THE INSURANCE Commission (IC) issued new guidelines on outsourcing business activities and processes of insurance companies.
According to Circular Letter 2018-72, insurers shall be ultimately responsible to their policyholders for any outsourced activities and for ensuring that the outsourced activities are conducted in a safe and sound manner.
Business process outsourcing (BPO) providers contracted by insurers are not allowed to conduct solicitation activities or perform loss adjustment. These should only be done by insurance firms, licensed agents and brokers.
Solicitation activities are actions deemed to persuade a person to purchase an insurance product. These activities include explaining the benefits or terms of a contract as well as filling out application forms in behalf of the client.
On the other hand, loss adjustment is the determination of the amount to be paid based on the claim of the insured.
Based on the new circular, BPO providers are also prohibited from deciding whether or not to underwrite risks and approve an insurance or reinsurance claim. IC also mandated insurance companies as well as BPO providers to observe and comply with data privacy laws in the collection, holding, processing and use of the clients’ personal information.
Amid their highly complex business environment, hiring BPO providers can be of great help to the insurance industry as it can stimulate and facilitate the productivity of the insurance companies, the IC said in a statement on Wednesday.
Insurance Commissioner Dennis B. Funa said the new regulations are aimed at making sure insurance firms follow guidelines to protect the interest of the insured public and strengthen the insurance industry at the same time.
“The new regulation was issued in recognition of the benefits that can be realized by insurers and reinsurers in the outsourcing of their business process,” Mr. Funa was quoted as saying in the statement.
He added that insurance companies can benefit from outsourcing their non-core businesses to third-party firms in order to focus and improve the efficiency of the in-house staff.
“We recognize that insurance companies can benefit from outsourcing their business processes such as improved productivity of existing operational capacity and trimmed down overall capital expenditures.” — K.A.N. Vidal