As a follow up to our study of life microinsurance in the Philippines (MILK Brief #14) the MicroInsurance Centre’s MILK team returns to this vibrant market to study the business case for life microinsurance at various stages of the value chain. The bulk of our analysis focuses on distributors and insurers, which we complement with a discussion of value (drawing from MILK’s Client Math work) and how an understanding of value can inform and even enhance an insurer’s or distributor’s business case. Detailed appendices show cost allocations for distribution expenses, providing a real picture of the profitability for microinsurance distributors. Key findings include:

• There is a strong and unambiguous business case for life microinsurance in the Philippines both for risk takers and distributors; insurers’ combined ratios in 2012 averaged 74%, leaving ample margin for profit, and for distributors, commission revenue easily exceeded related costs, again leaving ample margins for profit.
• clear-cut business case applies to MFI and cooperative distributors in partner-agent relationships as well as inhouse MFI (MBA) distribution channel.
• Positive financial outcomes were evident for distributors of both mandatory and voluntary covers.
• The Philippines market is seeing increasing competition for life microinsurance business as commercial and cooperative insurers seek greater market share; competitive pressure on the MBAs is compounded by slowing growth of their sponsor MFIs’ memberships.
• In the face of increasing competition, understanding the value proposition from a client’s perspective yields opportunities to compete not just with lower prices or larger payouts, but with appropriate, tailored coverage.