Eight insurance companies and the National Home Mortgage Finance Corp. (NHMFC) have been charged with violation of the Philippine Competition Act (PCA) for entering into an anti-competitive agreement with the insurers for the exclusive provision of mortgage redemption insurance to account holders or borrowers of NHMFC.
Charged along with NHMFC are Beneficial Life Insurance Company Inc., Country Bankers Life Insurance Corp., First Life Financial Co., Inc., Fortune Life Insurance Company, Inc., Manila Bankers Life Insurance Corp., Philippines International Life Insurance Co., Inc.., The Manufacturers Life Insurance Company (Philippines) Inc. and United Life Assurance Corp.
Also charged are members of the NHMFC executive committee who administered the agreements of the insurance pool: Ignacio Macrohon Jr., president; Daniel Mercado Jr., vice president; Jaime Santiago, chairman of the technical committee and; Evelyn Carada, secretary and treasurer.
If the parties are found guilty, they could face an administrative fine of up to P100 million.
The five-man Commission of the PCC will decide on the case filed by the anti-trust body’s investigation and prosecution arm, the Enforcement Office which took note of the fact that the pool of insurers the exclusive provision of mortgage redemption insurance (MRI) to its account holders for almost four decades.
In a Statement of Objections filed on Dec. 27, 2019, the PCC’s Enforcement Office charged the NHMFC, the insurance companies and their responsible officers for violating Section 14(c) of PCA. But one of the anti-competitive agreements has been in force since 1980.
The investigation was initiated when NHMFC approached the PCC during the two-year transitory period of the PCA, seeking a review of its agreements with the pool. Prior to the PCA’s enactment, the NHFMC attempted to terminate the said agreements but faced legal obstacles brought about by the insurance pool.
NHMFC, as secondary mortgagor, manages different mortgage loan portfolios that are originated by banks, housing developers and other primary lending institutions that offer loans for socialized and low-cost housing. Mortgagor-borrowers of these primary lending institutions, whose housing loans have been assumed by NHMFC, must obtain an MRI as a form of security.
The MRI ensures outstanding loans will be settled in the event of the borrower’s premature death.
PCC said this exclusive arrangement effectively deprived NHMFC and the housing loan borrowers of choosing MRI coverage from other providers which may offer better terms and conditions at lower premium rates. Any insurance company wishing to offer MRI to NHMFC is effectively required to go through the pool, thereby foreclosing competition in the relevant market. Additionally, the agreements cannot be terminated by mere notice, aggravating their foreclosure effect.
The PCC added with such agreements in place, facilitated by the pool’s Executive Committee, the insurance pool has enjoyed the lack of any competitive constraints for almost 40 years.
This has resulted in poor service, unfavorable premium rates, and lack of options to the detriment of thousands of account-holders, including low-cost and socialized housing borrowers.
