Rules on Bancassurance Under Amended Insurance Code

Legal basis and related issuances

The circular letter is issued pursuant to Sections 375 to 377, Title 9, Chapter IV (Bancassurance) of Republic Act No. 10607 (Preamble).
The circular letter requires compliance with rules on bancassurance supervision under Sections 375 to 377 of R.A. No. 10607 (Preamble, Section 3(a)).
The circular letter supplements the Guidelines on Variable Life Insurance Contracts previously issued by the Insurance Commission in July 2002 and its amendments (Preamble, Section 5).
The circular letter requires observance of Market Conduct Guidelines (MCG) and specifically directs that 2013 Market Conduct Guidelines be observed insofar as relevant to bancassurance conduct (Section 1(d), Section 4(b)(vii)).
Market Conduct Guidelines are governed by Insurance Commission Circular Letter No. 2013-33 dated 04 November 2013 (Section 1(d)).
Section 8 confirms no amendment or repeal of authority for rural, cooperative, or thrift banks to market, sell and service microinsurance products under BSP Circular No. 683 dated 23 February 2010 (Section 8).
The circular letter also references provisions on Insurance Commission jurisdiction over claims/complaints under Sections 437, 438 and 439 of R.A. No. 10607 (Section 3(f)).
The circular letter references the scope of the Insurance Commission’s power regarding bancassurance activities and the relationship with agents/brokers under the second paragraph of Section 439 of R.A. No. 10607 (Section 4(d)).

Core concepts and defined terms

“Bancassurance activities” means the presentation and sale of an insurance company’s insurance products to bank customers within the premises of a bank duly licensed by the BSP, using rules and regulations promulgated by the Insurance Commissioner and the BSP (Section 1(a)).
“Bancassurance Arrangements or Agreements” means a written and duly signed contract between the insurance company and the bank embodying agreed terms and conditions for bancassurance activities and transactions (Section 1(b)).
“Fund” means the underlying investment type chosen by a VUL policyholder for separate investment accounts, including Bond Fund, Equity Fund, Money Market Fund, Balanced Fund, or other Insurance Commission-approved Funds (Section 1(c)).
“Market Conduct Guidelines (MCG)” means rules adopted by the Insurance Commission through Circular Letter No. 2013-33 dated 04 November 2013 that govern the performance of agents and agency leaders in selling life insurance products (Section 1(d)).
“Managers” means persons or entities authorized by the insurance company or as approved by the Insurance Commission to manage the separate fund relating to the investment portion of VUL policies (Section 1(e)).
“Variable Life or Variable Unit-Linked (VUL) Insurance Contractor Policy” means a VUL policy on group or individual basis providing benefits or contractual payments that vary to reflect investment results of segregated portfolios or designated separate accounts, with separate accounting apart from other investments, and not deemed to be a security or securities under the Securities Act, as amended, nor subject to regulations under the Investment Company Act, as amended (Section 1(f)).
For clarity, “bancassurance” and “cross-selling” may be used interchangeably (Section 1(a)).

Authority to conduct bancassurance

Bancassurance (cross-selling) may be conducted only in bank premises of banks that have secured prior Monetary Board (MB) approval to engage in the activity (Section 2(a)).
The insurance company’s conduct of bancassurance, including execution of written bancassurance arrangements or agreements, must be approved or ratified by the insurance company’s Board of Directors (Section 2(a)).
Insurance companies are prohibited from offering for cross-selling at any bank insurance products that do not bear the prior approval of the Insurance Commissioner (Section 2(a)).
Bank employees’ role in bancassurance is limited to referral of bank clients to insurance company representatives unless specifically trained and qualified for bancassurance tasks (Section 2(b)).
Bank clients must give prior consent before any referral to insurance company representatives (Section 2(b)).
Exception: bank employees specifically trained and qualified by the insurance company may preliminarily present and discuss insurance product features and financial needs discussions as part of presenting product options (Section 2(c)).
Trained bank employees must be duly certified as having undergone such training (Section 2(c)).
The Insurance Commission prescribes and approves training programs for bank employees (Section 2(c)).
As an incident of their role, trained bank employees taking part in bancassurance no longer need an insurance agents license (Section 2(c)).
The Insurance Commissioner may require bank employees to obtain a license to act as insurance agent and issue guidelines, if the Commissioner deems it proper (Section 2(c)).
Trained bank employees may: assess a client’s financial needs; make preliminary presentations of insurance and other products available from the insurance company without final recommendations; make preliminary presentations of generic product descriptions; make preliminary presentations of company history/background/profile; present historical returns with disclaimers emphasizing returns are not guaranteed and depend on market conditions; and perform other activities needed to obtain the client’s consent to be referred for further discussion—without being deemed as selling/solicitation requiring an agents license (Section 2(d)).
Without required training and qualification, bank employees’ bancassurance activities are limited to referral to the insurance company’s sales representatives (Section 2(d)).
Bank employees are prohibited from conducting “substantial presentation” involving discussion of details and particularities of insurance products (Section 2(e)).
Bank employees may not conclude any contract; contract conclusion must be referred to the insurance agent, and contract conclusion covers any agreement or the amount of investment or premium to be paid (Section 2(e)).
Clear distinction must be maintained between financial product provider representatives selling insurance products and bank employees authorized to market and/or sell insurance products (Section 2(f)).
Insurance product presentation and/or sale must be conducted in distinct areas from areas where own-bank products are sold (Section 2(g)).

Bancassurance agreements: submission, content, confidentiality

Bancassurance Arrangements or Agreements must be submitted to the Insurance Commission for approval by the insurance company and bank (Section 3(a)).
Contracting parties may conduct bancassurance activities only upon Insurance Commission review and approval of the bancassurance arrangements or agreements (Section 3(a)).
Any amendment to bancassurance arrangements or agreements must likewise be submitted for prior Insurance Commission approval (Section 3(a)).
Bancassurance arrangements or agreements must contain provisions requiring:
- compliance with all Insurance Commission requirements on bancassurance;
- a mechanism to address complaints arising from bancassurance transactions; and
- distinct and clearly marked bank premises areas for bancassurance activities separate from areas where bank products are sold (Section 3(b)).
An insurance company may omit commercially sensitive provisions in the bancassurance arrangement or agreement before submission to maintain confidentiality of computations of certain fees, including pre-termination fee or buy-out option fee formulas/computations, and schedule/computation of termination fee (Section 3(c)).
If the insurance company deems other provisions also should be kept confidential, it must seek prior Insurance Commission approval to omit such items (Section 3(c)).
Deleted provisions must be divulged to the Insurance Commission if warranted and when so directed by the Insurance Commission (Section 3(c)).
Deleted confidential provisions must not be divulged to other persons other than concerned officers of the Insurance Commission (Section 3(c)).
The negotiation and execution of the bancassurance arrangement or agreement must be approved or ratified by the insurance company’s Board of Directors (Section 3(d)).
The agreement must include a written grievance mechanism designed to address any and all complaints from bancassurance/cross-selling activities, and must clearly provide the role of insurance companies and bank personnel in addressing queries, resolving problems, claims, and other concerns of the insuring public (Section 3(e)).
The Insurance Commission exercises jurisdiction over claims and complaints involving any loss, damage or liability for which an insurance company may be answerable under any policy or contract of insurance subject to bancassurance activity (Section 3(f)).

Advertising and conduct rules

Promotional materials (brochures, newsletters, leaflets, pamphlets, product illustrations, and similar aids) must provide information that is reasonably accurate, made in good faith, and without apparent showing of misrepresentation or deception (Section 4(a)).
Insurance companies must ensure bancassurance activities are conducted by authorized representatives in an honest and orderly manner and under minimum guidelines (Section 4(b)).
Authorized representatives must recognize clients’ rights to product choice and to refuse bundled or tiered financial products/services under the cross-selling arrangement at all times (Section 4(b)(i)).
No actual presentation of insurance products may be initiated and conducted in bank premises without prior client consent (Section 4(b)(ii)).
No person, including bank personnel, may conduct actual presentation and/or selling of insurance products to bank clients without securing the necessary license or authority from the Insurance Commission; bank employees may only make preliminary presentations when trained and qualified under Section 2 (Section 4(b)(iii)).
All insurance products offered or cross-sold in bank premises by duly licensed persons must always bear the prior approval of the Insurance Commissioner (Section 4(b)(iv)).
Insurance companies must reasonably ensure authorized representatives inform bank clients that the products offered for sale are not bank products and are neither guaranteed by the bank nor insured with the Philippine Deposit Insurance Corporation (PDIC) (Section 4(b)(v)).
Authorized representatives must consider the bank client’s financial objectives, financial condition, and protection needs, and the personal/financial interests of the representative must always be secondary to the client’s interests (Section 4(b)(vi)).
Life insurance authorized representatives must observe the 2013 Market Conduct Guidelines insofar as pertinent and relevant; non-life representatives must observe them only as far as applicable (Section 4(b)(vii)).
Violations of laws, rules and regulations, Insurance Commission and BSP issuances, and other competent government authorities cause suspension of bancassurance activities and imposition of allowable fines against the erring insurance company, subject to due notice and hearing (Section 4(c)).
The Insurance Commission may order the immediate suspension of bancassurance activities pending compliance with mandatory requirements within an allowable period determined by the Insurance Commission and embodied in the suspension order (Section 4(d)).
The Insurance Commission’s power under the circular letter does not extend to the relationship between the insurance company and its agents/brokers as provided under the second paragraph of Section 439 of R.A. No. 10607 (Section 4(d)).
Even during suspension powers or instances giving rise to enforcement action, the provisions in validly executed bancassurance agreements remain valid and binding unless clearly in conflict with this circular letter and other Insurance Commission rules and regulations issued at the Bangko Sentral ng Pilipinas (Section 4(e)).

VUL enhanced consumer protection duties

Bancassurance involving VUL policies must comply with applicable Guidelines on Variable Life Insurance Contracts and the Market Conduct Guidelines, plus the minimum practices under Section 5 (Section 5).
Each potential client must be provided a Product Highlight Sheet (PHS) summarizing key information material to proper understanding of the variable life insurance product, including features and risks (Section 5(a)).
The PHS should be at least a separate document but is treated as part of the product proposal and the policy contract (Section 5(a)).
The PHS must cover at least:
- what the client is investing in and who the client is investing with;
- key risks of the investment;
- fees and charges for the investment;
- how often valuations are made available;
- how the client can exit and risks and costs of exit;
- how to contact the parties; and
- other important information to know before investing (Section 5(a)).
Sample PHS and sample “Definitions of Risks” page are provided in ANNEXES A and A-1 (Section 5(a)).
A Client Suitability Assessment (CSA) through Client Profile Questionnaire (CPQ) or Risk Profile Questionnaire (RPQ) must be undertaken for each client prior to acquisition of a variable life insurance contract (Section 5(b)).
The CSA/CPQ/RPQ must determine the client’s understanding of, tolerance for, and capacity to manage various risks (Section 5(b)).
A sample CPQ is provided in ANNEX B (Section 5(b)).
An Investment Policy Statement (IPS) must be generated for the client as a mandatory complement to the CSA/CPQ/RPQ (Section 5(c)).
The IPS formalizes the client’s investment philosophy and investment directive regarding handling of investible funds (Section 5(c)).
The IPS may be a portion of a product proposal containing fund allocation chosen by the client, descriptions of the funds, and must be signed by the client (Section 5(c)).
The fund allocation indicated in the IPS may differ from the risk profile in the CSA/CPQ/RPQ as long as the client’s signature is affixed (Section 5(c)).
If the insurance company has readily available pro forma IPS forms, they must have prior approval of the Insurance Commission (Section 5(c)).
The insurance company must disclose material information giving rise to actual or potential conflict of interest to the client (Section 5(d)).
The insurance company must take all reasonable steps to ensure fair dealings with the client (Section 5(d)).
The conflict of interest disclosure may follow the sample statement structure provided, including how managers make decisions and how allocations are handled fairly (Section 5(d)).
The conflict of interest disclosure statement must be included in the product proposal and policy contract and must be subject to prior Insurance Commission approval (Section 5(d)).
VUL promotional materials, PHS, and VUL policies must contain a standard disclosure statement substantially declaring that the product is not a deposit product; earnings are not assured; principal is exposed to risk of loss; the product cannot be sold unless benefits and risks are thoroughly explained; and the purchaser must understand the product (Section 5(e)).
An alternate standard disclosure statement must include the requirement that features, benefits, and associated risks MUST be thoroughly explained by a licensed representative of the insurance company, and provides instructions to contact the Insurance Commission or the insurance company with name, location, and contact number (Section 5(e)).
The disclosure statement must be placed in the front cover of any material used within bank premises for cross-selling VUL policies, in bold print with minimum font size of 12, and the insurance company may prescribe alternate wording consistent with the statements subject to Insurance Commission review and approval (Section 5(e)).

Claims and complaint handling requirements

The insurance company must be solely responsible, or jointly with the concerned bank as applicable, in resolving complaints arising from bancassurance transactions (Section 6(a)).
Each insurance company engaged in bancassurance activities must establish an effective consumer protection framework for complaint handling, including processes for handling complaints from cross-selling transactions, including after-sale claims (Section 6(a)).
The Insurance Commission must be provided necessary documents showing that the consumer protection framework exists (Section 6(a)).
Written processes for handling claims and complaints must be consistent with R.A. No. 10607 and all existing and pertinent issuances of the Insurance Commission (Section 6(b)).

Reportorial obligations

Insurance companies engaged in bancassurance must submit an Annual Summary Report not later than 30 April of the ensuing year covering the year ending 31 December (Section 7(a)).
The Annual Summary Report must list the banks, including branches, with duly executed bancassurance arrangements or agreements entered into by the insurance company (Section 7(a)).
The Annual Summary Report must indicate:
- the addresses of the respective bank offices and branches;
- the names of bank personnel and authorized insurance company representatives engaged in presentation and selling of insurance products therein;
- the list of complaints and claims filed at the concerned bank and its branches relative to bancassurance activities;
- the names of complainants and the nature of their claims; and
- the actions taken by the concerned insurance company (Section 7(b)).
Sample Summary Reports and sample claims and complaints forms are provided in ANNEXES C and C-1 (Section 7(b)).
Insurance companies must submit other regulatory requirements that the Insurance Commission may require pursuant to subsequent administrative issuances (Section 7(c)).

Miscellaneous and non-amendment

The circular letter does not amend or repeal provisions granting rural, cooperative or thrift banks authority to market, sell, and service microinsurance products under BSP Circular No. 683 dated 23 February 2010 (Section 8).