How to kill the non-life insurance industry
Many have criticized the
SEC for somehow partly causing the current woes of
CAP and
Pacific Plans after
changing the ARL rules for the pre-need industry (of course, these companies are also at fault). Now, the
Insurance Commission released a proposed circular that requires non-life insurance companies to triple their minimum paid-up capital from P50 million to P150 million by yearend (!!!), then double to P300 million by the end of 2006 (!!).
An industry association, aghast over the announcement, noted that
some 86 of the 96 non-life insurance companies are in danger of folding up as only 10 are capitalized over P300 million. Another 8 are capitalized over P150 million. But almost half have only some P50 million in capital.
Of course, the idea is to strengthen the industry, but such a drastic measure will only weaken it. Having to triple capital by P100 million in about six months is close to impossible. Mergers and acquisitions take time. The best way is to do the transition incrementally at a gradual pace. Otherwise, it will certainly cause policyholders to panic and lose faith in the system.
So, if you're a holder of a non-life insurance policy, such as fire, car, residential, etc., you better check how your insurance company is holding up. The advantage in this case is that unlike life insurance policies and pre-need plans, you're not tied up for years.
Non-life insurance is usually renewed every year, so if you feel your insurance company might be in trouble if this circular becomes effective (it's still a proposal so don't panic), don't cancel your policy yet. But do start to shop around particularly with the better-capitalized companies so you can transfer your business before your current policy expires.
