Press Release
February 4, 2013

Amendments to 38-year old Insurance Code get Senate approval

The Senate today approved on third and final reading a bill amending the Insurance Code of the Philippines to regulate and supervise the insurance industry in the country.

Sen. Serge Osmeña, chairman of the Senate Committee on Banks, Financial Institutions and Currencies and sponsor of Senate Bill No. 3280, stressed the need to introduce amendments to the 38-year-old Insurance Code to make it "relevant to the changes that have transpired in the industry but also, in anticipation of future transformation that it is bound to undergo considering the growing sophistication of industries across the globe."

Increased product diversity, sophistication in the sales' and clients' servicing practices, expansion of investment instruments and opportunities, evolving requirements of the industry, diversification of distribution channels to the insuring public and the need for improved and expanded protectionist provisions in the Insurance Code are some of the major changes in the industry mentioned by Osmeña in his sponsorship speech.

"Amendments will have to be flexibly constructed to enable at pace alignment with the continuously evolving financial markets, maturing compliance standards and practices, strengthening government processes and developing insurance accounting standards," according to Osmeña.

"Amendments would create a more relevant and nurturing operation framework for the industry, he added."

Regulatory amendments introduced in the 38-year old Insurance Code are the recognition of processes that use advancements in technology, provision for fair protection to insurers from fraud and discriminatory mechanisms, redefinition of solvency regime to conform with internationally-accepted standards, institution of changes in company and agent licensing process, grant of a fixed six-year term and strengthening the powers of the insurance commissioner and addition of new titles and related provisions on micro-insurance and bank assurance.

Once the bill is passed into law, policy holder interest promoting amendments like allowing government employees to acquire insurance by payment of premiums through salary deductions have also been allowed.

Other amendments promoting the interest of the policy holder includes the increased amount of exemption from court authority or judicial bond requirements in the parent's exercise of minor's rights under the policy and the adjudication of contested claims cases at the insurance commission level.

Investment instruments that were not in existence in the Insurance Code have also been included in the list of admissible assets under the proposed legislation that would have a "positive impact in the network of insurers."

Moreover, a financial reporting framework which adopts internationally-accepted accounting standards in the reporting of the financial condition of insurers had been added as accounting-related amendment.

"This would close the gap in the valuation of admitted assets, reserves and investments between the statutory accounting standards under the annual statement required by the Insurance Commission against the externally audited financial statement," Osmeña said.

"The adoption of these amendments would create a more relevant and nurturing operation framework for the industry. We need to support this industry which has become an active partner in the national development through significant investments in government bonds and securities as well as various government infrastructure and socio-development programs," Osmeña said.

Senate Bill No. 3280 is a consolidation of bills filed by Senators Edgardo Angara, Antonio Trillanes IV, Jinggoy Ejercito Estrada, Ramon Revilla Jr., Miriam Defensor Santiago and Manny Villar, taking into consideration House Bill No. 4867 introduced by Representatives Juan Edgardo Angara, Erminilando Mandanas, Sergio Apostol, Guillermo Romarate and Teodorico Haresco. (APPLE BUENAVENTURA, PRIB)

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