What is the Role of Insurance Commission?
The Insurance Commission is a government agency under the Department of Finance that supervises and regulates insurance, pre-need, and health maintenance organization industries pursuant to Republic Act Nos. 10607, 9829, and Executive Order No. 192, series of 2015.
Why is there a need for the government to supervise the business of insurance?
The business of insurance is a highly regulated commercial activity in the country and is imbued with public interest. (Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R. No. 175666, 29 July 2013; citing Tongko vs. The Manufacturers Life Insurance Company (Phils.), Inc., G.R. No. 167622, 29 June 2010, 622 SCRA 58,75, Republic vs. Del Monte Motors Inc., 535 SCRA, 53,60 and White Gold Marine Services, Inc. vs. Pioneer Insurance and Surety Corporation, 502 SCRA 692, 700.)
Yes, the Insurance Commission has concurrent authority to adjudicate involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be sued under any contract of reinsurance it may have entered into; or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interest, cost and attorney’s fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim Five million pesos (P5,000,000.00). (Section 439, Republic Act No. 10607)
For Compulsory Motor Vehicle Liability Insurance, the jurisdiction of the Insurance Commission is original and exclusive provided that the insurance claim does not exceed P 5,000,000.00 (Section 398, Republic Act No. 10607).
Can an insured file a case before the Insurance Commission and the Courts of competent jurisdiction involving the same insurance or reinsurance claim at the same time?
No, the filing of a complaint with the Insurance Commission shall preclude the civil courts from taking cognizance of a suit involving the same subject matter. (Section 439, Republic Act No. 10607).
Are the claims against pre-need companies who offer memorial service plans, educational plans and/or pension plans fall under the jurisdiction of the Insurance Commission?
Yes, the Insurance Commission shall have the primary and exclusive power to adjudicate any and all claims involving pre-need plans. (Section 55, Republic Act No. 9829)
Can a claim against a pre-need company involving a pre-need plan be filed before the Courts of competent jurisdiction?
No. This authority is primary and exclusive to the Insurance Commission. (Section 55, Republic Act No. 9829)
What are the minimum qualifications required of applicants for insurance agents’ examination?
They must be of good moral character and must not have been convicted of any crime involving moral turpitude and have been trained in the kind of insurance presently contemplated in the license applied for. (Section 313, Republic Act No. 10607)
Who are exempt from taking the Agents’ examination?
- One who presently holds, or had previously held, at any time during the last 10 years, a license of the kind applied for.
- One who has successfully completed the Insurance Agent’s Course conducted by the Insurance Institute for Asia and the Pacific or an academic course and/or training program, satisfactory to the Commissioner, in the kind of insurance contemplated in the license applied for.
- One who, because of his previous connection with any insurance company, or with any office or firm handling insurance matters, is found by the Insurance Commissioner to be competent to transact the business contemplated in the license applied for. (paragraph 4.7, Insurance Memorandum Circular 3-93
Who may be insured?
Anyone, except a public enemy may be insured (Section 7 of RA 10607) and has an insurable interest.
Insurable interest in life/health insurance consists of what?
Every person has an insurable interest in the life and health:
- Of himself, of his spouse and his children;
- Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
- Of any person under legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent performance; and
- Of any person upon whose life any estate or interest vested in him depends. (Section 10, Republic Act No. 10607)
What is insurable interest in property insurance?
Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest. (Section 13, Republic Act No. 10607)
Insurable Interest in property consists of what?
An insurable interest in property may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. (Section 14, Republic Act No. 10607)
In property insurance, what is the effect if a person does not possess any insurable interest?
No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. (Section 18, Republic Act No. 10607)
The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. (Section 53, Republic Act No. 10607)
A person is the new owner of a motor vehicle that has an existing insurance policy from its previous owner and his/her name is not indicated as the new insured. Should that person inform the insurance company that he/she is now the new owner of the motor vehicle and why?
Yes, the insurance company should be informed accordingly so that the appropriate changes may be effected.
What is the effect if a person failed to inform the insurance company and the vehicle suffered an accident?
The insurance claim will be denied for lack of insurable interest since no contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured (Section 18, Republic Act No. 10607) and the insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. (Section 53, Republic Act No. 10607)
What should the parties always keep in mind for purposes of acquiring an insurance product?
Each party to a contract of insurance must communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. (Section 28, Republic Act No. 10607)
What is the meaning of “concealment” in insurance transactions?
A neglect to communicate that which a party knows and ought to communicate, is called a concealment. (Section 26, Republic Act No. 10607)
What is the effect if the existence of concealment was discovered by one of the parties?
The injured party is entitled to rescind a contract of insurance. (Section 27, Republic Act No. 10607)
Will it matter if the concealment is intentional or unintentional?
No. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (Section 27, Republic Act No. 10607)
A person is entitled to the return of his/her premium in any of the following instances:
a. To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against. [Section 80 (a), Republic Act No. 10607]
b. Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued: Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law. [Section 80(b), Republic Act No. 10607]
c. A person insured is entitled to a return of the premium when the contract is voidable, and subsequently annulled under the provisions of the Civil Code. (Section 82, Republic Act No. 10607)
d. On account of the fraud or misrepresentation of the insurer, or of his agent, or on account of facts, or the existence of which the insured was ignorant of without his fault. (Section 82, Republic Act No. 10607)
e. When by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy. (Section 82, Republic Act No. 10607)
f. In case of an over insurance by several insurers other than life, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. (Section 83, Republic Act No. 10607)
The insurance contract/policy is generally not valid and binding. (Section 77, Republic Act No. 10607)
Are there any exceptions to this rule?
Yes, there are exceptions. They are the following:
a. In the case of a life or an industrial life policy whenever the grace period provision applies;
b. Whenever under the broker and agency agreements with duly licensed intermediaries, a ninety (90)-day credit extension is given. No credit extension to a duly licensed intermediary should exceed ninety (90) days from date of issuance of the policy. (Section 77, Republic Act No. 10607)
May an insurance policy/contract be cancelled? If so, what are the grounds?
Yes, an insurance policy/contract may be cancelled on the following grounds and by the following persons:
A. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:
a. Nonpayment of premium;
b. Conviction of a crime arising out of acts increasing the hazard insured against;
c. Discovery of fraud or material misrepresentation;
d. Discovery of willful or reckless acts or omissions increasing the hazard insured against;
e. Physical changes in the property insured which result in the property becoming uninsurable;
f. Discovery of other insurance coverage that makes the total insurance in excess of the value of the property insured; or
g. A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. (Section 64, Republic Act No. 10607)
B. For health insurance products, if there is a free-look period clause in the policy, the consumer may return or cancel the contract, and if ever payment was made, the amount paid as premium shall be returned in full to the consumer (Section 3.1, Circular Letter No. 2018-65). A free-look period refers to the number of days provided in the contract (Section 3.1, Circular Letter No. 2018-65). The free-look period is intended for those who disagree with the contract conditions after receiving it, such as the presence of pre-existing condition exclusion and other exclusions after reading and evaluating the contract, or those who change their mind in buying the contract (Section 3.2, Circular Letter No. 2018-65)
All contracts covered by Circular Letter No. 2018-65 are required to have a free-look period of not less than 15 days for contracts with effectivity period of more than six (6) months, and not less than five (5) days for contracts with effectivity period of six (6) months or less but longer than 30 days (Section 3.3, Circular Letter No. 2018-65).
C. For other types of insurance products, kindly refer to the insurance policy/contract for any specific stipulations/clauses/paragraphs/provisions.
When should an insurance claim be paid?
A. For life insurance claims, the proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due: Provided, however, That in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty (60) days after presentation of the claim and filing of the proof of death of the insured. Refusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. The proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due and payable at maturity. (Section 248, Republic Act No. 10607)
B. For non-life insurance claims, the amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty (30) days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such
ascertainment is not had or made within sixty (60) days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety (90) days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent (Section 249, Republic Act No. 10607)
C. For Compulsory Motor Vehicle Liability Insurance claims, the insurance company concerned shall forthwith ascertain the truth and extent of the claim and make payment within five (5) working days after reaching an agreement. If no agreement is reached, the insurance company shall pay only the no-fault indemnity provided in Section 391 without prejudice to the claimant from pursuing his claim further, in which case, he shall not be required or compelled by the insurance company to execute any quit claim or document releasing it from liability under the policy of insurance or surety bond issued. (Section 398, Republic Act No. 10607)
What is “Compulsory Third Party Liability Insurance”?
The Compulsory Third Party Liability (CTPL) Insurance is the other term used that is the equivalent of a Compulsory Motor Vehicle Liability Insurance. The CTPL is a specific and special type of insurance that covers death or bodily injury and damage to property of a third party or a passenger, as the case maybe, arising from the use thereof. (Section 387, Republic Act No. 10607)
This insurance is unique as this is only insurance product that is required before any land transportation operator or owner of a motor vehicle can register or renew the registration of his/her/its vehicle. (Section 389, Republic Act No. 10607)
What is the meaning of “Third Party” in CTPL?
The term “Third Party” is any person other than a passenger and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, as likewise defined herein, or his employee in respect of death, bodily injury, or damage to property arising out of and in the course of employment. [Section 386 (c), Republic Act No. 10607]
What is the “NO FAULT INDEMNITY CLAUSE/CLAIM”?
This is defined in pertinent provision of Section 391 of Republic Act No 10607 which states that “Any claim for death or injury to any passenger or third-party pursuant to the provisions of this chapter shall be paid without the necessity of proving fault or negligence of any kind, xxx”
Is there a minimum amount that an intended recipient is entitled to under the “NO FAULT INDEMNITY CLAUSE/CLAIM”? If so, what are the requirements?
Yes, there is a minimum amount for this clause/claim. The total amount is that it should not be less than P15,000.00. [Section 391(a), Republic Act No. 10607]
The requirements are:
The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim:
(1) Police report of accident; and
(2) Death certificate and evidence sufficient to establish the proper payee; or
(3) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed. [Section 391 (b), Republic Act No. 10607]
When must a claim in CTPL be filed to the insurance company concerned?
Any person having any claim upon the policy issued shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six (6) months from the date of accident, otherwise, the claim shall be deemed waived. (Section 397, Republic Act No. 10607)
Is there a period for a claimant to file the appropriate case before the Insurance Commission in case of denial of a CTPL claim by the insurance company?
Yes. The action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the courts within one (1) year from denial of the claim, otherwise, the claimant’s right of action shall prescribe. (Section 397, Republic Act No. 10607)