Insurance Law and Regulation: The Insurance Code, RA 10607 and IC Issuances
Domain 1 tests the statutory skeleton of Philippine insurance: the Insurance Code (PD 612, as amended by RA 10607), the rule-making and licensing powers of the Insurance Commission, and who may lawfully transact insurance business. Expect short fact patterns about licensing, capital and enforcement rather than abstract definitions.
Statutory frame
The Insurance Code (Presidential Decree 612, 1974) codified the old Insurance Act; Republic Act 10607 (2013) amended capital, licensing and governance provisions. The Insurance Commission, headed by the Insurance Commissioner, issues circulars, circular letters and advisories that bind licensees - they are regulation, not optional guidance. Sec. 2 defines insurance as a contract whereby one undertakes, for a consideration, to indemnify another against loss, damage or liability arising from an unknown or contingent event; that definition anchors most coverage disputes.
Licensing and capital
Insurers, reinsurers, brokers, agents, loss adjusters, actuaries and mutual benefit associations all require IC licences. For brokers the requirements include citizenship or ownership rules, an examination, office and experience standards, a surety bond and minimum net worth, with licences issued for fixed terms and renewable. RA 10607 lifted insurers' minimum paid-up capital to P1 billion by 31 December 2016 on a graduated schedule, with a higher bar for reinsurers and lower thresholds for MBAs. Enforcement tools include examination of books, fines, suspension or revocation, cease-and-desist orders, and conservatorship or liquidation of impaired companies.
Worked example
A licensed brokerage splits its commission 50/50 with an unlicensed "referral agent" who sourced a commercial fire account. Both are exposed: the broker for sharing compensation with an unlicensed person and aiding unlicensed solicitation, the referrer for transacting insurance business without a licence. Sanctions hit the licence and record, not the insured's cover - licensing rules are regulatory, so the fire policy remains fully enforceable between insurer and insured.
Traps
- Assuming a licensing breach voids the insured's claim; usually it does not.
- Quoting pre-2013 capital figures.
- Treating a circular letter as mere advice.
- Assuming a broker licence authorises agency work for an insurer - it does not.