The Insurance Commission (IC) has finally approved the guidelines on the adoption of a regulatory sandbox framework in a bid to encourage greater private sector participation in agricultural insurance.
According to Circular Letter No. 2021-60 signed by Insurance Commissioner Dennis B. Funa, “agriculture insurance in the country is mostly provided by the Philippine Crop Insurance Corporation” (PCIC) and the country has a “low” insurance penetration rate among farmers—8 to 14 percent for rice and only 2 to 6 percent for corn in 2013 to 2017.
Funa said a regulatory sandbox is a framework set up by a regulator that allows fintech start-ups and other innovators, such as insurance companies, to conduct live experiments in a controlled environment under a regulator’s supervision.
Under the guidelines, the IC said non-life insurance companies shall be allowed to provide agriculture insurance, independently or in collaboration with PCIC, or any of the following: national and international public and private sector insurers, reinsurers, technology providers, and multilateral agencies.
As defined by IC, agriculture insurance shall refer to the insurance of the produce of or assets used in cultivation of crops, livestock, rearing, animal husbandry, poultry farming, dairy farming and fisheries including all value chain activities like production, transportation, storage processing, packaging, preservation and marketing.
The increased capitalization of insurance companies enables them to cover catastrophic risks that are usually present in agriculture production and related activities, according to the commission.
“The development and availability of new technology platforms enable private insurers to more accurately determine the risks associated with agriculture and improve cost efficiency in the delivery of agriculture insurance to farmers located in remote areas,” it said.
“PCIC is willing and interested to share relevant data and information, as well as to provide and share capacity to private insurance companies that would like to provide agriculture insurance.”
Any non-life insurance company intending to apply for participation in the regulatory sandbox shall submit a formal proposal to the IC.
The IC also said the agriculture insurance products under the proposed pilots can also be distributed through licensed insurance or microinsurance agents or brokers as well as other distribution channels like agriculture input providers, microfinance nongovernment organization and banks engaged in agriculture finance, even if they are not licensed insurance agents or brokers.
Should an insurance company engage an unlicensed intermediary, a copy of the signed agreement between the insurance company and the unlicensed intermediary, providing specifically that the insurance company shall take full responsibility for the misconduct of the intermediary, should be submitted to the commission.
Sought for comment, Philippine Insurers and Reinsurers Association (PIRA) Executive Director Michael Rellosa welcomed the development although he said he has not yet seen the circular.
“I have not yet seen the circular of the IC, however, our current laws do not allow the private sector to receive subsidies, and if you look around the world almost all agri insurance programs, if not all, are highly subsidized, he said.
“Only the PCIC can do this so we have to work with the PCIC as reinsurers and perhaps later as coinsurers and maybe even later as an alternative to the PCIC. It depends on how and if the laws would be amended. Be that as it may, PIRA members are interested, willing, and able to work on agri insurance in collaboration with the PCIC.”