Industry seeks amendments to irrelevant insurance code

MANILA, Philippines – The Philippine Insurers and Reinsurers Association (PIRA) is advocating for major amendments to the country’s 36-year-old Insurance Code, which could not only update and improve the performance of insurance industry.

It could also make insurance products more affordable and economical, both for the insurance companies and majority of the country’s population.

PIRA is the country’s only trade organization representing the 83 non-life insurance companies.

Two critical issues for immediate attention are the Insurance Commission (IC) and the issue of taxes.

PIRA chairman Michael F. Rellosa said that the IC must be given more powers.

“We would like the new Congress to give the Insurance Commission more power in resolving insurance cases. Right now, the regulator of the insurance industry can only resolve cases involving P100,000 and below. Anything worth more has to go to the courts, which is bad for the industry because it takes a long time for the courts to resolve cases. We propose to raise the limit to P5 million,” Rellosa said in documents acquired from PIRA.

PIRA also proposes the abolition of the documentary stamp tax (DST).

After years of lobbying, the country’s life insurance industry succeeded in reducing the five percent premium tax of policies to half. It was also able to fix the DST to the issuance of the policy instead of after every payment of premiums.

“We believe the same can be applied to the non-life insurance industry, especially to microinsurance products. If the government truly wants to help the poor protect themselves, removing the DST is a good first step. This will already mean a 12-percent reduction in the cost of insurance,” the PIRA chairman said.

Only eight PIRA members are offering microinsurance products due to the limitations and the lack of proper regulations.

Total premiums attributed to the non-life sector from its microinsurance business only reach P200 million versus the industry’s total premiums of P42.62 billion. Initial estimates place the microinsurance business at P20 billion a year.

The Philippines is considered the 12th most populous country in the world, but it is ranked the third smallest in the region ahead of Macau and Brunei, according to Swiss Reinsurance (Swiss Re).

Rellosa lamented that more than half of the country’s population is below the poverty line and majority are found in the rural areas, dependent on agriculture.

Another disturbing fact is that the Philippines is located in both the Pacific Rim of Fire and the Typhoon Belt.

Studies undertaken by the Asian Development Bank and the World Bank indicate that climate change and environmental degradation will only lead to further loss of life and property especially for the region.

Thus the non-life insurers are aware of the challenges to increase protection for the country’s population.

“This can be considered both as a challenge and an opportunity. For me, this is an immense room for growth, especially for microinsurance,” Rellosa added. –Ted P. Torres (The Philippine Star)