Legal basis and coverage of intermediaries
- Presidential Decree No. 1460 (Insurance Code) authorizes the Insurance Commissioner to promulgate these licensing rules through Sections 414 and 305, as amended by Presidential Decree No. 1814.
- The rules apply to insurance agents, variable contract agents, general agents, insurance brokers, and reinsurance brokers.
- The rules govern licensing in the Philippines for persons who solicit, negotiate, procure, place, or otherwise handle insurance or reinsurance business for others or for authorized functions.
Core definitions
- The term “person” includes any individual, partnership, association or corporation.
- The term “insurance agent” means a person who, for compensation, solicits or obtains insurance on behalf of an insurance company, or transmits an application to or from such company, or offers or assumes to act in negotiation of such insurance.
- The term “variable contract agent” means a person who sells or offers for sale variable contracts, or does any act in the sale, negotiation, making, or consummating of such contract other than for himself.
- The term “general agent” means a person who, for compensation, solicits or obtains insurance for an insurance company or transmits applications to or from the company, and is empowered by the general agency agreement to do other acts for and on behalf of the company as specified therein.
- The term “insurance broker” means a person who, for compensation, commission, or other thing of value, aids in soliciting, negotiating, or procuring an insurance contract or placing risks or taking out insurance on behalf of an insured other than himself.
- The term “reinsurance broker” means a person who, for compensation, and not as a duty authorized agent, employee, or officer of the insurer with which the reinsurance is effected, acts or aids in negotiating reinsurance contracts or placing risks for reinsurance for any insurance company authorized to do business in the Philippines.
Licensing prohibitions and commissioning limits
- No insurance company doing business in the Philippines, or any of its agents, may pay any commission or compensation for obtaining or placing insurance or reinsurance to any person unless that person has first procured from the Insurance Commissioner a license to act as the appropriate intermediary.
- No person may act as an insurance agent, variable contract agent, general agent, insurance broker, or reinsurance broker in the Philippines unless the person has first procured the license from the Insurance Commissioner.
- The Insurance Commissioner issues the license only after receiving a written application and payment of the corresponding fee, and determining that the applicant is qualified and not otherwise disqualified.
- The license is valid until midnight of the 30th of June of the year following its issuance, unless sooner revoked or suspended for cause.
- Licenses may be renewed annually on 1st day of January, or within six (6) months thereafter.
- A partnership, association, or corporation license authorizes only the individual or individuals named in the license; attempted exercise by an individual not named in the license, with the knowledge or consent of the licensee, is cause for revocation or suspension.
- An insurance company and its agents may not pay commission or compensation for insurance on the life or property (or other related interest) to an agent unless the agent has secured or placed at least an equal amount of outside business during the period covered by the license.
- The “equal outside business” rule applies also when the license is held by a partnership, association, or corporation, including when business is obtained by or through its partners, members, or stockholders.
Licensing exclusivity and disqualification of personnel
- No person may be licensed to act as an insurance agent or general agent of more than one life insurance company.
- No person may be licensed simultaneously as an insurance agent (or general agent) and an insurance broker, and a person licensed as an insurance broker may not be licensed as an insurance agent or general agent in the same kind of insurance business.
- The same exclusivity limitation applies to the individual named in the license issued to a partnership, association, or corporation for insurance agent, general agent, or insurance broker.
- No official or employee of an insurance brokerage or an adjustment company, and no individual adjuster, may be licensed to act as an insurance agent, variable contract agent, or general agent.
Eligibility qualifications and examination rules
- To qualify for a license, the applicant must be:
- a resident of the Philippines;
- trustworthy; and
- able to pass the written examination, if not exempt.
- If the applicant is a partnership, association, or corporation, it must be:
- domiciled in the Philippines, and
- empowered under its articles to transact the kind of business applied for.
- The individual to be named in the license must also possess the qualifications for the intermediary license.
- Applicants must qualify through a written examination for the kind of license applied for, unless exempt.
- The Insurance Commissioner designates the times and places of examinations.
- Those desiring to take the examination must file an application with the Insurance Commission using forms prescribed by the Insurance Commissioner.
- Each examination applicant must pay an examination fee of P20.00 at the time the examination application is filed.
- Applicants for examination must have good moral character, must not have been convicted of a crime involving moral turpitude, and must show they have been trained in the kind or kinds of insurance contemplated in the license applied for.
- A 70% grade is required to pass the examination.
- No examination is required for:
- a person presently holding, or previously holding within the last ten (10) years, a license of the kind applied for (excluding a temporary certificate of authority);
- a person who successfully completed the Insurance Agents’ Courses conducted by the Insurance Institute for Asia and the Pacific or an academic course and/or training program satisfactory to the Insurance Commissioner in the relevant insurance kind; and
- a person found competent by the Insurance Commissioner to transact the business because of previous connections with an insurance company or an office/firm handling insurance matters.
License application documents and renewal mechanics
- License issuance and renewal applications must be filed using forms prescribed by the Insurance Commissioner.
- For a partnership, association, or corporation, the application must designate the individual who will exercise the power granted by the license.
- Every application must be accompanied by a copy of the applicant’s income tax return for the preceding year, with corresponding receipt(s) showing payment of all income taxes due.
- For issuance of a general agent’s license, the application must be accompanied by:
- a copy of the general agency agreement between the applicant and the insurance company; and
- a copy of the power of attorney empowering the applicant to receive notices, summons, and legal processes for and on behalf of the insurance company in actions or legal proceedings against the company.
- For renewal processing of insurance agent’s licenses, compliance with the “actively engaged” requirement is considered satisfied if a certification is made under oath by the president or executive senior vice president (if more than one vice president) or the vice president (if only one vice president) of the insurance company that the income tax return was examined and the applicant’s commissions or other compensation for the year amounted to at least three thousand six hundred pesos.
- The certification must be accompanied by a jointly signed statement of waiver by both the insurance company and the insurance agent stating that if the certification is false, the renewed license will be immediately cancelled without prior notice, and the responsible parties will be dealt with according to the applicable consequences.
- An alien applicant for renewal of an insurance agent’s license who was licensed before September 30, 1968 and has continually been licensed must submit proof that the report required in Section 2, Rule IV of the Implementing Rules of Republic Act No. 5455 was submitted to the Board of Investments.
- If an insurance agent’s or general agent’s life-business license renewal is denied for failure to be “actively engaged,” the agent or general agent may obtain a special license to service existing policies solicited by the agent and receive renewal commissions, upon submission of a sworn certification by a responsible officer of the insurance company that the agent has business entitled to renewal commissions; the special license:
- prohibits solicitation of new business under the special license; and
- may not be renewed annually for more than five (5) years.
- If an insurance agent, variable contract agent, general agent, insurance broker, or reinsurance broker failed to qualify for renewal due to not being “actively engaged,” the person may apply for a new license after one year following the expiration of the license, if the applicant shows training in the relevant kind or kinds of business for at least forty (40) hours during the last six (6) months prior to application.
Denial, suspension, revocation, and “actively engaged”
- The Insurance Commissioner may refuse to issue or renew a license, or may suspend or revoke an existing or renewed license, if the applicant or holder:
- willfully violates any provision of the Insurance Code, this memorandum circular, or any Insurance Commissioner rules, regulations, or instructions;
- intentionally makes a material misstatement in the application;
- obtains or attempts to obtain a license by fraud or misrepresentation;
- is guilty of fraud or dishonest practices;
- misappropriates or converts to personal use, or illegally withholds, money required to be held in a fiduciary capacity;
- fails to demonstrate trustworthiness and competence to transact the business in a manner that safeguards the public;
- materially misrepresents the terms and conditions of policies or contracts of insurance sought to be sold or already sold;
- fails to pass the written examination prescribed, unless exempt; or
- has been declared insolvent or bankrupt.
- No license to act as an insurance agent, variable contract agent, general agent, insurance broker, or reinsurance broker may be renewed if the holder has not been actively engaged as such agent or broker.
- The term “actively engaged” means the license holder earned during the year following issuance commission or other compensation for services rendered at least three thousand six hundred pesos.
- For a license held by a partnership, association, or corporation, “actively engaged” applies to the individual named in the license.
- Except for the special-life-business mechanism provided for in the renewal provisions, an application for issuance of a license is refused if the applicant previously held a license of the kind applied for that expired without renewal during the current year and the applicant was not “actively engaged” during the effectivity of the last license.
- A license to act as an insurance agent, variable contract agent, or general agent may be revoked upon termination of the agency contract, and the insurance company must give immediate written notice to the Insurance Commissioner.
Fees for issuance and renewal
- The license fee for issuance or renewal is:
- P25.00 per license issued to an insurance agent;
- 25.00 per license issued to a variable contract agent;
- 50.00 per license issued to a general agent;
- 200.00 per license issued to an insurance broker; and
- 200.00 per license issued to a reinsurance broker.
- If the licensee is a partnership, association, or corporation, it must pay a full additional license fee for each prospective individual named in the license in excess of one.