHP 5,000 (US $100). The insurance covers damage to property and health reimbursement due to natural disasters. Members can save between PHP 500 (US$10) and PHP 2,500 (US$50) per month for a minimum of five years and benefit from an interest rate of 5% per annum. 

At the end of the five-year term members can withdraw the interest earned and stop contributing deposits. They are only able to withdraw their funds in case of an emergency.

Another product launched by OIC, Save Plus for the Co-op Kid is a savings account that enables parents to build a college fund for their children. Members need to save for 10 years or until their children enter college. Withdrawals are permitted in instalments of two per year spread over the duration of the college term. 

In addition to building a college fund, members also benefit from free life insurance during the deposit period, which can cover an expenditure equal to the accumulated balance. In case of a member’s death, the child can withdraw from the fund when they reach the legal age.

Ms Sancheti said: “All the three products have a pre termination penalty in case the withdrawal is made for any other purpose than intended for. To ensure persistency in savings, a pre-termination fee is levied and the account closed in case of non-deposit of the minimum committed amount.

“All three solutions are anchored on savings with a relevant insurance bundle. This ensures that a member can access their own fund rather than taking out a loan with a high interest rate, which can put additional burden on an already difficult situation. The insurance is provided by CLIMBS.”

She added: “For the co-operatives, it builds member loyalty and provides them with the needed liquidity for a long duration term. All three products were launched a few weeks before the lock-down. While overall savings has impacted the uptake of the product, the initial feedback from members has been encouraging.

“In fact, OIC is certain that members will see the benefit of such a product more now than before and expects for the Health & Disaster Savings product to be the highest availed product offered by the year end.”

Climbs president and CEO, Noel Raboy, said: “The framework for risk management is: prevention, preparation, and coping. One of the core values of Climbs is innovation.  We continue to develop and deliver holistic risk management solutions to our Climbs member-owners of more than 4,000 co-operatives nationwide. This fits with ILO’s goals through the Impact Insurance Project.

“We are grateful that amidst the pandemic, we still see our partner -co-operatives in the pilot implementation of this project, the OIC and the NICO’s ongoing efforts to support and answer members’ needs through these products. We also appreciate the ILO’s support through the assigned fellow, Preeti Sancheti, who is helping us in this project. We look forward to its scalability, using a holistic model approach for all our members as we continue to promote protection, resiliency and sustainability.”  

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