The Insurance Commission (IC) is pushing for a 60-day grace period for insurance policies and pre-need contracts as this achieves a balance of interest of all parties.
“As a form of compromise between the House of Representatives and Senate versions of Bayanihan 2, we wrote Congress to suggest that life insurance and pre-need customers instead be given a 30-day extension in addition to the usual and existing 30-day or 31-day contractual grace periods under insurance policies and pre-need contracts. Taken together, this makes for a total extension of 60 days in favor of the consumers,” Dennis Funa, insurance commissioner, said in a statement yesterday.
“We firmly believe that this proposed alternative achieves a balancing of interests. The suggestion affords both life insurance and pre-need customers, as well as life insurance and pre-need companies, much needed relief from the adverse economic and financial effects of the coronavirus disease 2019 pandemic,” he added.
Funa said this will help ensure the continued ability of life insurance and pre-need industries to service their commitments to and respond to the needs of their customers in these trying times.
Funa sent his letter to members of the bicameral conference committee of congress, dated August 12.
The House of Representatives’ version of the Bayanihan 2 bill, particularly House Bill (HB) No. 6953, provides that insurance companies providing life insurance policies and pre-need companies shall implement a 365-day grace period, staggered payment schedule, or any mutually beneficial arrangement for premium payments.
On the other hand, the Senate version, particularly Senate Bill No. 1564, only provides for a 30-day grace period.
The bicameral conference committee on Friday agreed to reconcile the versions by adopting 60 days as the period of moratorium.
“We understand that the proposed policy in HB No. 6953, while favoring life insurance and pre-need customers, may spell financial danger to life insurance and pre-need companies, which are among the pillars of the Philippine economy that also need protection,” Funa said.
“As the regulatory body for life insurance and pre-need companies, the IC needed to tell congress that the proposed ‘one-year or 365-day grace period’ in HB No. 6953, if passed into law, will add to the life insurance and pre-need industries’ challenge of generating as much premiums from its existing business. Right now, said industries need to generate such premiums from existing business in order to offset the decline in new business premiums resulting from the slowed market demand,” he added.
Funa noted that life insurance and pre-need companies are still reeling from the effects of the reduced economic activity, which has already resulted in the reduction of premiums collected and earned.
“With due respect to congress, we fear that a one-year moratorium will exacerbate the adverse economic effects of the pandemic to said industries’ financial and capital positions, such that said industries may be permanently unable to recoup the consequent losses during this period, even if we were to consider future premiums,” he added.