Insurance in the Philippines: Protected by Law, Secured by Choice
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A. The Legal Framework
The Insurance Commission, which is under the Department of Finance (“DOF”), is the government agency in the Philippines that supervises and regulates insurance, pre-need, and health maintenance organization industries in accordance with Republic Act Nos. 10607 and 9829, and Executive Order No. 192, series of 2015.
No, the responsibility for ensuring that all laws related to insurance, insurance companies, and other insurance matters are properly enforced and rest solely with the Insurance Commissioner.1 The Insurance Commissioner also possesses the authority to issue regulations, instructions, circulars, orders, and decisions that may be deemed necessary to enforce the provisions of the Insurance Code, ensure that the insurance industry is efficiently regulated in line with global best practices, and protect the insuring public. 2
In the Philippines, the Insurance Code is the main source of law for contracts of insurance. Other special laws on insurance matters include the following:
- The Pre-Need Code of the Philippines, or Republic Act. No. 9829;
- The Revised Government Service Insurance Act of 1977, or Presidential Decree No. 1146, as amended;
- The Social Security Act of 2018, or Republic Act No. 11199;
- The Property Insurance Law, or Republic Act No. 656; and
- Republic Act No. 3591 which created the Philippine Deposit Insurance Corporation.
Matters not provided for in the Insurance Code and other special laws are regulated by the New Civil Code.
Besides, although it is not a law on insurance, the Revised Corporation Code also governs all insurance corporations insofar as it does not conflict with the Insurance Code.
Insurers who are found to be in an unsound condition or have failed to comply with insurance regulations can have their certificate of authority suspended or revoked. If the insurer unreasonably denies or withholds the payment of the claim of the insured, the insurer can also be made to pay damages which shall consist of attorney’s fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured until the claim is fully satisfied.
In addition to the above-mentioned sanctions, the Insurance Commissioner may impose fines upon insurance companies, their directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of any provision of the Insurance Code, or any order, instruction, regulation, or ruling of the Insurance Commissioner, or any commission or irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner.
Any company that violates any provision of the Insurance Code for which no penalty is provided shall be deemed guilty of a penal offense. The court may, at its discretion, impose fines or imprisonment of the officers, directors, or other persons responsible for its operation, management, or administration.
B. Insurance Companies
No insurer is allowed to engage in the insurance business without a certificate of authority from the Insurance Commission. A list of all insurance companies with valid and existing certificates of authority can be found on the official website of the Insurance Commission. The following are the types of insurance companies present in the Philippines:
- Insurance Brokers
- Reinsurance Brokers
- Insurance Brokers
- Reinsurance Brokers
- Life Insurance Companies
- Non-Life Insurance Companies
- Reinsurance Companies
Yes, foreign companies may apply to operate in the Philippines.
Under the Insurance Code, the Insurance Commissioner may, as a pre-licensing requirement of a new branch office of a foreign insurance company, in addition to the required asset or net worth, require the company to have an additional surplus fund in an amount to be determined by the Insurance Commission.
Department Order No. 15-2012 of the Department of Finance states that in the case of a new branch office of a foreign insurance company, the branch office must have total security deposits at least equal to the minimum paid-up capital required for domestic insurance companies.
No. The Insurance Company used to limit foreign ownership in adjustment companies, but Republic Act No. 10881 has since amended the Insurance Code to allow 100% foreign ownership.
C. The Insurance Contract
An insurable interest can refer to life and health or property. Every interest in the property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest. It must be susceptible to pecuniary estimation.
As defined under Philippine law, a contract of insurance is an agreement whereby one undertakes a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.3 Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against. 4
The insurer and the insured must deal with each other with utmost good faith. Each party to a contract of insurance must communicate to the other all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no any means of ascertaining. 5 Concealment entitles the injured party to rescind a contract of insurance. 6
The Insurance Commission has issued Insurance Memorandum Circular No. 2023-01 implementing Republic Act No. 11765 or the “Financial Products and Services Consumer Protection Act”. Insurers must ensure that the following consumer rights are protected:
- Right to fair and equitable treatment;
- Right to disclosure and transparency of financial products and services;
- Right to privacy and protection of client data;
- Right to protection of consumer assets against fraud and misuse; and
- Right to timely handling and redress of complaints.
D. Claims
Should the insured suffer any damage covered by their insurance policy, they will be entitled to make an insurance claim. To claim losses, the insured must send a notice to the insurer and in some cases, proof of loss. The insurer will then assess the claim and evaluate whether or not to accept it.
Claims can be denied if the claim is outside the coverage of the insurance policy or if there was any breach of contract by the insured. The Insurance Code aims to protect policyholders from unfair claim settlement practices. Under the Insurance Code, no insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices.
The Philippines has Compulsory Third Party Liability Insurance (“CTPLI”), which is a type of motor vehicle insurance. A victim of a motor vehicle accident can claim payment by presenting to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. The notice of claim must be filed within six (6) months from the date of the accident. 7
Claims can be denied if the claim is outside the coverage of the insurance policy or if there was any breach of contract by the insured. The Insurance Code aims to protect policyholders from unfair claim settlement practices. Under the Insurance Code, no insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices.8
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As a proud member of the Alliot Global Alliance, ADCO Law has released our first set of Insurance Comparative Guidelines. Our guidelines consist of an extensive examination of three different jurisdictions: Indonesia, the Philippines, and Japan.
From the types of insurance companies available and legal frameworks to the regulations that govern insurance contracts and claims, we want to provide valuable insight into how different approaches to insurance regulation can impact businesses and the overall economic landscape.
The Authors:
Michael Marlowe Uy
Partner, SKY Law
[email protected]
Ma. Elaine E. Marcilla
Mid-Level Associate, SKY Law
[email protected]
Disclaimer: The following article is intended for general informational purposes only and should not be interpreted as legal advice by ADCO Law, SKY Law, and Spring Partners, proud members of the Alliott Global Alliance (AGA). The viewpoints expressed herein do not represent the official legal stance of any of these firms. Consequently, the firms cannot be held accountable for any actions taken by individuals who use this article for purposes other than those for which it is intended.
For more information about AGA, please visit https://www.alliottglobal.com/
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