CIRCULAR Letter (CL) 12-2007, dated July 25, 2007, was issued putting in place the Certificate of Cover Authentication Facility of the Philippine Insurers and Reinsurers Association (Cocaf-Pira). The system currently being used by Pira. Formulated as an “interim” solution to the issues hounding the implementation of the Compulsory Third- Party Liability (CTPL) insurance, all insurance companies were “enjoined” to have their Certificate of Cover (COC) authenticated through the COC Cocaf-Pira, starting July 25, 2007.
As envisioned, an “updated list of accredited insurers in good standing shall be provided by the Insurance Commission (IC) to Cocaf for automatic checking of valid COCs, followed by an online data matching with the Land Transportation Office (LTO) vehicle file. Under the interim arrangement, all COCs authenticated through the said facility shall be verified through the COC Verification Facility (COCVF) of Stradcom at the LTO during vehicle registration.” Cocaf-Pira was directed to submit monthly reports of authenticated and verified COCs, by insurance companies, to the commission within the first five days of each month. Another group of insurers, the Organization of Insurance Companies of the Philippines, had adopted a verification system outside of the Cocaf-Pira.
Nonimplementation of the IC gateway
A Memorandum of Agreement (MOA) dated January 20, 2010, entitled: “To establish interconnectivity/sharing of information relative to the Certificate of Cover for Compulsory Third-Party Liability and Comprehensive Insurance through centralized monitoring and recording system to be known as the IC COC Gateway [ICG] and verification system to be known as the Enhanced Certificate of Cover Verification Facility [ECOCVF],” between the LTO, the Bureau of Internal Revenue (BIR) and the IC was signed.
Under the tripartite MOA, a) the “ICG shall serve as the sole electronic facility for recording all COCs as proof of coverage under the CTPL and Comprehensive Insurance for motor-vehicle registrations. The system shall provide interconnectivity/sharing of information among the parties and well-coordinated regulatory activities mandated of them”; and b) the “ECOCVF shall serve as the sole verification and tax-collection facility for all COCs as proof of coverage under CTPL and Comprehensive Insurance for motor-vehicle registrations. The facility shall provide interconnectivity/sharing of information among the parties and well-coordinated regulatory activities mandated of them.”
The ECOCVF is an integrated facility developed by the LTO “to include online and real-time verification of COCs, and ensure timely and effective collection of all taxes due to the BIR and other government institutions for CTPL and Comprehensive Insurance.”
As agreed upon, the three agencies vowed to assume the following tasks: 1) “The IC shall require/mandate accredited insurance companies to submit/file COCs pertaining to CTPL and Comprehensive Insurance policies into the ICG. For this purpose, the IC shall impose administrative sanctions upon insurance companies, their directors/officers/agents, for any willful failure or refusal to comply with or violation of the aforesaid requirement”; 2) “The LTO shall perform, host, manage and maintain the ECOCVF for the subsequent verification of COCs and shall interconnect with the ICG for proper monitoring of collection of taxes, fees and charges due to the BIR”; and 3) “The BIR shall have access to the ICG and ECOCVF to determine COC issuances and the amount of taxes due/paid to the government. The BIR shall also have access to the reports generated from the ICG and ECOCVF for purposes of industry analysis and tracking.”
Eventually, the ICG was formally proposed under CL 6-2010, dated February 12, 2010. Under this circular, all COCs to be issued by insurance companies must pass through an ICG and that no COC shall be accepted without complying with the requirements and procedures in CL 6-2010.
CL 19-2010, dated May 20, 2010, was issued, calling for the strict implementation of CL 6-2010. CL 26-2010, dated September 14, 2010, adopted a vehicle-classification system wherein the ICG System will not accept any “mismatched” vehicle type with the premium rate. The BIR, on the other hand, issued Revenue Memorandum Circular 7-2010, dated January 20, 2010, disseminating the MOA to all internal revenue officers.
Notwithstanding the laudable objective, the ICG never took off due to interconnectivity problems with the IC server. It was operationalized only for three months until it was eventually abandoned and forgotten.
Reportorial monitoring
The authentication of COCs, however, was mandated as early as 2002. Under CL 11-2002, dated July 4, 2002 (Authentication of Motor Vehicle COC), all insurance companies, agents and brokers were directed to submit to the process of authentication of all COCs, failure of which to comply “shall be sufficient cause for disqualification of an insurance company to issue COC for the CTPL insurance.”
In addition to the authentication and verification measures, CL 11-2004, dated May 13, 2004, required the quarterly filing “on the monthly number of Motor Vehicle CTPL COCs issued under a prescribed format.” In addition, CL 16-2004, dated August 2, 2004 (Reporting of Certificate of Covers on Recapitulation 1 of the Annual Statement) required that nonlife insurance companies will “report in the Annual Statement, under Recapitulation 1—Premiums Written and Premiums Earned, the number of COCs issued under CMVL-LTO and CMVL-NON-LTO. Consequently, a separate column will be added in the said recapitulation as indicated in the form attached to the circular.”
Regulation of commissions
With respect to agency commissions, CL 10-2003 dated December 3, 2003, directed nonlife insurance companies “to adhere to the 10-percent commission rate for CTPL business as prescribed in the Insurance Code. Likewise, only 10 percent of the premiums therefore must be allocated for marketing expenses.” The circular was issued after it was observed that nonlife insurance companies were “offering excessive commissions and other allowances to agents and brokers for the sole purpose of obtaining the business.”
1 comment
TPL like most LTO regulations is just a racket and has practically no value for the vehicle owner.