IC forming groups to curb corruption, collect taxes

The Insurance Commission (IC) is encouraging reputable non-life insurance companies to form consortiums that would professionalize the so-called socially-legislated insurance sector.

Socially-legislated non-life insurance products include the comprehensive third-party liability (CTPL) in automobile registration, the comprehensive general liability coverage (CGLC) for public transportation, customs bonds, judicial bonds, bail bonds, and the like.

The complex nature of socially-legislated products require the cooperation of several government agencies and its line counterparts.

"It is a dirty and messy business resulting in huge revenue losses to the government while leaving the general public unprotected," Benjamin S. Santos, IC commissioner said.

In general terms, the consortium of reputable non-life insurers ensures the issuance of legitimate policies for the protection of the riding public.

There will be an independent body separate from the consortium issuing the certificate of convenience (COC), accept the premium, and pay the appropriate taxes with the Bureau of Internal Revenue (BIR), and report to the IC.

The idea of forming consortiums grew out of tendencies of good insurers to stay away from the socially-legislated areas.

"There are a lot of good insurance companies, but some of them only serve their own parochial interests, family interests, and related business. The insurance industry is not a mom-and-pop industry. It should be serving the public!" Santos complained.

Other players avoid these areas due to the disarray, confusion and corruption coupled with the refusal of other government agencies to cooperate.

Earlier studies show that there are 4.4 million registered vehicles with the Land Transportation Office (LTO). The same studies also indicate that more than half of the premiums collected never find its way to the books of the insurance company.

The Bureau of Customs (BOC) lamented customs bonded warehouse accumulated debts amounting to P5.5 billion. The bureau filed a case against the insurance companies issuing customs bonds but nothing has happened. There are also reports that the accumulated debts of judicial and bail bonds have reached at least P400 million.

"Thus the government was deprived of a huge amount of money from non-tax payment as well as no insurance for the public. That is one of the biggest scam that has not been reported while billions of pesos are lost year in and year out," the commissioner lamented.

The consortium can correct these situation accompanied with further dialogue and cooperation between government agencies.

"With the consortiums, we could have the muscle to enforce the laws.We could select the best consortium, we could set the correct and fair rates, and we could formulate and approve the proper forms," Santos said. "We will select the best information technology (IT) company that will be a bond and information exchange that will allow government to know how much was cleared, how much was collected, and what claims were filed. We have to employ technology and the private sector."

The consortiums will likewise solve the problem of huge insurance coverage. It can pool organic or self-generated funds. It could tap the domestic or overseas reinsurers to ensure the ability to pay all kinds of claims, and go after huge and expensive markets.

It could serve as the embryo for further concolidation of the non-life insurance industry.

Entering 2005, the industry was an obese 104 players which was swiftly reduced to 96. The IC suspended or withdrew the certificates of authority (CA) to operate to players that were under capitalized, found consistently guilty of violations, or failed to pay claims.

Like its richer cousing, the banking industry, the insurance industry is encouraging players in both the life and non-life industry to consolidate to remain competitive in the face on the entry of richly-capitalized and more professional foreign players.