Under Circular Letter 2020-89 (Guidelines in the Treatment of Creditable Withholding Taxes), September 3, 2020, CWT may be considered as admitted assets of insurance companies, subject to conditions and documentation provided therein. Prior to this circular, CWTs were considered as non-admitted assets. It has been observed that several companies have recorded in their books unutilized or excess CWT that have been considered as non-admitted assets. Under Statutory Issue Paper 83 of the US National Association of Insurance Commissioners (NAIC), current income tax recoverables (i.e., CWTs) are considered as admitted assets if they are reasonably expected to be recovered. For insurance companies, this circular finds relevance with collected direct premiums, subject to CWT of 2 percent; collected reinsurance commission income from ceded premiums, subject to CWT of 2 percent; and collected rental income from properties or equipment of insurance companies, subject to CWT of 5 percent.
Brokers are indispensable partners of insurance companies. They bring business in a very competitive market. Brokers do not work for insurance companies (referred to as providers), they represent the insured’s interests. So an insurance broker knocking at an insurer’s door is always heaven sent. The business they bring to an insurance company can be significant. Most particularly for non-life insurers. The rewards of a repeat business can never be underappreciated. In addition to related services such as handling claims for the insured, several brokers also provide other added services such as advisory or consultancy services for its corporate clients.
Irish-domiciled insurance broker Aon Plc will be acquiring an also Irish-domiciled insurance broker Willis Towers Watson Plc. (Willis) in what has been set to become as the world’s biggest insurance merger ever. The merger talks started around January of 2019 and proceeded in an on-and-off tempo. Exploratory talks first started on January 30, 2019. The merger is set to be completed and closed by mid-2021. Aon will be the surviving entity. The $30 billion, all-stock acquisition merges two of the world’s leading brokers. Aon and Willis are the second and third largest insurance brokers in the world. The largest is Marsh and McLennan. This is until the Aon-Willis merger is completed. The merger, creating an $80 billion (equity value) company, will create the largest insurance broker in the world, surpassing Marsh & McLennan. Marsh, in April of 2019, acquired British rival Jardine Lloyd Thompson for $5.7 billion to create what was then the world’s largest insurance broker.
Variable or unit-linked life insurance is subject to risks which the policyholder alone must bear. The performance of the investment funds is not guaranteed. It fluctuates. It may go up or down. It is subject to the volatility of the market. While the policyholder receives all the investment benefits there may be, he also must accept losses from the performance of his investment fund. The value of his insurance policy will fluctuate with the value of his underlying investment funds.
AXA Insurance’s Global Health Access (GHA) is a yearly renewable health product with HMO-like features. It was launched in 2016. Certain features would qualify it as a non-insurance product. It lies in the gray area, where the regulator continues to grapple, between HMO products and health insurance. In any case, it does not directly compete with any HMO product in the market because of its high benefit payout.
The Philippine Machinery Management Services Corp. (PMMSC) or also known as ‘the “MacPool”) is an insurance pool that is dedicated to offering Construction and Engineering Insurance.
GeoRisk Philippines is a government-led multi-agency initiative to serve as the central resource of information on natural hazards and risk assessment. The project is formally known as the “Geospatial Information Management & Analysis Project for Hazards & Risk Assessment in the Philippines.”
When a consumer buys a product, it usually comes with a manufacturer’s or retailer’s warranty which is a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary due to defects in materials or workmanship within a specified period of time. In other words, it is a guarantee that a product will be repaired or replaced if it breaks down. This is mandated by law, specifically by Article 1562 of the New Civil Code and Articles 66 to 73 of the Consumer Act of the Philippines (Republic Act 7394). Warranties are timebound, usually one or two years. Warranties are usual for electronic or mechanical goods such as household appliances (washing machines, dishwashers, microwaves, televisions) and automobiles. The usual indemnity is to cover the cost of repair or replacement if the repair is deemed uneconomical.
Directors and Officers Liability Insurance (D&O) is a liability insurance that covers “individual directors and officers (D&Os), for loss arising from claims against them for which they are not indemnified by the corporate entity” and covers, as well, “the corporate entity, for the amount it pays on behalf of the D&Os to indemnify them for loss they sustain.” The latter is known as the “company reimbursement clause.” It can also cover the company itself in what is known as the “corporate entity clause.” The necessity of a D&O insurance lies in the fact that directors and officers can be held personally liable for corporate acts. Being a liability insurance, it does not cover suits filed by the directors or officers.
IT was not a long time ago when the term “life insurance” would be associated with death. The negative connotation made sales of insurance a difficult proposition, and insurance agents were met with hesitancy. Today, life insurance is more strongly associated with wellness. Rightly so, the common objective of the insured and the insurer should be the prolonged life of the insured. Insurance companies selling health and life insurance have integrated wellness programs in their insurance products. This is a bid at product repositioning, that insurance companies would want you to have a long and healthy life. It is a good selling point for an increasingly health conscious population.
A study was published by the University of Cambridge—Institute for Sustainability Leadership (CISL) in June 2019 on the impact of mutual microinsurance on Sustainable Development Goals (SDG) in the backdrop of Super Typhoon Haiyan (Yolanda) which occurred in November 2013. CARD MBA, as the mutual microinsurer, was the central subject of the study by Dr. Ana Gonzales-Pelaez.
IN Circular Letter 2020-70, the Insurance Commission encouraged the use of digital payments in insurance transactions. But how do we distinguish digital currencies, which is legal tender, from virtual currencies which is not endorsed by the Bangko Sentral ng Pilipinas?
The Philippines has undertaken the 2nd National Risk Assessment on Money Laundering and Terrorist Financing (TF) for the period 2015-2016, which it concluded in 2017. In 2016, the country concluded its 1st NRA for the period 2011-2014. In that NRA, ML threats were identified as emanating from predicate offenses such as drug trafficking, investment scam, corruption, among others. It also identified the instrumental sectors such as banks, securities, remittance agencies and foreign exchange dealers. Insurance companies, among others, are considered as “covered persons” for money laundering supervision. The 1st NRA also led to the creation of the Anti-Money Laundering Division in the Insurance Commission in 2015.
The Insurance Commission conducted a survey on health insurers to determine their overall response to the Covid-19 pandemic. The survey was conducted from April 16 to May 8, 2020. Surveyed were life and non-life insurance companies, Mutual Benefits Associations (MBAs) and Health Maintenance Organizations. Owing to the sudden emergence of the pandemic, which was declared by the World Health Organization (WHO) on March 11, 2020, the Commission was blind to the real situation on the ground. Moreover, it was unprecedented in contemporary history. There was a real need to find out what was happening, and a survey was the only way to find out. The life and MBA sectors had 100 percent respondents, the non-life had 96 percent and the HMO sector had 89 percent respondents. Out of those surveyed, 58 percent issued health insurance products, of which 61 percent covered pandemic cases.
The Insurance Commission will soon be issuing a framework for the adoption of regulatory sandbox in the Philippines. A regulatory sandbox is a framework set up by a regulator that allows FinTech start-ups and other innovators, such as insurance companies, to conduct live experiments in a controlled environment under a regulator’s supervision. It is a novel regulatory innovation. It is “designed to incubate innovation in the financial sector in a relaxed, but safeguarded regulatory environment.” The Asian Development Bank also defines regulatory sandbox as “a framework set up by a finance sector regulator to allow small-scale live testing of innovations by private firms in a controlled environment [operating under a special exemption, allowance, or other limited, time-bound exception] under the regulator’s supervision.”
The insurance industry is one of the leading investors in green bonds in the country.
The Bangko Sentral ng Pilipinas (BSP) has recognized digital payments as a policy priority. It has advocated the migration from a cash-based to a digital or a cash-lite economy. It seems though that we have a long way to go because 85 percent of all retail sales in the country are still conducted in cash. Perhaps a culprit is the low-awareness about the different e-payment platforms. With the advent of fintech, our march toward a digital economy could be accelerated.
(Speech delivered by Insurance Commissioner Dennis B. Funa at the Insurance Commission’s 71st anniversary celebrations on January 28, 2020, at the Philippine International Convention Center)
Insurtech (insurance technology) innovation is happening almost imperceptibly in the Philippines, and in numerous steps by different companies. Here below are some of these insurtech innovations.
Variable contracts or investment-linked insurance products is regulated by Sections 238 to 246 of the Amended Insurance Code. Investment-linked insurance have varying labels in different jurisdictions. In the US, it is known as variable life or variable universal life. In the UK, it is known as unit-linked, owing to its roots in unit trusts. In Asia, it is known as investment-linked, or insurance that is “linked” to investments. Others call it equity-linked insurance.
Every year, around the world, including the Philippines, billions of dollars in life insurance benefits are left unclaimed by beneficiaries. There is no escheatment legislation for unclaimed life insurance benefits in the Philippines. In Singapore, proceeds of over 8,000 policies were left unclaimed as of September 2015. In the US, it is estimated that every year over $1 billion in insurance benefits are unclaimed. It was estimated that the average unclaimed life insurance benefit is $2,000, although it could be as high as $300,000.
FICCO Mutual Benefit Association (MBA) was based in Cagayan de Oro City. It was organized by members of the First Community Cooperative (Ficco) to extend financial assistance to its members, their spouse, children and parents in the form of death benefits, provident savings and loan redemption assistance. The MBA was incorporated on August 23, 2007, and obtained its IC Certificate of Authority on November 8, 2007.
While life insurance usually looks forward to giving insurance benefits to beneficiaries upon the death of the insured, life insurance can also carry certain benefits for the insured to be enjoyed by him while he is still alive. These are called living benefits, as distinguished from death benefits. These living benefits are available only where equity or “cash value” accumulates. This cash value increases as the policy matures. These can be found in whole life insurance, variable unit-linked insurance, and endowments but not in term life insurance.
The salvage business in non-life insurance is what we might call the tail-end of the insurance cycle. Salvage refers to the damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage right over property on which they have paid claims, such as badly damaged cars. If the insured retains the damaged property, the salvage value or scrap value will be subtracted from any loss settlement. It is the insured’s decision whether or not to surrender the damaged property to the insurance company. The insured may decide to retain the property for sentimental reasons. The insurance company will only take damaged goods for salvage if it will reduce their total loss payout.
There are two types of life insurance in the Philippines: Term life insurance and permanent life insurance. Permanent life insurance may either be whole life or endowment life insurance. A third type may, perhaps, be added in the form of variable unit-linked life insurance (VUL), which some quarters classify as a form of whole life insurance.
Sections 181 and 182 of the Amended Insurance Code provide that contracts of annuities shall be considered a life insurance contract. Articles 2021 to 2027 of the New Civil Code govern life annuities in general. The provisions on life annuities were included in the Spanish Civil Code of 1889 (Chapters II and IV of Title XII of Book IV). Article 2021 gives us a definition of annuity, to wit: “The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income.”
A nonlife insurer may either retain the risks that it takes on or cede a portion of such risks by way of reinsurance. The more risks the insurer retains, the riskier it becomes for the insurer. Section 221 of the Insurance Code imposes a limit on the maximum amount of risk (or business) the insurer may retain in its books. Beyond which it must reinsure. This is called the “retention limit.”
According to the Philippine Cancer Society, in 2012, at least 13 out of 100 males and 14 out of 100 females in the Philippines would have some form of cancer if they lived up to age 75. Eleven out of 100 males and seven out of 100 females would die from cancer before the age of 75. One out of two Filipino cancer patients die within a year after diagnosis. According to the Cancer Coalition Philippines (CCP), seven Filipino adults are dying of cancer every hour. According to the World Health Organization, the number of cancer cases in the Philippines for 2018 was 141,021, with 86,337 deaths. Cancer is now the third-leading cause of morbidity and mortality in the Philippines, after communicable diseases and cardiovascular diseases.
LIFE expectancy has increased around the world, and the top causes of death have declined by 54 percent from 1900 to 2010. However, every year, thousands of people will suffer a stroke or heart attack, and thousands more will be diagnosed with cancer. According to the American Cancer Association, one in three people are at risk of cancer.It is also expensive.
Both life and nonlife insurers can issue health insurance policies. Together with the Health Maintenance Organization (HMO) industry, they comprise the providers of private health insurance in the Philippines.