Question & AnswerQ&A (Republic Act No. 10607)
Presidential Decree No. 612, known as "The Insurance Code," ordains and institutes the comprehensive laws governing insurance contracts, insurance companies, brokers, agents, adjusters, mutual benefit associations, and other related insurance matters in the Philippines.
An 'insurer' or 'insurance company' includes all individuals, partnerships, associations, or corporations, including government-owned or controlled entities, engaged as principals in the insurance business, except mutual benefit associations.
Every person has an insurable interest in the life and health of himself, spouse, children; any person on whom he depends for education or support; any person under a legal obligation to him for payment of money or services which death or illness might delay or prevent; and any person upon whose life an estate or interest vested in him depends.
According to Section 12, the beneficiary’s interest in a life insurance policy shall be forfeited if the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured. The proceeds then go to the nearest relative of the insured, if not otherwise disqualified.
Concealment entitles the injured party to rescind the insurance contract. An intentional and fraudulent omission to communicate information proving the falsity of a warranty entitles the insurer to rescind the contract.
A life insurance policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years from its date of issue or last reinstatement, except for non-payment and military or naval service related provisions.
Section 188 provides that a domestic stock insurance company must have a paid-up capital stock of at least two million pesos. Additional contributed surplus funds may also be required before issuance of certificate of authority.
Insurance companies must maintain a margin of solvency which is an excess of admitted assets over liabilities and reserves of not less than two per mille (0.2%) of the insurance in force for life insurers or 10% of net premiums written for other companies, with a minimum of 500,000 pesos.
The Commissioner can impose fines not to exceed five hundred pesos per day for willful violations, and may suspend or remove directors, officers, and agents for violations of any provision of the Insurance Code or related orders after due hearing.
The Security Fund is created for the payment of claims against insolvent insurance companies authorized to transact business in the Philippines and to reinsure policies of insolvent insurers. It assists policyholders and creditors when an insurance company becomes insolvent.