Non-life insurers score new GSIS insurance products


Posted at Feb 28 2009 02:47 AM | Updated as of Feb 28 2009 10:47 AM

Non-life insurers have asked the Insurance Commission (IC) to investigate the move of Government Service and Insurance System (GSIS) to offer certain insurance products, saying this is outside the state pension fund’s limits and would encroach into the market of the private sector.

In a letter to IC Commissioner Eduardo T. Malinis dated February 24 and distributed to reporters yesterday, Philippine Insurers and Reinsurers Association (PIRA) Chairman Honorio J. Ramajo said since GSIS is exempted from taxes, it would have "an undue competitive advantage" over private firms who offer similar insurance schemes.

He noted that GSIS had already published a print advertisement promoting the said insurance products, which are collectively known as "GCare Plans."

"May we therefore request the Commission to look into the matter, and if deemed justified, to again and possibly, finally dissuade GSIS from further pursuing the subject ad and refrain from soliciting non-life insurance business from the private sector," Mr. Ramajo said in the letter.

IC and GSIS officials were not available for comment yesterday.

In its website, the state pension fund said G-Care "offers motor vehicle insurance, personal accident insurance, and fire insurance at, bar none, the most affordable rates in the country." It consists of three products namely "My Shield" which offers personal accident insurance to people aged three to 80 years old; "Home Shield," which offers a fire insurance cover worth P1 million; and "Auto Shield," which offers comprehensive car insurance to GSIS members and their immediate family members.

The said insurance schemes are being offered to GSIS members as well as their parents, legitimate spouses, children and siblings.

But PIRA said these violate the Property Insurance/General Insurance Fund Law, the law that created the fund being administered by GSIS. It cited Sec. 2 of the law that states the fund would be used "to indemnify or compensate the government... for any damage to or loss of its properties due to fire, earthquake, storm or other casualty."

Mr. Ramajo said the law defined "government" as "national, provincial, city or municipal government, agency, commission, board, or enterprises owned or controlled by the government" while the word "property" included "vessels and crafts, motor vehicles, machineries, permanent buildings, properties stored therein or in buildings rented by the government or properties in transit."

"From these well-defined provisions of law alone, it is already very clear that GSIS’ authority to engage in non-life operations are limited exclusively to the extension of insurance coverage to properties and/or risks owned by the government or in short government risks and/or properties," he wrote.

"The properties, liabilities and risks of GSIS members, etc... cannot be considered government properties and/or risks... they are on the contrary, clearly private properties and risks," he added.

PIRA said the move by GSIS to sell GCare products would also deprive the government of taxes since the pension fund enjoys tax perks.

"GSIS’ limited powers under the law to extend non-life insurance coverage only to government properties and risks was precisely the principal reason why it has been given various tax exemption privileges... for it is assumed and expected that it would anyway deal exclusively in government to government transactions," the group’s letter read.

The group said GSIS would stretch its tax exemptions to cover deals that should be fully taxed under existing laws.

"This unjustified exploitation of its tax exemption privileges, we suspect, is one of the principal considerations that drives GSIS to encroach and compete for these accounts...It (GSIS) is not only violating our tax laws, but is also doing serious harm to the revenue collection efforts of our government," PIRA said.

Mr. Ramajo said the move would also provide GSIS undue advantage over private insurance firms in their own market since it could offer cheaper products due to its tax privileges.

"Apart from the possible use of its (GSIS) vast resources and influence, it is actually exploiting unfairly... its tax exemption privileges... to gain undue competitive advantage over these smaller private insurance companies," he said.

"It was never the intention of our lawmakers to allow a big government institution like GSIS... to crowd out legitimate private companies at any given time, especially when it comes to non-government accounts market," he added.

In an interview late Thursday evening, Michael F. Rellosa, PIRA Deputy Chairman and President of Fortune General Insurance Corp., said they would first exhaust all administrative remedies to address the problem before resorting to legal action. — Alexis Douglas B. Romero