GSIS, the better ctpl alternative

The beleaguered multi-billion peso compulsory third party liability (CTPL) insurance business has just taken a new twist.

The Insurance Commission (IC), which is supposed to police this notorious part of the insurance industry, appears to be creating an even bigger problem by letting the non-life insurance sector decide on what must be done with the very problem it had created.

First, the IC announced that the Land Transportation Office had approved the proposal to put up a "clearing house" for CTPL policies, with this planned clearing house to be comprised of – guess what – insurance companies!

Second, the Department of Transportation and Communication denied the IC’s announcement, saying that it supervises the LTO and that as far as the agency is concerned, there is no approval given to the commission’s plan.

To spite GSIS

It appears that the IC is going to the extreme just to spite the Government Service Insurance System, which had proposed to corner the P2.4-billion vehicle insurance industry.

GSIS had earlier proposed to be the exclusive vendor of CTPL policies covering an estimated five million vehicles currently registered with the LTO, whether private or public utility vehicles.

In its proposal, vehicle owners will pay for automatic coverage with the LTO during registration. The payment for the CTPL will be bundled into the registration fees, taxes and penalties that the LTO will collect and remit to another government pocket, which is the GSIS.

IC alternative

And what is the IC’s alternative?

The commission took on the proposal of the Philippine Insurers and Reinsurers Association (PIRA), which is to consolidate the CTPL business under one consortium.

The clearing house, made up of the insurance firms themselves, is supposed to match all CTPL premium payments with insurers and make sure that those involved are legitimate and actually exist. This reminds me of the pre-need industry’s self-regulation policy that really did not work because members were trying to protect themselves rather than the pre-need plan holders.

To give the clearing house concept some cloak of respectability, the IC proposed that the mode of payment of CTPL premiums would be through banks. Banks have supposedly agreed to participate in the scheme; naturally, as it will give them additional retail business.

But as we very well know in the CTPL business, the problem is not with the collection and payment of premiums, but with the inability of the victims or those insured who are trying to get reimbursement from the insurers. The problem of fixers who "misrepresent" insurance companies is also a big concern.

The biggest drawback in the IC proposal is that the clearing house will take only 40 percent of the CTPL premiums and leave the remaining 60 percent to the "free" market - which does not really help solve the problem of fake insurance policies or policies issued by companies that are not able to settle insurance claims.

The public welfare

Between the two proposals, which one offers the public – whose welfare is at stake here – the best protection? Obviously, if politics and selfish interests were to be set aside, it is the GSIS scheme.

Since the government is centralizing its database, the GSIS offer is workable. For motorists, the GSIS proposal is simple and convenient, and most importantly, offers minimum potential for fraud.

IC claims that centralizing with the GSIS the CTPL issuance may drive nearly a hundred of non-life insurance firms out of business and leave about 130,000 employees and agents (I wonder if this is the real number of people involved in the CTPL business) jobless. To the skeptics, however, there appears to be more to the commissioner’s hard sell for the IC proposal than meets the eye.

The IC’s intention to put up a clearing house manned by the insurers themselves is, in effect, letting the insurance industry, which had been found to have corrupted the system, police itself.

Let us not forget that these 100 or so non-life insurers in 2003 should have booked P2.5 billion in CTPL premiums from 4.3 million vehicles that registered with the LTO that year. But they claimed to have sold only P1.3 billion worth of CTPLs.

With 4.3 million registered vehicles in 2003, the government recorded only P310 million in taxes from insurance premiums, whereas it should have collected P579 million.

Out-of-the-box solution

The problem with fake CTPLs has dogged motorists and the public for years. I’m not too optimistic that the clearing house concept manned by members of the insurance industry will solve this malady.

On the other hand, perhaps it is high time that we look at other out-of-the-box solutions, like that being proposed by GSIS. At least, motorists will only run after one insurer – and definitely, one that is legitimate. This is a sure way of eliminating those fake CTPLs.

The government will also be assured of collecting all taxes due it, from the 12.5-percent documentary stamp tax, 10 percent value-added tax and 0.15-percent local government tax imposed on every insurance premium, since all payments will be collected by the LTO.

Empty brickbats

As expected, issues are being raised once more about GSIS becoming a monopoly or that the GSIS will favor only certain players in the re-insurance of the CTPLs. I think what vehicle owners are more concerned about is that when they have a claim on their CTPL policy, such will be paid and that the owner is not just holding a worthless piece of insurance paper.

On the issue of the possible displacement of 130,000 insurance workers, one wonders how many of these are in the employ of fly-by-night insurance companies that only solicitously go after premium payments but disappear when insurance claims have to be settled.

Rising local poker stars

Continuing our discussions about the surge in popularity of the game of poker, particularly the Hold’em deal, allow me to give recognition to a number of poker enthusiasts who demonstrated during the year the patience, endurance and skill to remain focused despite increasing pressure to win in the non-wager poker tournaments.

Leading the pack are the leg champions of the Poker King Challenge series jointly launched by the Poker Club of the Philippines and Philippine Amusement and Gaming Corp. (Pagcor). The five champions are Mon Gelveson, Perry Calalang, engineer Nicolo Palo of Angeles City, Cebu City businessman Jessie Dy, and business executive Jason Lim.

The 6th leg champion will be known tomorrow, 7th January, at the end of the competition slated to start 12:30 p.m. at the Casino Filipino Silahis. The Grand Finals of the series when the Poker King 2005 will be crowned will be on 28th January 2006 at Casino Filipino Tagaytay.

Other notable poker enthusiasts are Rober Karian, champion of the 1st Casino Filipino Tagaytay Hold‚em tournament, and of course, not to forget, the champion of the Cebu Series of Poker, Inc., "Pnsoy" Canizares, who finished 5th in the strong field of 61 local and foreign players.

The biggest Texas Hold’em tournament for 2005 that attracted 115 participants held at Airport Casino Filipino was won by Ben Chim (grand champion). The tournament was well-promoted and managed by the team headed by Senior Branch Manager Rogelio "JB" Bangsil and very ably assisted by its consultant, Nick Galan.

Last, but definitely not the least, worth mentioning is Joe Davies, the champion of the Honda Philippines-sponsored Business & Leisure Hold’em Mall Tour held at Eastwood City mall. Davis bested Franco Montano in an exciting "all-in" last deal. This creative approach to the game is the brain-child of Ray "Butch" Gamboa, president of the Poker Club of the Philippines, in his desire to make Texas Hold‚em a spectator sport.

All of these rising poker stars are now looking forward to the biggest national hold‚em championship with a guaranteed P1 million prize to the National Champion to be held on 8th and 9th April 2006 at Airport Casino Filipino Paranaque. Those interested to join, please visit www.PhilippinePokerTour.com <http://www.philippinepokertour.com/> or call the Secretariat (c/o Cindy) at telephone number 817-9092.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz <http://bizlinks.linkedge.biz/> .