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Rollout of Philippine Alternative Dispute Resolution for Microinsurance set for July

The Insurance Commission of the Philippines has set for itself a deadline until end-June 2013 to issue circulars on the “Guidelines for the Implementation of Alternative Dispute Resolution for Microinsurance (ADReM)”.This will effectively require all insurance entities, agents and brokers who are engaged in the microinsurance business to follow mediation-conciliation processes of claims dispute based on parameters offset under the banner, Least cost, Accessible, Practical, Effective and Timely (LAPET). ADReM aims to provide options to resolve disputes outside the courtroom and to minimize the expense and delays of litigation.

The circulars will take reference from the ADReM Framework developed by the Technical Working Group (TWG) and adopted by the Insurance Commission and the insurance industry in October 2012 after a series of stakeholders’ consultations around the country. The TWG has continued to work on detailing the guidelines of ADReM implementation, including the procedures for mediator-conciliator accreditation.

The TWG is a public-private sector collaboration composed of the Insurance Commission, Department of Finance-National Credit Council (DOF-NCC), Philippine Insurers and Reinsurers Association (PIRA), Philippine Life Insurance Association (PLIA), Rural Bankers Association of the Philippines (RBAP), Chamber of Mutual Benefit Associations, Inc. (CHAMBAI), Microfinance Council of the Philippines (MCPI), Society of Independent Insurance Intermediaries Association of the Philippines (Triple I), Life Underwriters Association of the Philippines (LUAP), MicroEnsure Insurance Brokers Philippines Inc., and German International Cooperation-Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (GIZ-RFPI Asia).

In the Philippines, GIZ RFPI Asia serves as the dialogue platform in formulating policies and procedures on microinsurance, including on dispute resolution mechanisms appropriate to the needs and capacities of low income Filipinos. GIZ will continue the support for the capacity building of both the regulator and the industry for the effective implementation of ADReM.

The remarkable pace of growth of the Philippine microinsurance sector has, in large part, been spurred by its enabling policy environment. The national strategy, the regulatory framework and the roadmap to financial literacy on microinsurance have all been effectively operationalized to result in a noteworthy market response. With this welcome industry growth, the necessary dispute resolution mechanisms are being installed to ensure that consumers are protected and industry integrity is preserved.

Philippine insurance dispute resolution today

Disputes in insurance arise when insurance companies commit bad faith insurance by, among others, failing to conduct appropriate and timely investigation of claims, refusing to settle or reimburse for loss incurred, unreasonably denying benefit claims or under-settling.

Currently, traditional insurance dispute resolution in the Philippines can be coursed through three channels in the Insurance Commission. The Public Assistance and Information Division facilitates mediation conferences for any amount of claim, so long as the objective of the parties involved is an amicable settlement. Should this mediation fail, and if the claim amount does not exceed Php100,000, the case could be forwarded to the Claims Adjudication Division, where a formal complaint is lodged with the aid of a lawyer.

In cases where adjudication fails and the aggrieved claimant files an administrative complaint seeking therevocation of the insurance provider’s license (without necessarily seeking monetary claim), the dispute is then handled by the Regulation Division.

No such dispute resolution system – whether mainstream or alternative – currently exists for the microinsurance sector. The Regulations for the Provision of Microinsurance Products and Services (IMC 1-2010) states that disputes related to microinsurance contracts are to be settled by alternative dispute resolution systems, however, the guidelines for such systems are yet to be developed.

To date, only one dispute case has been brought forth and subsequently settled through the Public Assistance and Information Division. Should additional cases arise in the future, especially from remote or urban areas, both the response capabilities of the IC and the financial capacities of microinsurance clients become vital concerns.

With only two IC satellite offices - one in Cebu and another in Davao - to cater to future microinsurance client complaints nationwide, dispute resolution certainly becomes a physical and financial challenge, especially to a clientele with limited resources. The goal of the ADReM TWG, therefore, is to close the distance – physically and administratively - between conflicting parties and regulator by developing alternative dispute resolution mechanisms.