Tuesday, July 10, 2007 Proposal to raise insurance rates to hurt clients; IC stays mum
CLIENTS of some insurance and re-insurance companies that offer low premium rates are bound to be affected with the proposal of the Insurance Commission (IC) to increase insurance rates for any damage brought about by earthquakes.
This is because the IC wants the standard rate of 0.1 percent increased to 0.15 percent for insuring homes and other properties.
So, in order for some insurance and re-insurance companies to continue their operations, some of those that offer low premium rates to lure a broad market need to impose higher premium rates to their clients to follow IC’s imposed minimum rate.
Victorio Valledor, Lockton president and chief operating executive, also noted that the IC came up with the circular in such short notice.
Insurance firms that will charge lower will be deemed to have violated the circular.
Benefit
“If there is somebody who’s going to support the charges that we want, (we want what’s) good for the client. Why overcharge the client if it’s for their benefit” Valledor said.
He added that because of this, the insuring public is now being deprived of the opportunity to enjoy a rate lower than 0.15 percent, which is ironic to the IC’s purpose of protecting the interest of the insuring public.
No answer
Sun.Star Cebu emailed Evangeline Crisostomo-Esco-billo, IC commissioner to react on the issue, but the response did not answer the questions raised.
However, Valledor said the IC’s reason for mandating the increase is to make sure insurance companies will not go bankrupt and the interest of the insuring public will be protected.
Valledor said that there used to be the same price control mechanism years ago, but “by consent of all parties, we did away with the tariff. That was not because of a court decision or anything, but the regulator and the regulatee positively agreed to go away with the tariff,” he said.
The tariff was reintroduced starting with the recent development that the minimum rate to cover earthquakes should not be lower than 0.15 percent, which is “a wrong decision since we already did away with the tariff,” he added.
Moreover, Valledor said that only the court could decide on the matter.
He believes that the insurance code of the Philippines does not authorize the IC to control the prices in the insurance industry.
“I don’t think that is in the code,” he said. (TEP)
