Joint IC-CDA-SEC Memorandum Circular “Informal Insurance”

CDA is consistent in improving the operation of the cooperatives because of the

guidelines they are implementing. Together with these guidelines are the provisions for the betterment of cooperative’s member and stability of the cooperatives.

            One of these provisions is about the informal insurance or insurance like activities by the cooperatives. Based on Joint IC-CDA-SEC Memorandum Circular No. 01 – 2010 entitled “Defining Government’s Policy on Informal Insurance Activities” that entities/cooperatives undertaking or will undertake insurance activities are required to comply with the provision of the insurance code including the requirement of securing a Certificate of Authority from the Insurance Commission. This provision defines insurance activities as activity wherein contributions/premiums are regularly collected prior to the occurrence of a contingent event.

            But what is really the objective of having insurance or being insured and how does it help? Insurance company takes the risk of large but uncertain losses in exchange for small premium. So it gives a sense of security, which is a real gift to a business man. If all uncertainty could be removed from business, income would be sure. Insurance removed/reduced many uncertainties and to that extent is profitable. Insurance companies also spend large sums of money with a view to finding out the reasons of fire accidents, theft and robbery and suggest some measures to prevent them. They also support several medical programs in order to make the public safety minded. Without such losses preventive activities of insurance companies, the chances of loss would have been greater than they are at present days.  

            This provision terminate informal insurance or insurance like activities within one year from the effectivity of this circular which is 15 days after publication in a newspaper of general circulation in the Philippines, but due to various request of certain sectors to be given ample time to formalize their informal insurance this provision was extended wherein the period which entities shall formalize and terminate their informal insurance is extended until December 31, 2011.

            Another provision regarding the informal insurance was also released last June 25, 2011 to give guidelines on the treatment of funds collected from informal insurance activities. This provision states that “Pools of Funds accumulated by entities from the operations of unauthorized insurance or insurance like activities shall be used exclusively for the benefit of the contributors who will continue to be covered by insurance or insurance like contracts with authorized providers”.

            Few people realize the importance of life insurance and most people do not understand the importance of life insurance until they have lived through a tragedy of love ones death and the impact of inadequate insurance coverage. People often feel that to talk about death is to invite it into their lives – it’s the ‘knock on wood’ type of superstitious thinking. Death doesn’t discriminate like that, and bad things do happen to very nice people. The key to dealing with the issue of unforeseen accident, injury or death is to focus on the impact to your loved ones if you were suddenly gone. Immediately, you realize that it isn’t actually about you and your zest for life – it’s about protecting the financial future of your family.

            The objective of this provision is to protect the general public from unsafe and unsound insurance and informal risk protection schemes and the procedure to formalize an informal insurance is either secure a Certificate of Authority to the Insurance Commission or make a contracts to an authorized insurance provider.

Nothing is more uncertain than death’s timing and nothing is more certain than Life Insurance!