Policies on the Informal Insurance like Activities

1. DEFINING GOVERNMENT’S
POLICY ON INFORMAL
INSURANCE ACTIVITIES
Joint IC-CDA-SEC MC 01-2010
1st NSCC MBAI Convention
NSCC, Caoayan, Ilocos Sur

2. Topics
•Joint IC-CDA-SEC MC 01-2010. “Defining Government’s
Policy on Informal Insurance Activities”
•Joint IC-CDA-SEC MC 02-2010. Guidelines on the
Treatment of Funds Collected from Informal Insurance
Activities

3. One of the amendments introduced by the
amended Insurance Code is the insertion of the
word “cooperatives” in Section 190, which defines
what juridical entities may become insurers. For the
first time in Philippine insurance history,
cooperatives were statutorily recognized as being
legally capable of carrying out an insurance
business.Thus, the birth of “cooperative insurance.”

4. Joint IC-CDA-SEC MC 01-2010
WHEREAS, under the Insurance Code of the Philippines, entities
that will undertake or are undertaking insurance activities are
required to secure a Certificate of Authority from the Insurance
Commission before these entities can transact an insurance
business;
WHEREAS, under Chapter XIII of the Cooperative Code of 2008,
cooperatives registered with the Cooperative Development
Authority that are undertaking or will undertake insurance
activities are required to comply with the provisions of the
Insurance Code, including the requirement of securing a Certificate
of Authority from the Insurance Commission;

5. Joint IC-CDA-SEC MC 01-2010
WHEREAS, the members/clients of these institutions
engaged in self-insurance or informal insurance schemes
without the requisite Certificate of Authority from the
Insurance Commission are exposed to certain risks;
WHEREAS, it is of utmost importance to protect the
general public from unsafe and unsound insurance and
informal risk protection schemes;

6. Joint IC-CDA-SEC MC 01-2010
NOW THEREFORE, pursuant to the authority vested in us under
existing laws the following are hereby promulgated:
1. All entities that will engage or are engaged in insurance
activities, including micro insurance, are hereby required to
secure a Certificate of Authority from the Insurance
Commission. For this purpose, insurance activity is hereby
defined as an activity wherein:
1.1.Contributions/premiums are regularly collected prior to the
occurrence of a contingent event; and

7. Joint IC-CDA-SEC MC 01-2010
1.2. Guaranteed benefits are prided upon the occurrence of a
contingent event.
This definition excludes risk pooling practices such as the
“damayan” or “abuloy” system wherein the individuals or groups of
individuals voluntarily pledge and contribute a certain amount of
money to fund and the benefits are not predetermined but are
contingent to the amounts collected. Membership to the fund is
voluntary and the amount collected in such fund or portions
thereof will be given to the aggrieved party (who is likewise a
contributor to the fund) upon the occurrence of an unforeseen or
contingent event

8. Joint IC-CDA-SEC MC 01-2010
2. Entities including cooperatives and non-government
organizations currently engaged in unauthorized
insurance or insurance-like activities (hereinafter
referred to as informal insurance providers) shall
terminate their informal insurance or insurance-like
activities within one (1) year from the effectivity of this
Circular.

9. 3. To ensure smooth transition and to continually provide insurance
coverage of their members or clients within the one-year transition
period, these informal insurance providers may enter into formal
arrangements within authorized insurance providers by:
3.1. Partnering with commercial insurance companies that will provide
approved insurance products and services either under a group or
individual insurance policy contract; or
3.2. Having their members/clients become members of authorized
cooperative insurance providers or mutual benefit associations of
their choice.
Joint IC-CDA-SEC MC 01-2010

10. Joint IC-CDA-SEC MC 01-2010
4. For Informal insurance providers that will continually engage in
insurance business and thereby undertake insurance activities,
they shall, within two (2) years from effectivity of this Circular,
organize themselves into an insurance provider and secure a
Certificate of Authority from the Insurance Commission as a:
4.1. Life or Non-Life Insurance Company;
4.2. Cooperative Insurance Provider; or
4.3. Mutual Benefit Association.

11. Joint IC-CDA-SEC MC 01-2010
5. The Insurance Commission (IC), Securities and Exchange
Commission (SEC) and the Cooperative Development Authority
(CDA) shall collaborate and exchange information, and
undertake the necessary measures including the issuance of
cease and desist orders, after due notice and hearing, to ensure
that insurance providers are operating within the provisions of
the Insurance Code and other appropriate laws, rules and
regulations.

12. Joint IC-CDA-SEC MC 01-2010
6. All issuances, circulars and regulations that are inconsistent
with the provisions of this Joint Memorandum Circular are
hereby repealed accordingly.
This Circular shall take effect fifteen (15)days after publication
in a newspaper of general circulation in the Philippines.
Signed this 29th day of January, 2010, Manila, Philippines.

13. Cooperatives
engaged in self-
insurance or
informal
insurance
schemes
Partnering with
existing authorized
insurance or
insurance- like
product providers.
Use pool of funds to
pay premiums of
members
Excess funds, if any,
shall be credited, in a
n equitable manner,
to the members’
savings accounts in
the cooperative.

14. Cooperatives
engaged in self-
insurance or
informal
insurance
schemes
Partnering with a
licensed cooperative
Insurance .Use pool of
funds to pay
contributions of
coops and one time
membership fee
Avail insurance
products and services
Received ISCPR
Members received
PR equitably

15. JOINT IC-CDA-SEC MEMORANDUM CIRCULAR
NO. 02-2010
SUBJECT: GUIDELINES ONTHETREATMENT OF
FUNDS COLLECTED FROM INFORMAL
INSURANCE ACTIVITIES

16. Joint IC-CDA-SEC MC 02-2010
Whereas, informal insurance providers have previously collected
contributions or premiums from individuals or groups of individuals
(hereinafter referred to as contributors) covered by the unauthorized
insurance or insurance-like activities;
Whereas, these contributions or premiums were placed in pools of funds by
informal insurance providers for the purpose of covering the insurance
benefits of the contributors;
Whereas, once the unauthorized insurance or insurance-like activity has been
terminated in accordance with Joint Circular No. 1-2010, this pool of funds
remains with the informal insurance provider although the insurance coverage
has been transferred to or underwritten by an authorized insurance provider;

17. Joint IC-CDA-SEC MC 02-2010
NOW, THEREFORE, for and in consideration of the aforementioned
premises and pursuant to the authority vested in us under existing
laws the following are hereby promulgated:
1. These guidelines shall cover the “pools of funds” collected by
informal surance providers that are going into formal insurance
arrangements with authorized insurance or insurance-like
providers, including Health Maintenance Organizations
(HMOs) and Pre-Need corporations, in compliance with the
provisions of the IC-CDA-SEC Joint Memorandum Circular 1-
2010 dated 29 January 2010.

18. 2. For purposes of this circular, “pools of funds” shall
refer to deposit accounts, trust funds, securities,
investments or such other monies of similar nature
held by informal insurance providers arising from the
collections of the contributions or premiums from
contributors covered by unauthorized insurance or
insurance-like activities.
Joint IC-CDA-SEC MC 02-2010

19. Joint IC-CDA-SEC MC 02-2010
3. Pools of funds accumulated by entities from the operations of
unauthorized insurance –like activities shall be used exclusively for
the benefit of the contributors who will continue to be covered by
insurance or insurance-like contracts with authorized providers.
a. For entities partnering with existing authorized insurance
or insurance- like product providers , the pool of funds
shall be used in equitable manner to pay for :

20. i. premiums or fees of insurance or insurance-like
products bought by the entity for the contributors from
any authorized insurance or insurance-like providers; or
ii. Contributions, fees or dues, mandatory and/or
voluntary, to Mutual BenefitAssociations (MBAs) wherein
the contributors shall become members.

21. Joint IC-CDA-SEC MC 02-2010
b. In addition to Section 3.a above, the pool of funds of cooperatives maybe
utilized to cover the contributors share capital contributions to single
purpose or multi-purpose primary cooperative that either
i. Is authorized and duly licensed to engage in insurance and insurance-
like activities; or
ii. Will join an existing Cooperative Insurance Society; or
iii. Will organize with other primary cooperatives a federation or
secondary cooperative authorized to provide for the insurance needs
of the primary cooperatives and its members.
Excess funds, if any, shall be credited, in a n equitable manner, to
the members’ savings accounts in the cooperative.

22. Joint IC-CDA-SEC MC 02-2010
c. For entities organizing MBA, the pool of funds shall be
entirely transferred, in behalf of the contributors, to the
MBA concerned to cover and/or augment the Guaranty
Fund requirement and pre-operating expenses; provided,
the amount allocated for pre operating expenses shall not
exceed the lower of ten (10) percent of the amount of the
transferred funds of one million and five hundred thousand
pesos (Php 1,500,000.00).

23. Joint IC-CDA-SEC MC 02-2010
IN CASE OF NONCOMPLIANCE
• Commencement of revocation proceedings against the
primary franchise of the erring entities; or
• Imposition of other administrative sanctions in accordance
with the “Corporation Code of the Philippines” or the
“Cooperative Code of the Philippines” – without prejudice
to the filing of criminal charges against the individuals
responsible for the violation.

24. Joint IC-CDA-SEC MC 02-2010
5. Finally, nothing herein shall preclude the IC from
initiating actions pursuant to Presidential Decree No.
1460, as amended, otherwise known as the “Insurance
Code of the Philippines” against erring entities and the
use of the Pools of funds.

25. The period within which entities shall formalize and
terminate their informal insurance and insurance-
like activities is extended to December 31, 2011.

27. • 168 Microinsurance products approved (47 life, 37
non-life and 41 MBA)
• 22 licensed Microinsurance-MBAs
• 45 insurance companies (18 life and 27 non-
life) selling MI products
• 179 licensed as MI agents (54 RBs, 2Thrift, 2
Coop and 122 Individuals)
• About 24.75 million (24.77% out of 99.9 million
Filipinos) insured under MI
Microinsurance Industry: Performance
ROSALINAV. BACTOL (2015)
http://www.microfinancecouncil.org/wp-content/uploads/2015/08/Breakout-Session-
1_Microinsurance_Hon.-Emmanuel-Dooc_Rosalina-Bactol.pdf