IC hails ruling vs CIC demand for data on policy loans
THE Insurance Commission (IC) has welcomed the ruling of the Makati Regional Trial Court nullifying a circular issued by the Credit Information Corp. (CIC) requiring insurers to submit the premium payments, insurance contracts and policy loans of its clients.
In a statement on Tuesday, Insurance Commissioner Dennis B. Funa said the decision of the Makati RTC affirms the IC’s position that insurance contracts, premium payments and policy loans are not basic credit data and do not have anything to do with a person’s credit standing.
“The decision of the Makati RTC supports our stance that policy loans should not be treated as reportable credit transactions under the Credit Information System Act [Cisa]. For the past three years, this Commission has been trying to explain and convince the CIC that policy loans, as one of the benefits of an insurance contract, are not credit data that are required to be reported under the Cisa. However, all our arguments have fallen on deaf ears,” Funa said.
On January 4, Makati RTC Branch 56 decided to nullify CIC Circular Letter 2017-04, which requires insurance companies to submit the premium payments, insurance contracts and policy loans of its clients.
The Makati RTC was acting on the Petition for Declaratory Relief filed by the Philippine Life Insurance Association Inc. (PLIA) in line with the requirements under the CIC circular letter.
“The CIC dismissed all our arguments by simply invoking that the same are bereft of probative value in relation to the coverage of the Cisa. It was at this instance that the PLIA was forced to elevate the issue before the court,” he added.
The court declared that premium payments, insurance contracts and policy loans are not within the ambit of basic credit data required to be submitted under Republic Act (RA) 9510 or the Cisa, as it does not pertain to a borrower’s performance on a loan, credit line, guarantee or any other form of financial accommodation.
In its decision, Judge Bonifacio S. Pascual pointed out that, for an information to constitute basic credit required to be submitted to the CIC under R A 9510, the information must be either positive credit information or negative credit information.
“For this reason, it is apparent that for information to be submitted to the respondent, the basic credit data must be either positive or negative. This is an unconditional prerequisite of the law, as the objective of RA 9150 is to create a credit information system that will directly address the need for reliable credit information concerning the credit standing and track records of borrowers,” the decision of the Makati RTC said.
In ruling that policy loans, premium payments and insurance contracts do not reflect the insured’s creditworthiness, the court emphasized PLIA’s arguments that policy loans are in the nature of advances against the policy benefit fund that is earned as payments are made on the policy through the years.
“...taking out a policy loan may or may not reflect a need for cash by the policyholder. Availing of the same is the sole option of the policyholder as it is a benefit feature of the insurance policy granted to him by law. He may use it any which way and whenever he wants to. That is not an indication of risky behavior. On the contrary, the policyholder may use the same so that he does not need to apply for a loan from somebody else. He may even just invest it to allow higher yields,” Plia said.
The court also ruled against the CIC’s argument that the submission of policy loans, premium payments, and insurance contracts does not constitute violation of the Data Privacy Act (DPA) as it is expressly excluded from its coverage.
“The main issue is that insurance policy loans have nothing to do with one’s credit standing,” Funa said.
The Credit Information Corp., headed by its President and CEO Jaime P. Garchitorena, was created in 2008 in line with RA 9510, which is mandated to collect credit information for the establishment of a comprehensive credit information database.
Under RA 9510, banks, insurance companies, and credit card companies, among others, are required to submit basic credit data to the CIC on a regular basis.