What you need to know: The Insurance Commission of the Philippines
MANY Filipinos still consider insurance as an extra cost rather than as an investment that could lessen potential losses resulting from dangers and disasters that may affect lives or properties. There is a sense of hesitation among Filipinos in placing their hard-earned money in a financial instrument, such as an insurance policy. They believe this to be useless unless something bad happens.
Aside from the low average incomes and high costs of basic needs in the Philippines, the reluctance to invest in insurance may also be rooted on the general public’s inadequate knowledge of how the insurance system works for their benefit.
There may also be a lack of awareness of the insurance industry’s institutional safeguards, such as the governing laws on insurance and related financial instruments and the Insurance Commission, the regulatory agency mandated to oversee the insurance sector, promote its growth and sustainability, and protect the rights and interest of both insurer and insured entities.
To help reduce this insurance awareness gap, this piece, a first in the forthcoming series of articles on “Let’s talk about insurance,” introduces the Insurance Commission by chronicling its establishment and ensuing development in the Philippines.
Before the Spanish colonization, the concept of insurance as we know it today was unheard of in the Philippines. Any financial losses brought about by disasters were either shouldered by the individual or shared with the family or the tribe which the family was a member of. Insurance was then introduced to Filipinos when Lloyd’s of London, a European insurance market, appointed Strachman, Murray & Co., Inc. to set up in the Philippines. The growing insurance-related activities necessitated the adoption of the laws on insurance found in the Spanish Civil Code of 1889. Strachman, Murray & Co. Inc.’s domestic operation set in motion the arrival of more foreign insurance companies which brought the life insurance (Sun Life Assurance of Canada in 1898), and non-life insurance (Yek Tong Insurance Company in 1906) into the country. Not long after, in 1910, the first homegrown domestic life insurance company was established (Insular Life Assurance Co. Ltd.).
Four years later, the government opted to promulgate insurance laws tailored to the regulatory needs of the local environment. In 1914, the Insurance Act (Act 2427) was enacted and took effect on July 1, 1915, repealing and revising the adopted Spanish insurance laws. The Insurance Division of the Bureau of Treasury supervised the insurance business with the Insular Treasurer, designated as Insurance Commissioner ex-officio, at its helm. The regulatory office later functioned under the Bureau of Banking, which was eventually renamed as the Office of the Insurance Commissioner (by virtue of RA 275) when the Central Bank of the Philippines formally opened in 1949.
Due to the changing needs of the insurance sector, the Insurance Code of the Philippines was instituted via PD 612 on Dec. 18, 1974, and repealed the Insurance Act of 1914. Among the several presidential decrees which later amended PD 612 and transformed it into the Insurance Code of 1978, a Presidential Decree (PD 63) renamed the Office of the Insurance Commissioner as the Insurance Commission in 1972. On Aug. 15, 2013, Republic Act 10607, otherwise known as the Amended Insurance Code, was signed into law by then President Benigno S. Aquino 3rd.
At present, the Insurance Commission operates as an attached agency under the Department of Finance and is tasked to regulate and supervise the insurance sector, including life and non-life companies, mutual benefit associations, and trusts for charitable uses. Because the insurance business is charged with public interest, the Insurance Commission guards the public from potential abuses by issuing licenses to insurance agents, general agents, resident agents, underwriters, brokers, adjusters and actuaries. It also authorizes the suspension and revocation of such licenses. The enactment of RA 9829, or An Act Establishing the Pre-Need Code of the Philippines, on Dec. 3, 2009 placed the pre-need sector under the regulatory supervision of the Insurance Commission. Under EO 192 s. 2015 issued by President Benigno Aquino 3rd, the regulation and supervision of health maintenance organizations (HMOs) were transferred from the Department of Health to the Insurance Commission.
The next column will shed light on another relevant aspect of the insurance industry and its dynamic environment. If you have questions, comments or suggestions, feel free to contact the author.
Randy B. Escolango, Ph.D. is the Deputy Insurance Commissioner for Legal Service, appointed in August 2017. He may be contacted at: email@example.com
Source: Manila Times