The government needs to streamline its regulations if it wants the insurance industry to grow and be at par with those in more advanced countries in the region.
In a public consultation organized by the Development Academy of the Philippines (DAP), Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA) said the insurance industry is already faced with a myriad of challenges, and the biggest challenge of all is the overlapping regulations that insurance companies have to comply with.
“We have to work out a system where the various regulators agree on certain rules that would eliminate overlaps, redundances and duplication of reportorial requirements. We also need a system that would promote a common understanding and acceptance of definitions, formulas and concepts,” Mr. Rellosa said.
Serving as a research fellow for DAP’s Modernizing Government Regulations project for the insurance industry, Mr. Rellosa facilitated stakeholders consultations and industry dialogues in Metro Manila, Davao and Cebu in October 2019.
These dialogues aim to review existing regulations to streamline unnecessary rules and compliance cost. They advocate the adoption of Good Regulatory Practice and provides capacity-building trainings to government regulators on tools that promote effective regulatory-making process and review.
From these consultations and dialogues, Mr. Rellosa was able to gather insights from various industry stakeholders on the issues and problems they encounter relative to government regulations.
“Our industry is one of the most regulated industries with a huge number of regulators, thus resulting to conflicting or redundant reportorial requirements, compliance issues, confusing bureaucracy and stiffled industry growth,” Mr. Rellosa said.
The insurance industry’s main regulator is the Insurance Commission (IC), which, according to the research is composed by new officers with a relatively short experience in the industry and a limited understanding of the concepts and principles of insurance.
These same officers even have new responsibilities as insurance-like industries such as Health Maintenance Organizations (HMOs), pre-need companies and Mutual Benefit Associations (MBAs) have been put under their watch.
As if being regulated by the IC is not enough, insurance companies also report to the Securities and Exchange Commission, the Bureau of Internal Revenue, the Anti-Money Laundering Council. the Data Privacy Commission, the Local Government Units, the Supreme Court, the Department of Public Works and Highways, the Anti-Competition Commission, and the Bureau of Fire.
Further complicating the situation is the fact that insurance companies are hard pressed to comply with the minimum capitalization requirement of P1.3 billion by 2022 as well as the International Financial Reporting Standards (IFRS) 17 also by the same year.
On top of all these, insurance companies have to contend with a lackluster investment climate, the low premiums caused by cut-throat competition, and the increasing number of natural and man-made catastrophes.
“We really have to review and streamline regulations in order to help the industry hurdle these challenges. Regulations are there to provide order and ensure protection to the insuring public. But they should also promote growth and a sense of service to those being regulated. If not, these regulations will feel more like a noose threatening to strangle the industry,” Mr. Rellosa said.