The Insurance Commission (IC) has issued a circular letter redefining “unsafe” and “unsound” insurer practices and imposing penalties on these.
“The broad definition under the existing law could easily be challenged if the commission would not clarify the definitions of prohibited acts that constitute violations of the law. A regulation clearly defining the same was issued to put more teeth in the regulation of the insurance industry,” Insurance Commissioner Dennis B. Funa said of Circular
The new regulation was issued after reviewing the unimplemented provision of the Insurance Code that empowered the agency to penalize insurance firms, their directors, officers and agents for conducting business in an unsafe or unsound manner.
As defined under the new regulation, unfair business practices are broadly classified into: misrepresentation to the public, unfair discrimination, unfair claims management, misrepresentation in insurance applications or claims, failure to effectively control and supervise its agents and failure to respond to regulatory inquiries.
“The definition provided under the circular letter only covers those arising from the contractual relationship of these entities with the insuring public. It does not cover business practices likely to cause insolvency or substantial dissipation of assets or earnings of a covered entity or likely to weaken its financial condition,” he added.
Other practices considered unsafe or unsound are: misrepresentation relating to terms and conditions of an insurance policy; misleading or making false representation or incomplete comparison of policies for the purpose of inducing or tending to induce a person to lapse, forfeit, or surrender his said insurance; failing to disclose all applicable charges; advertising an insurance product which has not been approved by the commission in a misleading manner; failing to promptly acknowledge receipt of claims, to adopt and implement reasonable standards for prompt investigation of an insurance claim; discriminating against a person solely because of his or her race; and failing to maintain reasonable standards of supervision and control over its insurance agents, and by such reason, an agent committed or was permitted to commit an act or omission prejudicial to the insuring public.
The penalties imposed against any person found guilty of engaging in unsafe business practices include an order to cease and desist from engaging in such practices and to pay a fine ranging from P10,000 to P200,000, according to the IC.