Insurance Commission requires cancellation period for HMO, insurance policies

MANILA, Philippines — The Insurance Commission (IC) has ordered insurance companies and health maintenance organizations (HMOs) to provide a “free-look” period for health insurance policies and health maintenance contracts to help protect consumers.

A free-look period refers to the period of time in which a new health insurance policy owner can terminate or cancel the insurance policy.

Insurance commissioner Dennis Funa issued IC Circular Letter 2018-65, requiring insurance companies to give a 15-day free-look period for health insurance policies with a duration of more than six months, and a five-day free-look period for policies covering six months or less.

Funa likewise signed IC Circular Letter 2018-66, which directed HMOs to incorporate a similar free-look period in all health maintenance contracts.

If a policy buyer decides to cancel or surrender the policy within the free-look period, Funa said he or she would be entitled to the refund of all premiums paid.

Funa said this period is for the benefit of a policyholder and could be used to review the policy to make sure it meets the needs of the insured.

“It is that window of time given to policyholders to read the policy provisions, understand the inclusions and exclusions, and if he or she has purchased the right product.”

Should the customer find the terms of the policy to be inadequate, Funa said they would be allowed to demand for the cancellation of the contract within the free-look period.

“If the insured for any reason does not want to accept the coverage or cancel the policy, he or she may demand for the cancellation or termination of the contracts,” Funa said.

The free-look period begins once a policyholder receives the health insurance policy or contract.

“A free-look period protects a customer if he or she feels that the policy document is not what he or she signed up for and protects the insuring public from dangers of misselling,” the IC chief said.

According to latest data from the IC, the local insurance industry reported a total premium income of P218.91 billion as of end-September 2018, 18 percent higher than the P185.51 billion posted in the same period in 2017.

The life insurance industry, for its part, recorded positive growth in the first nine months of 2018 as total premiums rose by 20.4 percent to P174.15 billion from P144.63 billion in the same period last year.

Meanwhile, the net premiums written by the non-life insurance sector also increased by 7.34 percent to P36.83 billion from last year’s level of P34.31 billion.

Contributions and premiums collected by mutual benefit associations also grew 21.2 percent to reach P7.93 billion.

As a result, insurance density in the country increased to P2,053.58 per capita as of end-September from P1,768.49 per capita a year ago, while insurance penetration climbed 0.12 percentage points to 1.76 percent.