INSURANCE and reinsurance firms will now have to get approval from the Insurance Commission (IC) before they enter agreements with any business process outsourcing (BPO) providers.
According to the Circular Letter No. 2019-49 issued and signed by Insurance Commissioner Dennis B. Funa, the application for pre-approval of an outsourcing agreement will be filed before the IC’s Regulation, Enforcement and Prosecution Division (REPD).
“An insurer/reinsurer shall not enter into an outsourcing agreement/contract with a BPO Provider unless said agreement/contract has been pre-approved by this Commission,” the circular read.
The REPD will submit a recommendation to the Insurance Commissioner if the proposed agreement has no violations based on the guidelines for BPO activities as stated in the Circular Letter No. 2018-72.
The commissioner will have the power to approve or reject the application.
The REPD will also have to keep a record of all approved outsourcing contracts.
The guidelines for outsourcing activities of insurance or reinsurance companies released in December did not require prior approval of entering into BPO agreements. The rules stated that insurers should be “ultimately responsible to their policyholders” for all outsourced activities and ensure that they are conducted in a “safe and sound manner”.
However, BPO providers are not allowed to do solicitation activities or perform loss adjustment because they should only be done by insurance firms, licensed agents and brokers.
Solicitation activities refer to actions that persuade a person to buy insurance products, including explaining the contract, making recommendations, as well as completing orders or application forms in behalf of the client.
Also, the insurance firm should be capable of continuing its operations if the provider cannot perform its duty.
Mr. Funa said in January that the guidelines are meant to ensure that companies will protect the interest of their insured clients and strengthen the industry as well. — B.M. Laforga