Sec. Mar Roxas move to reforms PUV's insurance upheld by court

DOTC Secretary Mar Roxas
A regional trial court (RTC) has upheld the government’s initiative to institute reforms in the passengers’ insurance program for public utility vehicles (PUV) which will lower insurance cost and protect the riding public’s interest.
DOTC Sec. Mar Roxas’ move to introduce reforms in the Passengers Personal Accident Insurance Program (PPAIP) administered by the Land Transportation Franchising and Regulatory Board (LTFRB) was affirmed by the Quezon City RTC.
The court order issued by Quezon City Judge Lita S. Tolentino-Genilo dismissed a petition for a temporary restraining order (TRO) against LTFRB’s move to open up accreditation for providers of this insurance service.
“Judge Genilo’s decision clears the way for the insurance reform which will open up competition and entry for free-market forces in accident insurance management,” Roxas said.
In August 2010, LTFRB took a move to open the process for accreditation of a new management group to implement the PPAIP.  It was opposed by TNC Insurance Management Agency Group through a TRO filed with the RTC. But the order enables LTFRB to pursue the reform.
“LTFRB under its chairman James Jacob will now move forward to open up the insurance coverage industry.  He has already been talking with eight insurance companies who are willing to compete for the right to give our passengers a good insurance service,” said Roxas.
Jacob said an accreditation process for new insurance agents will be carried out by the LTFRB beginning October 24, and will end on November 15.
“First we want to ensure that these companies have the financial capability to pay insurance benefits because we want to avoid the risk of non-payment from fly-by-night insurance companies,” said Jacob.
“By opening up the competition, we’ll have lower insurance premiums, and there will be more benefits for our passengers.”
Prior to this reform, the industry was dominated by only two players—PAMI for those registering odd-numbered plates and by UNITRANS, even-numbered plates.
“With the high price of diesel, we want to help jeepney operators enjoy a lower price for insurance premium, while passengers will benefit from wider coverage,” Roxas said.
LTFRB aims to impose an “all risk, no fault” insurance policy to the five insurance agencies that will be accredited.  This policy ensures that any passenger that meets an accident will be paid by a PUV operator regardless of who is at fault in an accident.
“We have set a maximum premium and minimum benefit for the accreditation process.  Those applying for accreditation will now compete in order to bring down the premium and raise the benefit,” said Jacob.
From around P1,000 insurance premium at present, LTFRB has set a maximum insurance premium of P900 per registered vehicle.  This applies for all types of PUV—whether jeepney, taxi, FX Asian Utility Vehicle, or bus.
Under the accreditation process, death benefit is now raised to a minimum of P75,000 from the prevailing P50,000.
The LTFRB has so far pre-qualified eight applicants for the accreditation.
The requirement for financial capability imposes that an applicant should have a minimum paid-up capital of P125 million each if an organization belongs to a group.  If one is a lead company in a group applicant, it should have a paid-up capital of P250 million, while a single company should have a paid up capital of P500 million.
“But we will not only look at your paid-up capital. We’ll also look at your liquidity.  We’ll look at your assets vis a vis your liabilities because you might have a high paid-up capital, but you have lots of debts to pay,” Jacob said.
“All five companies that we will accredit should have a common claims (reserve) fund of say P30 million.”
Another qualification under the accreditation process is the rate of settlement process of a company or the number of days by which it can pay insurance benefit—the shorter, the better.
The applicants will also win an accreditation based on its number of branches or presence nationwide, particularly near LTFRB’s nationwide offices.
Out of the estimated 400,000 registered vehicles with LTFRB, more than half are PUVs.