Questionable mandatory insurance

CITING the need to mitigate the risks associated with natural calamities, the Insurance Commission recently proposed the issuance of an executive order by President Aquino that will require owners of private dwellings and small and medium enterprises to get insurance coverage for their properties.

The order aims to create a mandatory national catastrophe insurance pool that will protect homeowners and entrepreneurs from the adverse effects of typhoons, earthquakes, fires and floods induced by typhoons.

Insurance Commissioner Emmanuel Dooc said that although he would love to get congressional approval for this project, he doubts if he can secure it considering the proximity of the 2016 elections, so he will settle for an executive order.

The proposal is an initiative of the Philippine Insurers and Reinsurers Association, an organization of the country’s non-life insurance companies, and is reportedly supported by the World Bank and International Finance Corp.

The details of the plan are still being finalized, but this early, it is doubtful if it will even get to first base in Malacañang because of its legal infirmities and adverse financial implications on the affected parties.

Reputation

Sad but true, the insurance industry in our country does not enjoy a good reputation.

It’s bad enough that Filipinos are averse to making contingency plans for death, injuries and other emergencies, the conduct of some insurance companies has aggravated that attitude.

Except for a handful, insurance companies are looked at by the public as good only at collecting premiums but are nowhere to be found or difficult to deal with when indemnity claims are made.

Stories are legion about adjusters (or investigators sent by insurance companies) who require the submission of voluminous documents before they process the claims, or otherwise make it difficult for claimants to get the payments due them.

It is not uncommon for claimants to grudgingly agree to accept lower payments at the urging of the adjuster to expedite the processing of their claims.

If the claimant complains to the insurance company about the adjuster’s actions or the delay in the processing of their claims, the company’s usual response is, it’s part of their internal procedures or their reinsurers insist that certain processes be strictly followed.

Obligation

Running to the IC for relief is not a viable option in case the insurance company gives the claimant the runaround or the employee supposedly in charge of processing the claim is perennially unavailable for one reason or another.

The IC will simply endorse the matter to the insurance company for “comments and appropriate action.”

The claimant can only keep his fingers crossed that something favorable will come out of that referral.

This what-do-we-care attitude is expected to rear its ugly head, and may even worsen, if IC’s compulsory insurance scheme pushes through.

The “third party liability” insurance that car owners are required to secure before their motor vehicles can be registered or their registration renewed is illustrative of this point.

Getting the insurance company to make good its obligation under this coverage is a touch and go affair.

If the insurance policy was issued by a company that had a desk at the Land Transportation Office (LTO) branch concerned, chances are the company is fly-by-night and the only reason its policy is honored by LTO is because its officials are in cahoots with the bogus company.

Don’t even try calling the telephone number indicated in the policy because they are fake.

And even if the insurance company were legitimate, the claimant will still have to go through the proverbial eye of a needle to be able to claim the benefits of third party liability.

Worse, he will be made to feel he is being given a big favor in processing his claim.

Consequences

By saying that the mandatory insurance pool can be created without the benefit of legislation, Dooc is giving the impression that the matter is a simple commercial issue that the president can address by the mere expedient of an executive order.

It’s more than that. The mandatory insurance project touches on a person’s right to administer his properties or conduct his business affairs in the manner he sees fit.

In IC’s scheme, the property owner is being ordered, under pain of still undetermined sanctions, to incur additional expenses to pay for insurance that will supposedly minimize his losses in case his house or business is adversely affected by natural calamities.

The imposition of this financial obligation is beyond the authority of the president. Only Congress, after a careful deliberation of the pros and cons of the scheme and enactment of the appropriate law, can authorize such action.

Aside from the legal angle, IC seemed to have overlooked the financial impact of its mandatory insurance proposal to its targeted parties. The insurance premiums represent additional expenses to the person who wants to build his own house or put up a business.

If the intention of the insurance pool is to provide protection from natural calamities, that expense will have to be incurred for as long as the house or the business is intact or in operation.

The compulsory insurance coverage runs counter to the government’s oft-repeated campaign to ease the way of doing business in our country.

It is ironic that, on the one hand, the government is giving incentives for our people to acquire or build their own homes, or engage in meaningful business activities, and, on the other, IC wants to put financial roadblocks to that objective.

IC cannot be faulted for trying to drum up business for insurance companies but it should not be done at the expense of the general public.

(For comments, please send your e-mail to [email protected].)