The Philippines needs to overhaul its insurance framework by mandating home coverage and incentivising disaster-resilient construction, the Organization for Economic Cooperation and Development (OECD) says.
The Paris-based organization is pushing Philippine policymakers to close a "massive" protection gap, citing the country's ranking as one of the world's most climate-disaster vulnerable nations, reported the Manila Bulletin.
The OECD's assessment revealed a market imbalance: microinsurance has gained traction in life and third-party motor vehicle segments, but most Philippine homes lack coverage against extreme weather.
"Microinsurance has been successfully deployed, but mostly for life insurance and third-party motor vehicles, leaving homes largely unprotected against extreme weather events and natural disasters," the OECD stated.
Despite escalating climate risks, home insurance penetration remains weak, the organization noted. Current mandatory coverage requirements apply mainly to mortgaged properties, creating a significant protection shortfall.
OECD data shows only a small fraction of Filipinos carry home insurance, with even fewer holding policies covering natural hazard risks.
To address these gaps, the OECD has proposed making home insurance mandatory for businesses in the country.
“A potentially significant reform would be to make home insurance mandatory in the Philippines, as it is in a few other countries, thus reaching a larger pool of households and firms, dispersing risks and helping to reduce premiums,” the organisation said.
OECD also suggested that the Philippines expand home insurance and share risks through public–private partnerships (PPPs), promoting re-insurance markets and affordable coverage for vulnerable households.
The OECD also stressed that property insurance expansion is critical given low-income households' heightened vulnerability to property losses.
The organisation proposed pairing mandatory coverage with premium subsidies, recommending "a dedicated fund to subsidise premiums for low-income households" to ensure affordability.