Insurance firms cry foul over new LTO anomaly

Insurance companies operating at the Land Transportation Office (LTO) said the process for the authentication of the certificates of coverage (COCs) being issued to cars registered and issued the compulsory third party liability (CTPL) has failed to detect and prevent the practice they know as “COC switching.”

Insurance companies servicing the CTPL insurance business at the LTO said COC switching takes place despite the authentication of CTPL certificates being conducted by LTO’s IT provider, Stradcom Corp.

Sources in the Philippine Insurance and Reinsurance Association (PIRA), which has 80 member-insurance companies operating at the LTO, said COC switching deprives the government – particularly the Bureau of Internal Revenue – of money since insurance firms pay the BIR 24 percent of the CTPL insurance premium they collect.

In COC switching, certificates that are for tricycles or motorcycles are issued to private cars while certificates for private cars are issued to public utility vehicles, enabling unscrupulous insurance agents to cheat on the insurance premium they have to pay according to the type of vehicle being registered.

Sources said the continued occurrence of COC switching could be attributed to absence of vehicle classification during the authentication process laid out by Stradcom.

PIRA earlier complained of the higher interconnection fee charged by Stradcom since it took over as authentication and interconnectivity provider in the CTPL issuance process at the LTO starting last July.

From the P26 charged by the previous provider, Stradcom increased the fee to P45, not including the value-added tax charged for the transaction.

It was learned that Stradcom was tapped to provide the authentication service by the Department of Transportation and Communications upon the laps of the previous provider, D-TEC.

It is estimated that there are about six million motor vehicles registered with the LTO each year. At an average tax of P100 per motor vehicle supposed to be paid to the government, the BIR should be collecting around P600 million from the CTPL insurance premiums.