Insurance Regulation and Ethics
What this domain tests
The regulatory framework under the Insurance Code (PD 1460, as amended) and Insurance Commission rules: licensing, market conduct, agent and broker duties, and anti-fraud.
Core rules
- Regulator. The Insurance Commission licenses insurers, agents, brokers, adjusters and reinsurers; it approves policy forms and rates where required and monitors solvency and market conduct.
- Licensing. No person may solicit or transact insurance without a license. Agents represent the insurer; brokers represent the insured. An agent's authorized acts bind the insurer.
- Conduct. Rebating, misrepresentation, twisting and unfair claim practices are prohibited. Commissions may be paid only to licensed persons.
- Disclosure. Insurers must explain cover, exclusions and duties; privacy and anti-money-laundering rules apply.
- Anti-fraud. Fraudulent applications, staged losses and exaggerated claims can lead to denial, rescission, criminal prosecution and license revocation.
Worked example
A licensed agent offers a client a personal rebate from her commission to win a fire policy. Even if the client accepts, the rebate violates the Insurance Code anti-rebating rule. The agent may face suspension or revocation, and the insurer may face regulatory action. If an unlicensed person instead solicits the same policy, the insurer may not be able to enforce the contract in the same way, and the unlicensed person is exposed to penalties.
Traps
Do not confuse an agent with a broker; do not assume a licensed agent can act outside the insurer's authority; do not treat rebates as harmless marketing; and do not ignore the difference between regulatory approval and contractual enforceability. Fraud findings can be civil and criminal.