NEDA backs changes in Insurance Code

MANILA, Philippines - The National Economic and Development Authority (NEDA) is backing the passage into law of amendments to Presidential Decree (PD) 612 otherwise known as the 1974 Insurance Code of the Philippines.

 In its just-released Socio-Economic Report (SER) 2010-2012, NEDA said the Insurance Commission (IC) with the cooperation of the private sector introduced amendments to the Code to enhance regulatory policies and procedures that will be in accordance to global best practices. 

“The challenge is how to fasttrack the approval of the bill(s),” it said. 

The amendments not only bring the country’s insurance industry up to global standards, but also gives the regulator more teeth in dealing with judicial harassment by delinquent industry players. 

Institutionalizing the amendments to the outdated Code will strengthen the code of good corporate governance introduced by the IC through a system of “scorecards to determine levels and quality of compliance.” 

Delays in the passage of the proposed amendments will result in delays in implementing reforms for the industry, which among others could mean missed opportunities for the industry that offers protection, savings and investments for the insured and uninsured population. 

Meanwhile, the SER noted the capital build up program of government to boost underwriting capacities, improve insurance services, and prepare for the Asean regional integration. 

It noted that the minimum paid up capital required was P250 million for 2012. These will be increased further in a build up program “to make the industry more competitive in time for the Asean Economic Community come 2015.” 

Concerns were likewise raised regarding the expanded regulatory scope of the IC, after the transfer of regulatory and supervisory functions of the pre-need industry from the Securities and Exchange Commission (SEC) to the IC. 

At the start of 2012, 21 pre-need firms were issued working licenses. But the commission also inherited 30 insolvent pre-need companies that were in different stages of conservation, rehabilitation or liquidation.

Last month, the IC revealed that it was also managing 32 life, non-life and mutual benefit associations that are likewise in various stages of conservations, rehabilitation and liquidation. 

Meanwhile, NEDA welcomed efforts by the IC to establish a catastrophe insurance model as a means for disaster risk reduction and financing, knowing fully well that the Philippines is one of the worst affected by typhoons and floods.

“The immediate objective is to be able to set up a catastrophe pool for residential buildings and small and medium enterprises (SMEs) in view of the high vulnerability of the country to catastrophic risks,” NEDA said. 

That situation is aggravated by the fact that the Philippine has one of the lowest insurance coverage especially the low-income and informal settlers. 

Insurance coverage of all types reaches only 20 percent of the country’s population, with the majority through government pension funds such as the Social Security System (SSS) and the Government Service and Insurance System (GSIS). 

Private insurance firms only account for four to six percent of the insured public. 

To speed up protecting the public, the Department of Finance (DOF), the IC and several foreign and local entities formulated the National Strategy on Microinsurance, and the Regulatory Framework for Microinsurance. It is complimented by the Roadmap to Financial Literacy on Microinsurance. 

Government has also implemented the OFW Compulsory Insurance Coverage Program for agency-hired migrant workers, according to NEDA.

 To date, nine participating life and non-life insurance companies had covered 483,306 agency-hired migrant workers. And a total of 1,669 migrant workers have filed claims against their respective policies, of which a total of P39.5 million in benefits have been paid.