According to the exposé by Sen. Juan Ponce Enrile, insurance companies reported premiums amounting to only P1.3 billion, paying just P310 million in taxes. Thus they cheated the government of P268 million in taxes in one year alone.
But that is not the worst part. The really unconscionable part is that a great portion of the CTPL policies issued were fake. Hence tens of thousands of motor vehicle owners were cheated of insurance coverage, leaving them to pay for damages from their own pockets in case of an accident involving their vehicles.
Because of the exposé, there have been some proposals to stop the racket. But, if the Commuters and Consumers Advocate (CCAP) is to believed, a bigger scam is in the offing over the CTPL, this time emanating from the Insurance Commission itself as well as from some members of the insurance industry, called "buccaneers" by Enrile.
The CCAP, through its representative, Rene Mades, has filed a complaint with the Office of the Ombudsman against no less than Insurance Commissioner Evangeline Escobillo for violation of the Anti-Graft and Corrupt Practices Act and the Code of Conduct and Ethical Standards for Public Officials and Employees.
She is accused of having illegally "endorsed and approved" the creation of a private stock corporation, called Compulsory Insurance Processing Center Corp. (CPICC), to centralize the processing of all CTPL policies issued to owners of motor vehicles. This, despite the fact, that it is the IC that should perform this special task.
According to Mades, Escobillo in effect helped create a "private monopoly" in the issuance, selling, handling, dealing and processing of CTPL policies. "At the very least, the creation of a single entity that shall handle the CTPL business is a combination in restraint of trade," in violation of the Constitution, he stressed.
In addition, Mades declared, Escobillo gave "unwarranted benefits and advantage" to the Philippine Insurers and Reinsurers Association (PIRA), a private rating corporation composed of insurance companies as members, by directing that only members of PIRA can become members of CPICC. For fear of losing out in the CTPL business, some insurance companies paid P200,000 each for subscriptions to CPICC, said Mades.
Mades said that Escobillo herself was present in a meeting of PIRA on April 10, 2006, during which the CPICC was discussed. She did not object when it was announced that the by-laws of the corporation would be sent to her for approval.
He adds that it is very strange, irregular and illegal that a public officer will be directly involved in the setting up of a private corporation that will eventually be regulated by the very office he or she is connected with. Consequently, she is presumed to have personal gain or interest in CPICC, according to Mades.
It is very difficult to see how the formation of the CPICC, composed of members of the insurance industry themselves, would be able protect CTPL policy holders from being defrauded. This is like the fox being assigned to guard the chicken coop, or the convicts being made to patrol the prison.
The insurance companies themselves apparently have been guilty of defrauding policy holders as well as the government as exposed by Senator Enrile. As a matter of fact, the scheme would only strengthen the capability of the industry to gyp the motor vehicle owners, who are helpless because they are required by law to acquire CTPLs whether or not they liked it.
It is the Insurance Commission that has been depended upon by the public and the government to protect them against insurance fraud. The IC as a matter of fact was formed precisely to regulate the industry for the protection of the insured against fraud and of the government against insurance tax evasion. It is because of IC’s apparent negligence, possibly criminal and conspiratorial, that enabled the insurance companies to defraud the public and the government of billions of pesos.
Strangely, the IC has ignored a proposal by the Government Service Insurance System (GSIS) to issue CTPL policies, guaranteeing full coverage of insurance policies and full payment of insurance taxes. The GSIS proposal would also cut the annoying red tape in registering vehicles because CTPL payments shall be automatically recorded in the LTO receipt, without the registrant having to seek out an insurance agency that might after all turn out to be fake.
The CTPL coverage has been required by law for more than 20 years, since the 1980s, and consequently both the public and the government have been defrauded of billions of pesos with the possible connivance of some unscrupulous insurance companies and the IC.
The Ombudsman should be lauded for giving due course to the complaint of the commuters and consumers’ organization by directing Ms Escobillo not to file a motion to dismiss but instead to file a counter-affidavit, having found the complaint to be initially meritorious.
But this should not be enough. The Ombudsman must immediately act on the case so as to protect both the public and the government.
For comments, e-mail at philstarhiddenagenda@yahoo.com