Insurance Commission lauds court ruling vs credit bureau submission

MANILA, Philippines — The Insurance Commission (IC) has welcomed the ruling of the Makati Regional Trial Court (RTC), which nullifies an order requiring insurance firms to report the policy information of their customers to the Credit Information Corp. (CIC).

Acting on a Petition for Declaratory Relief filed by the Philippine Life Insurance Association Inc. (PLIA), the Makati RTC Branch 56 nullified CIC Circular Letter No. 2017-04 requiring insurers to submit the premium payments, insurance contracts and policy loans of their clients. 

Insurance commissioner Dennis Funa said the decision affirms the position of the IC that insurance contracts, premium payments and policy loans should not be considered as basic credit data.

“The decision of the Makati RTC supports our stance that policy loans should not be treated as reportable credit transactions under the Credit Information System Act (CISA),” Funa said.

According to Funa, the IC has tried to convince the CIC before that policy loans, as one of the benefits of an insurance contract, are not credit data that should be reported under the law.

“However, all our arguments have fallen on deaf ears. The CIC dismissed all our arguments by simply invoking that the same are bereft of probative value in relation to the coverage of the CISA. It was at this instance that the PLIA was forced to elevate the issue before the court,” the insurance chief said.

In its decision dated Jan. 4, 2019, Makati RTC Branch 56 declared that premium payments, insurance contracts and policy loans are not within the ambit of basic credit data required to be submitted under Republic Act No. 9510 or the CISA as it does not pertain to a borrower’s performance on a loan, credit line, guarantee or any other form of financial accommodation.

The court said that for an information to constitute as basic credit data required to be submitted to the CIC, the information must be either positive credit information or negative credit information.

“For this reason, it is apparent that for information to be submitted to the respondent, the basic credit data must be either positive or negative. This is an unconditional prerequisite of the law, as the objective of RA 9150 is to create a credit information system that will directly address the need for reliable credit information concerning the credit standing and track records of borrowers,” the court said.

The court also noted the arguments of PLIA that policy loans, premium payments and insurance contracts do not reflect the insured’s credit worthiness.

“As stated by PLIA, ‘taking out a policy loan may or may not reflect a need for cash by the policyholder. Availing of the same is the sole option of the policyholder as it is a benefit feature of the insurance policy granted to him by law. He may use it any which way and whenever he wants to. That is not an indication of risky behavior. On the contrary, the policyholder may use the same so that he does not need to apply for a loan from somebody else. He may even just invest it to allow higher yields,’” the court decision read.

Makati RTC likewise refuted CIC’s argument that the submission of policy loans, premium payments, and insurance contracts does not constitute violation of the Data Privacy Act as it expressly excluded from its coverage.