WE ALLOW financial institutions to handle our money (a) because they provide services that we need and (b) because we trust them – or at least we trust them more than the alternatives.

Underpinning our trust and confidence are various regulatory bodies: Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC), Securities and Exchange Commission (SEC).

"The Manny Pacquiao Blog". Click here for stories and updates on the Filipino boxing champ.

If the worst thing does happen and our bank goes bankrupt, then we have the Philippine Deposit Insurance Corporation (PDIC), which theoretically, pays up to P500, 000.Theoretically. The problem is that PDIC only has few billion, not nearly enough to cope with any significant bank’s woes.

* * *

The insurance sector is the arena that causes the most concern. Now that the government no longer distinguishes between pre-need and mainstream insurance, then neither do we.

There have been so many who have been cheated that they form groups whose purpose is to retrieve funds, and, if possible, prosecute the owners. Six months ago a coalition of plan holders called Parents Enabling Parents (PEP) gained publicity when it was found that the company that cheated them, Phil-Asia Care Plans Inc, had sold over 100,000 plans nationwide but that only 4,500 plans were registered with SEC. Selling the plan, taking the client’s money, then not issuing proper documentation is the standard modus operandi of the shady sectors of the insurance industry.

Closing the door long after the horse has bolted, the SEC halted Phil-Asia’s sale of plans to the public and filed criminal cases against it and Vicente Aflugencia Sr. before the Mandaluyong Regional Trial Court for violation of the Securities Regulation Code.

The problem of most insurance policies is that the policy holder is obligated to pay the monthly contributions promptly. When there are rumors that not all is well with the insurance company, then the policy holder has a dilemma.

If he stops making the payments, then the terms of the policy are usually punitive and he will lose badly. If he continues to make payments, and the company has failed, then again the policy holder loses badly.

It is this backdrop which causes many, understandably, to be extremely cautious about committing to insurance policies.

* * *

Generally, financial institutions, in terms of their relationship with customers, behave as though they call the shots. In some senses this is acceptable, after all they have spent much time and effort in developing systems and procedures which work most of the time. Most of the time. It is when the systems and/or the procedures may have not worked properly that we separate the sheep from the goat. On these occasions, does the financial institution react as though it is still in control or does it recognize that there is a possibility that there is a problem?

Worse still, if there is a disagreement between the financial institution and its customer/client, does the institution persist in occupying the high ground (“the customer is always wrong”)? Or does it recognize that there could, indeed, be a problem (“the customer may not be wrong”).

It is time we started treating banks and insurance companies as if they were individuals subject to laws that govern social behavior. If they misbehave and misbehave chronically, then we need to take them to an external forum to expose, if appropriate, their wrongdoings. In the Philippines we have the barangay court system which is a cheap and often cheerful mechanism by which wrongs can be righted. The financial institution tends to be surprised at being put in a situation where both itself and its customer is subject to a higher authority – it is used to being judge and jury presiding over its own inadequacies.

We salute the Money Market Association of the Philippines which states, Section x of its code of practice. “Handling customer complaints. Any formal complaints must be brought to the attention of management and/or compliance unit. A formal complaint is defined as any complaint whether received in writing or verbally which calls for immediate escalation to be handled by the proper officer or unit. Any breach of market practice or etiquette must be treated as a formal complaint and the proper officer or unit should be informed of this immediately.” We wish banks and insurance companies would do the same.

* * *

Representative Narciso Santiago III, a party–list lawmaker is pushing for the use of plain and simple language in preparing health insurance documents to enhance citizen awareness of insurance information and services. We agree. In fact, we would like to see this extended to all forms of insurance coverage. We would also like to see the documents prepared so that there is no doubt as to the interpretation of the word used. For example, what does “account value” mean in the context of a life insurance policy?

What do you think it means, Trevor?

Does it mean whatever your company decides it means? Or can we establish a better relationship between the insurer and the insured so that there are no disputes?

* * *

Since the AIG debacle of September 2008, the Asian subsidiaries have been on the market on several occasions. A failed attempt was made to sell Philamlife in September 2008, as was a second failed attempt in March 2009.

On neither occasion was there even close agreement on price between buyer and seller. On the March 2009 occasion, GSIS was a serious prospective buyer. But, according to Winston Garcia, his people were not given the time or opportunity to properly carry out due diligence. Since Philamlife does not enjoy an unblemished reputation here, then this will adversely affect its selling price.

Now, the British insurance giant, Prudential is negotiating to buy the Asian arm of AIG including Philamlife for a mind-boggling $35.5b.

We hope the bid is successful if it means greater stability.