Payment of insurance death claims

For cultural reasons, many Filipinos are averse to getting life insurance for themselves or their loved ones.

Talking about death or making preparations for the coming of the Grim Reaper, unless clearly inevitable, is considered taboo for discussion in the family circle. If at all, it is done in whispers.

To aggravate matters, life insurance companies in the country are not known for the prompt payment of death claims.

With the exception of a few, these companies are quick to send demand letters for delayed instalment payments with threats of immediate cancellation of policies, but are bureaucratic and legalistic in the processing and payment of death claims when the policy matures or the insured passes away.

This explains the low ranking of the Philippines in the Asean region in terms of take up of life insurance and, because of that, the anemic participation of insurance companies in the domestic stock and bond markets.

The issue of delay in the payment of death claims was recently addressed by the Insurance Commission (IC) through Circular Letter 2018-63, dated Dec. 11.

The IC ordered all life insurance companies “to immediately release the proceeds of the life insurance to the beneficiaries within sixty (60) days after presentation of the claim and filing of the proof of death of the insured.”

This directive is consistent with the provision of Republic Act No. 10607, which was enacted in August 2013, to immediately make such payment upon the claimants’ compliance with the abovementioned requirements.

If the insurance company refuses or fails to pay the claim within that period, the beneficiary shall be entitled to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board.

The refusal or payment of the death claim, however, may be justified if it is based on the ground the claim is fraudulent.

The law further states that “the proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounting value of all premiums paid in advance of their due dates, but are not due and payable at maturity.”

The objective of the law is clear: Make the beneficiary enjoy the benefits of the insurance policy taken by the insured within 60 days and at the best terms possible.

Noticeably, despite the fact that this law has been in effect since 2013, it is only now that the IC is enforcing the 60-day payment period for death claims.

Until Circular Letter 2018-63 was issued, the IC followed the guidelines on the payment of death claims stated in a 1958—repeat, 1958 or 60 years ago—circular it issued upon the instructions of the Bureau of Internal Revenue (BIR), which made the payment dependent on whether the designation of the beneficiaries was irrevocable or revocable, or the proceeds were to be given directly to the named beneficiaries or the estate of the deceased.

It is a puzzler that the past IC commissioners overlooked and failed to implement the 60-day period payment requirement that took effect three years ago.

To use street language, those officials were probably “natutulog sa pansitan” (idiom for missed out on an opportunity) during the past years.

We can only imagine the number of claimants who suffered delays in the processing of their claims because of the negligence (or incompetence) of the government officials tasked with supervising the insurance industry.

It is futile to raise the argument that the BIR is partly to blame for the belated enforcement of the prescribed payment period.

As principal regulator of the insurance industry, it is the IC’s responsibility, not the BIR’s, to make sure the interests of the insured persons and their beneficiaries are protected.

Better late than never. The latest IC circular may, if strictly complied with by life insurance companies, improve their public image.

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