The Philippines is being urged to reform its insurance system by making home coverage compulsory and encouraging disaster-resilient construction, according to the latest report by the Organization for Economic Cooperation and Development (OECD).
The Paris-based organisation highlighted a “massive” protection gap in the country, which ranks among the world’s most vulnerable to climate-related disasters, including typhoons, floods, and earthquakes, the Manila Bulletin reported.
The OECD noted that while microinsurance has gained traction in life insurance and third-party motor vehicle policies, the majority of Filipino households remain exposed to extreme weather and natural hazards due to insufficient property coverage.
“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.
Currently, mandatory insurance coverage in the Philippines largely applies only to mortgaged properties. This narrow scope leaves a significant portion of the population without protection, even as climate risks intensify. OECD analysis indicates that only a small fraction of households carry home insurance, with an even smaller percentage having policies that cover natural hazards.
To address these gaps, the OECD has recommended introducing mandatory home insurance for businesses, arguing that such a measure would expand coverage to a wider pool of households and firms, distribute risks more effectively, and ultimately help lower premiums.
The OECD also emphasised the role of public–private partnerships (PPPs) in expanding insurance access, suggesting that these collaborations could strengthen reinsurance markets and provide more affordable coverage for vulnerable communities.
“Property insurance expansion is especially critical for low-income households, whose exposure to losses is disproportionately high,” the organisation noted.
To ensure affordability, the OECD recommended pairing mandatory coverage with targeted subsidies. They proposed the creation of a dedicated fund to subsidise premiums for low-income households, ensuring that protection against natural hazards does not become financially out of reach.
Key Insurance Coverage Insights in the Philippines
| Insurance Type | Penetration Status | Notes on Coverage Gaps |
|---|---|---|
| Life Insurance | Growing | Strong uptake via microinsurance |
| Third-Party Motor Insurance | Growing | Widely adopted |
| Home Insurance | Low | Most homes uninsured against natural disasters |
| Mandatory Coverage | Limited | Mostly applies to mortgaged properties only |
| Proposed Reforms | Pending | Mandatory home insurance for businesses, premium subsidies for low-income households |
The OECD report underscores that strengthening the country’s property insurance framework is essential for both economic resilience and social protection. By mandating coverage and incentivising climate-resilient construction, the Philippines could significantly reduce the human and financial costs of natural disasters, while promoting a more inclusive insurance market.