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The Philippine Insurers and Reinsurers Association (Pira) opposes the move of the Land Transportation Office (LTO) to introduce a cartel that would monopolize the issuance of third-party liability insurance to motor vehicle owners.
In an interview, Pira Chairman Michael Rellosa said insurance companies have voted overwhelmingly to take all possible legal measures to oppose the imposition of LTO’s Memorandum Circular (MC) 2015-1975.
The circular creates an entity that would administer the issuance of compulsory third-party liability (CTPL) insurance to motor vehicle owners.
Rellosa said 44 out of 55 Pira member-companies that attended the association’s special membership meeting voted to oppose the LTO’s order, and 40 of these companies expressed support for a legal action to stop the order.
“Our members recognize that the LTO does not have the legal right to regulate insurance business in anyway since such power and responsibility reside only in the Insurance Commission under the revised Insurance Code,” Rellosa said.
“It is illegal for the LTO to issue an order limiting the business of issuing CTPL insurance cover to a select number of insurance companies, and worse, appoint an administrator that virtually takes over the function of the Insurance Commission,” he said.
Meanwhile, insurance agents who sell CTPL insurance cover welcomed Pira’s decision.
Salvador Navidad, president of the Bukluran ng mga Manggagawa sa Industriya ng Seguro (BMIS), said Pira’s move gave them hope in their fight against the LTO’s cartelized monopoly. BMIS has filed a motion for a temporary restraining order to stop the LTO’s order.
The group said, “It is also immoral for the LTO to take away our role as legitimate insurance agents and deprive us of a legitimate livelihood.”
“For the record, we do not sell fake CTPL insurance cover. If the LTO insists that such a thing exists, then we challenge them to prove it. Irregularities exist in the LTO only because unscrupulous LTO officials are involved,” the group added.
BMIS also stressed that LTO’s MC 2015-1975 is “a way for the agency to institutionalize corruption in the LTO. This virtually creates a cartel of insurance companies that would monopolize the CTPL insurance business and benefit only the corrupt officials of the LTO.”
“If the LTO is truly sincere in improving CTPL insurance, it should instead explore interagency cooperation and not impose a system that was arrived at without consultation with the Insurance Commission, the Bureau of Internal Revenue, and private insurers,” the group said.
The chairman of the Philippine Insurers and Reinsurers Association (Pira) was unanimously chosen to head the Asean Insurance Council (AIC) during the 41st AIC Meeting in Phnom Penh, Cambodia , last week.
Michael F. Rellosa, 54, and president of Fortune General Insurance, succeeded Mr. Chua Seck Guan, chairman of the Persatuan Insurans Am Malaysia or the General Insurance Association of Malaysia. He would serve a term of one year.
On top of being the new AIC head, Rellosa also chairs the AIC’s Education Committee, a post he has held since last year.
Rellosa said the AIC is facing major challenges as the region enters the period of economic integration. He expressed concern over the growing risks from climate change which he believes must be addressed by the AIC as a united front.
“The need to unite and collaborate with each other is felt now more than in any point of AIC’s history. It is my goal to see a more active collaboration among all of us in the region,” he said.
Asean becomes a single economy by January 2016, creating a region with a population of over 600 million and a combined GDP of $2.4 trillion.
Rellosa said there are still significant work to be done to fully integrate the insurance business in all of Asean.
Yet, he believes the need to integrate has taken on a greater urgency now.
“Cities are expanding and people are prospering. We have more at stake—more at stake not just in each other’s success, but also in each other’s failure,” he said.
Rellosa noted that the region is very vulnerable to natural catastrophes. Extreme weather conditions are not only a bane of agriculture, which remains a major economic activity in Asean, but can also be severely disruptive to global manufacturing and supply chains that keep the region’s factories humming.
“In the past four years alone, we have witnessed three major catastrophes—the Tohoku earthquake and tsunami in Japan, floods in Thailand, and the Supertyphoon Yolanda in our country. Economic losses resulting from these natural catastrophes have been a severe financial strain,” he said.
He said these natural catastrophes should be enough reason for insurers in the region to work hand in hand in promoting insurance to their respective countries.
“We have realized that we have more similarities than differences, that the problems confronting insurers in countries like the Philippines are the same problems confronting those in Cambodia or Vietnam,” he said.
One major challenge the AIC will address under Rellosa’s leadership is the low penetration rate of insurance in the region which, as studies show, is due to the lack of knowledge and appreciation of people on the importance of insurance.
“There is a need to educate people about the value of insurance and that need is true not only for the Philippines but in all Asean member-countries. And that is what we will prioritize this coming year,” he said.