The Insurance Commission warned that the proposal obliging life insurance and pre-need companies to grant one-year moratorium to all policyholders would spell financial danger to protection industry.
Insurance Commissioner Dennis B. Funa said the proposed 365-day moratorium on life insurance and pre-need premium payments would further exacerbate the already adverse economic effects of the pandemic to the business.
While the proposed moratorium on premium payments under Bayanihan to Recover as One bill (Bayanihan 2) is favorable to customers, this, however, takes a heavier toll on life insurance and pre-need firms’ financial and capital positions.
“If passed into law, [it] will add to the life insurance and pre-need industries’ challenge of generating as much premiums from its existing business,” Funa said in his letter dated August 12, 2020 to members of the Bicameral Conference Committee of Congress.
“Right now, said industries need to generate such premiums from existing business in order to offset the decline in new business premiums resulting from the slowed market demand,” Funa explained.
Instead of a yearlong moratorium, Funa suggested an alternative grating a 30-day extension to the existing one-month contractual grace periods under insurance policies and pre- need contracts.
Taken together, Funa said his proposal, which “achieves a balancing of interests,” makes for a total extension of 60-days in favor of the consumers.
“The suggestion affords both life insurance and pre-need customers, as well as life insurance and pre-need companies, much needed relief from the adverse economic and financial effects of the COVID-19 pandemic,” Funa said.
“It will help ensure the continued ability of life insurance and pre-need industries to service their commitments to and respond to the needs of their customers in these trying times,” he added.