Non-life insurers said regulators should review the relevance of the country’s insurance tariff rates, especially now as free trade and globalization increase competition for the local sector.
During the 13th General Insurance Summit held last week in Makati, the Philippine Insurers and Reinsurers Association (PIRA) said that it is high time for the Insurance Commission (IC) to take a look into tariff rates and why non-life insurers are having difficulty following them.
PIRA Vice Chairman Michael Rellosa revealed that in 2015, the non-life insurance industry paid P21 million in fines for tariff breaches.
“For outsiders, it is easy to think that we are probably earning so much by breaching tariff rates that we do not mind paying 21 million in fines,” he said.
“But no. On the contrary, the tariffs we breached were not price ceilings but floor rates. We were charging rates below those prescribed by the tariff. In effect, we paid fines for giving our clients low rates,” he added.
The PIRA official urged the IC to consider the tariff in relation to the steadily developing Association of Southeast Asian Nations (Asean) economic integration.
The IC is requiring insurers to increase capital from P250 million in 2015 to P550 million by the end of 2016, a directive that is feared will reduce the number of industry players from 70 as of the end of 2015 to an estimated 50 by the start of 2017.
Rellosa, who is the present chairman of the Asean Insurance Council, said the economic integration is the reason why the government made insurance companies raise more capital than they could actually use at the moment.
“The increased capital is meant to promote stability and level the playing field in the industry. The ultimate objective is to make companies competitive. But how could we reconcile this with a tariff regime where we are not given enough leeway to have competitive rates?” he asked.