Authentication automation via improved competition

Vehicle owners in general are required each year to obtain a Compulsory Third Party Liability (CTPL) insurance to cover them from vehicular accidents resulting in third party body injury. By third party, this refers to people who might be injured in accidents such as pedestrians, vehicle passengers as well as the counter-party vehicle’s passengers. The processing of CTPLs is required to obtain a Certificate of Cover (CoC) Policy, which will then be forwarded to the Land Transportation Office (LTO) as requirement to complete vehicle registration. No alternative product in the market exists for CTPLs, and since issuance is mandatory, the captured market size and data integration have been topics of debate by those involved in the industry.

Securing the policy is not very taxing on the part of the end-user. Vehicle owners can procure these policies from legitimate insurance firms, and policies are relatively simple to issue. Similarly structured like any other policies (e.g., comprehensive motor car package), these are typically sold based on “agreed catalogued prices,” depending on vehicle type, among other considerations. Variances relative to premium payments would only be on coverage amount, or what we often refer to as “sum assured.”

Annually, these policies expire and preferences are typically considered “generic” for users. However, there are vehicle owners who have long-standing relations due to good customer service with an insurance or brokerage firm, which usually make it convenient processing renewal requests. These brokers, especially those equipped with Web-based platforms, handle registration from start to finish for a considerable fee, relieving clients of the hassle of queuing through LTO’s processing windows. Unfortunately, there were some who may have succumbed to fake policy issuances and CoCs, possibly due to some motorists’ dismay for the long registration route. Because “unauthorized franchising” exists, there may have been motorists who obtained CTPLs via “illegal channels,” leading to wasted premiums and even lost taxes. Other brokers who pretend to have “legal basis” may have also engaged in the anomalous practice of issuing inappropriate policies, or those that do not match the actual vehicle units.

In my view, a “regulating party” should have a distinct and separate role relative to counter-checking proposals for an online “authentication database.” Banking on the principle of laissez faire, insurance is within the “servicing circle” that should be properly left to private hands. As such, authorities might consider setting a technological framework that would comply with defined protocols, with the intention of passing the inputs through a “clearing facility” to re-authenticate the process. Such a scheme would help ensure proper check and balance from industry participants, avoiding issuances of wrong CTPLs. If this framework is supported, members could readily identify specific pricing components that would be transparent to end-users. 

In the final run, the motoring public benefits most through competition, as private service providers will be compelled to provide higher value advantage to consumers. Competitive markets have a way of further reducing prices without necessarily affecting service quality, as CTPL benefits could be readily bundled with additional coverage for consumers’ protection against other perils. Simply put, consumers need to be adequately informed on risk-reward benefits over and above their CTPL availment.

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Joey Gajasan is the finance manager of 2insureall.com. For queries, e-mail at [email protected].