IC favors CTPL clearing system

The creation of a compulsory insurance processing center corporation (CIPPC) will help eradicate fake compulsory third party liability (CTPL) policies. However, it will not disenfranchise and threathen the livelihoods of hundreds of ordinary yet legitimate insurance agents.

The Insurance Commission (IC), an agency of the Department of Finance (DOF) mandated to regulate the life, non-life and reinsurnace industry, said the CIPPC was modeled after the clearinghouse systems of the Philippine Clearing House Corp. (PCHC), the Fixed Income Securities Exchange, and the Philippine Central Depository System (PCDS).

"The CIPCC is the most fair, efficient, and effective solution to the CTPL mess.

This has been borne out of the extensive studies, objective analysis, and evaluation conducted by the Commission," Insurance Commissioner Evangeline C. Escobillo said.

The commission learned that of the number of registered motor vehicles nationwide reached 4.3 million. However, industry statistics also show that fake CTPL policies accounted for an estimated P1.2 billion in unreported insurance premiums in 2003.

This translates to billions of pesos in lost government revenues in the last five years.

In fact, it was the subject of a privilege speech by Senator Juan Ponce Enrile in October of last year.

Under the CIPCC, all agents and brokers would pay their certificate of covers through banks and the transactions would be completed in as little as five minutes due to the real-time connectivity between the banks, the CIPCC, and LTO motor vehicle registration system.Payment can be done either over-the-counter or through secure web-based electronic payment systems.

The CIPCC through the banks would automatically allocate the 40-percent reserve fund (required under Section 213 of the Insurance Code), the 24.5-percent value added tax (VAT)/documentary stamp tax (DST) for the Bureau of Internal Revenue, the tax for the local government unit concerned, the 10-percent commission for the agents, and the premium balances for the insurer.

Motor vehicle owners are required to insure their vehicles for third party liability before registering with the Land Transportation Office (LTO).

The data collated at payment would be sent and processed through the center’s clearinghouse and the IC validation center not only to ensure that the insurance policy is authentic but also to validate whether the issuing insurance company is still in good standing.

After the clearing process, the bank would issue a certificate of compliance (COC) payment slip to the agent or broker.

By the time the agent, broker, or insured presents the payment slip and motor vehicle registration papers at the LTO, the CTPL data had already been uploaded to the LTO IT system ready for retrieval for registration.

"This system would eradicate all fake CTPL policies off the streets, adhere strictly to the ‘cash and carry’ rule under Section 77 of the Insurance Code, ensure tax collection, allow agents to sell while limiting their commission rate to 10 percent as mandated by the Code, allow all licensed insurance companies to participate, ensures correct premiums collection, eradicate predatory pricing, protects the financial soundness of insurance companies, ensure prompt settlement of claims, and ensure that would be real-time monitoring and policing of insurance companies and the insurance policies being issued," Escobillo stressed. – Ted Torres