A look at all sides

The newest scandal facing the Government Service Insurance System (GSIS), in particular the turning over of some P1 billion in dividends to the national coffers in Dec. 2004, can be seen in different ways, depending on how one wants to look at it.

A complaint filed before the Office of the Ombudsman Ombudsman by former GSIS employee Albert Velasco has alleged that GSIS violated anti-graft laws when it turned over the dividends to the national treasury.

On the other hand, GSIS officials insist that there is nothing wrong with it since the turning over of money to the National Government want made in pursuance to Republic Act no. 656.

According to GSIS chief legal counsel and spokesperson Estrella Elamparo, the said law mandates the GSIS to remit whatever unused or surplus earnings the GSIS has from its General Insurance Fund (GIF), which is distinct and separate from the GSIS’ Social Insurance Fund (SIF).

She pointed out that also in Dec. 2004, GSIS members received dividends of P847 million, but this time coming from the SIF.

Elamparo explains that the P1 billion that went to the national coffers came from the GIF while the P847 million that went to GSIS members also in the same year came from the SIF. The SIF is where the contributions of GSIS members are kept while the GIF is the repository of the GSIS investment funds and earnings from its businesses.

The P1 billion turnover was the first in eight years, 1997 being the last time that the government received dividends from the GSIS in the amount of P200 million.

Does this mean therefore that if the GIF and SIF are totally separate and distinct, that investments of GSIS say in Meralco come from the GIF and that all dividends from its Meralco investments go into the GIF? Does this also mean that any money that will be made by GSIS in handling the compulsory third party liability (CTPL) insurance will not benefit the public since it will go to the GIF?

A recent PCIJ report unveiled how GSIS officials have made money via bloated premiums and unpaid claims.

RA 656 or the Propery Insurance Law which took effect  in 1951, created the Property Insurance Fund to be used to indemnify or compensate the government for any damage to, or loss, of its property due to fire, earthquake, storm, or other casualty. Administration of the fund was placed under the GSIS which was also vested with powers to reinsure with private insurance companies any excess risk.

The entire government, except a municipal government below first class, was required to insure its properties, with the Fund against any insurable risk herein provided and pay the premiums thereon, which however, shall not exceed the premiums charged by private insurance companies.

The law also provides that the records and accounts of the Fund shall be kept separate and distinct from those of other funds of the GSIS.

RA 656 also states that “any disposable surplus that may result from the operation of this Fund once declared by the System shall be apportioned in accordance with the schedule approved by the System among governments whose properties are insured in the Fund,” thus Elamparo’s statement.

It is estimated that the GSIS currently insures P1.5 trillion worth of state assets.

The PCIJ report quotes Honesto General of the Association of Insurance Brokers of the Philippines (AIBP) as saying that GSIS has conspired with private brokers and reinsurers to skim off huge commissions that can be made from fat insurance premiums.

Such overcharging it was said, was being done with the collusion of the top finance people of the insured government entities, who inflate the losses on insured properties to justify higher premiums.  Industry sources estimate commissions range from 2.5 to 10 percent of the insurance premium, depending on the nature of the risk.

So how is the public affected? Detractors say that the high cost of insuring government property is borne by the public, either in the form of higher government fees or of deteriorating public services.

According to the PCIJ report, In 1994, a team from the Commission on Audit (COA) tried to go to London to investigate the reinsurance fraud. This was after they had uncovered huge losses in the GSIS arising from premium advances to favored brokers, and unpaid insurance claims.

COA found that when the insurance claims of some government agencies rose, these brokers suddenly declared bankruptcies, leaving huge unpaid claims in the books of GSIS and the state agencies insured.

The Senate also did an investigation  in 1996 on the basis of a COA report that showed the GSIS had more than P500 million in uncollected claims from foreign and local reinsurance firms as of end-1994, the PCIJ report stated.

As a result of the Senate probe, the GSIS charter was amended in 1997, placing its investment activities under the Insurance Commission’s watch. It is however claimed that this did not plug the loopholes that made connivance on reinsurance deals possible.

GSIS president Winston Garcia said he tried to learn from these mistakes and that one of his first acts was to “clean up” the reinsurance business, where “small-time” insurance brokers had made a killing on GSIS contracts by ceding the business to dubious reinsurers abroad.

Garcia then issued Office Order 10-01 directing GSIS to reinsure directly with National Reinsurance Corporation of the Philippines , a private company created by a Marcos decree that is composed of 74 local reinsurance companies. GSIS is Philnare’s biggest shareholder with a 19-percent stake.

Garcia said the order allows GSIS to deal directly with the top 10 reinsurance companies and bans small-time brokers.

In short, the whole thing is more complex than graft being committed by GSIS for turning over dividends to the government. GSIS may be correct in saying that turning over of P1 billion in 2004 to the national treasury is mandated by RA 656. The answer however has led some sectors to ask if GSIS records can justify the claim that the GSIS members’ fund is intact. Are the SIF and GIF indeed treated and dealt with separately? If GSIS can prove that members’ funds were not diminished by the turning over of dividends to government, then well and good. Some are saying that turning over of funds to government will benefit the people anyway. Others meanwhile want an investigation into this government property insurance scheme of GSIS, in the aftermath of the agency taking over the CTPL. However this whole brouhaha turns out, let us hope that GSIS members are benefited.

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