THE INSURANCE COMMISSION

• Regulatory government agency

• Executes all laws pertaining to insurance
• Regulates insurance companies

Life insurance contributes directly to the welfare and progress of the country by partially relieving the
community of the care of dependents. It encourages provision for the future and accumulates capital for
investment in commerce and industry. This being the case, the government established the Insurance
Commission.
Regulatory government agency - Under the Department of Finance
Executes all laws pertaining to insurance
- Headed by the Insurance Commissioner
- Adjudicatory powers to settle claims involving not more than P100,000
Regulates different types of companies:
Stock – Stock companies are owned and controlled by people and organizations that purchase shares
and invest their money in the company’s stocks.
Mutual – A mutual company is a cooperative association which has no capital stock, therefore, no
stockholder. The policyholders own and exercise control. Moreover, policyholders have the right to vote
for directors or trustees.

Functions of Insurance Commission

• Issues licenses to insurance companies
• Reviews policy contracts and premium rates
• Examines the financial condition of insurance companies to ensure solvency
• Renders assistance to the public on matters pertaining to insurance

The insurance industry strongly relies upon the trust and confidence of the public. This being the case,
the Insurance Commission (IC) was created to govern
life and non-life insurance companies, and even pre-need insurance companies in the Philippines.
Licenses
- issues licenses for companies to operate in the Philippines
Policy Contracts
- reviews legality of contracts and monitors premium rates of insurance companies

Location - 1071 United Nations Avenue cor. Romualdez St., Ermita, Manila

The Insurance Commission was formerly referred to as the Office of the Insurance Commissioner. The law
that created the Office of the Insurance Commissioner as an Independent office was Republic Act No.
275, which took effect upon the formal opening of the Central Bank of the Philippines on January 3, 1949
and which, in effect superseded the provisions of Executive Order No. 54, dated April 21, 1947 and
Section 169 of Act No. 2427, otherwise known as the Insurance Act.
Address
- Licensing exam is also administered here
Insurance Code of the Philippines
• Rendered the provisions of Presidential Decree No. 612
• Promulgated in 1978
• Also known as Presidential Decree No. 1460
• Special law to govern insurance

The is the Insurance Code of the Philippines.

Since the industry is placed in a position of trust, this special law was promulgated to govern insurance.
The Insurance Code or Presidential
Decree No. 612 was first passed. However, many provisions of the first draft of the Insurance Code were
rendered obsolete in 1978.
Subsequently, a new decree to consolidate and codify all the insurance laws of the Philippines was
passed. It is now known as the Insurance Code
of 1978 or Presidential Decree No. 1460. The Insurance Code contains all the necessary guidelines,
responsibilities and requirements of
insurance companies in the Philippines.

BUILT ON TRUST
• Between the company, the advisor and the client
• Importance of upholding professionalism and proper ethics

Built on Trust
- the company: company has to be registered with the IC, meets its requirements, has the capability to
deliver his promise
- the advisor: advisor has to be qualified, screened and trained by the company and licensed with the IC
to be professional in their fields
- the client: client has to be aware of the benefits and understand what he or she is purchasing before
making his decision
By having a life insurance policy, all three will benefit. Explain.
To uphold professionalism and maintain ethical standards, the IC administers a licensure examination.

IC EXAM and IIAP VALIDATING FINAL EXAM

Requirements and Procedure:
Successfully complete the Sun Life Insurance Concepts Course and choose from either the IC Exam or the
IIAP-Validating Final Exam.

If you opt to take the IC Life Exam, the following are the steps you need to take
Step 1: Pass the Simulated IC Exam at the end of this course.
Step 2: Secure a Test Permit from Sun Life Sales Training and Development
Step 3: Secure Barangay/NBI Clearance
Step 4: Accurately, legibly and completely fill out the Application for Life Insurance Agent's Walk-in
Examination Form (3 copies in your own handwriting)
Step 5: Attach one (1) copy of your 1x1 Identical ID Photo on the upper left hand corner of each
application form
Step 6: Proceed to OIC Licensing Division at United Nations Avenue, Manila to take the exam.
Since the industry is built on the foundation of trust between the agent, client and the insurance
company, it is the IC's duty to regulate the operations of all the companies, including the behavior of
agents who represent the insurance companies, with the aim of ensuring professionalism and ethical
practices. In line with this goal, the IC administers a licensure examination for all its insurance agent
candidates.
The government administers these exams to have adequate control over the conduct of advisors, to
maintain high professional and ethical standards and to protect the public.

CONCEPTS OF LIFE INSURANCE – TRADITIONAL LIFE INSURANCE CONCEPTS

Concepts of
Life Insurance
Man at Work

INC
OMEXPE
E
NSES
In
Memo
OLD DISAB DEAT
ry SICKN
AGE ILITY H ESS

To understand how life insurance works, we need to learn its fundamental concepts and appreciate how
it is used to protect an individual’s income.
To do this let us take a look at a basic concept called Man @ Work. Man works to generate income
primarily used for the family’s expenses. This is the common practice of most people to provide for their
loved ones through their income.
There are however threats to a persons income these threats can be summarized by the acronym ODDS:
O stands for Old Age. Not many people know that living too long is a threat to their income. The
mandatory retirement age in the Philippines is 65 years old, which means once you reach the age of 65 if
you are not prepared for your retirement you may meet an economic crisis
since your income stops, but your expenses continue, and in some cases increase due to the rising costs
of long term health care.
D stands for Death. Dying to soon can prevent your future plans from coming to fruition. From the basic
needs of your family to the
education of your children, these suffer in case you are taken out of the picture.
 You need to make sure that aside from working for your money, you make your money work for you. By
setting aside a certain amount of your income and acquiring a preservation tool in the form of life
insurance, that will act as safety net and mitigate the risks to your income by these 4 threats. It can
provide money to your family in case you are taken out of the picture, it can provide you money for your
retirement, or through its supplemental benefits, provide disability income, or pay for your medical bills
in case you get sick.

That’s why we can say Life Insurance is against all O.D.D.S!

Concepts of Life
THREATS SERVICE BENEFIT
Insurance
Family Death
In Memory Protection Benefit

DEATH

Retirement Maturity
Income Benefit

OLD AGE

Guaranteed Cash
Savings Values

SICKNESS & DISABILITY

Based on what we have learned, Life Insurance can protect your income against all ODDS, through the
basic services it provides:

It can protect against the threat of untimely death, by providing family protection through the death
benefit
It provides for those who live too long and experience old age, by providing Retirement Income through
the maturity benefit

It can also provide ready cash during times of emergencies, or when faced with disabilities or illnesses, by
offering guaranteed savings through the Cash Values

Human Economic Value (LUXURY – COMFORT – SUBSTINENCE – POVERTY)

• Human life has an economic value
• The capitalized monetary worth of the earning capacity of an individual devoted to the support
of his family during his working lifetime

As mentioned, Life Insurance contains the solutions to the problem of protecting human life values
against inevitable economic loss.
The key concept that illustrates this is the Human Economic Value, which states that every human life
value can be expressed as a monetary valuation. This amount can be determined from the total value of
the individual's assets and any future earnings derived therefrom

Human Economic Value is an important tool in Life Insurance since it provides a measurement of how
much financial protection a family may need and is the basis for the needs analysis forms you will learn
to use as an advisor.

Life insurance is able to provide for the uncertainties in life such as untimely death by using the
concept of Risk Sharing.

RISK SHARING
• A group of people places a fund together in preparation for an uncertain event.
• Everyone is prepared to accept a small loss to compensate the unfortunate from the
effect of a larger loss.

Life Insurance is a system designed to protect people against financial hardship in the event of a
loss. This is done when a group of people places a fund together in preparation for an uncertain
event, everyone is prepared to accept a small loss to compensate the unfortunate from the
effect of a larger loss. Thus, life insurance is a risk sharing business

What is RISK?
• Chance of loss.
• Exists when there is uncertainty about the future.

Now that you have working knowledge of the concept of risk sharing let us explain it further by
defining what risk is. Risk is present if there is a chance of loss, and it exists if there is
uncertainty about the future.
TYPES OF RISK:
1. SPECULATIVE RISK – involves three possible outcomes: loss, gain, or no change.
2. PURE RISK – is a risk that involves no possibility of gain; there is either a loss or no loss.
May be insured.

Given this, there are two types of risk involved in relation to Life insurance.

1) Speculative Risk - is a risk that involves three possible outcomes: loss,gain, or no change.
An example of a speculative risk is gambling, if you decide to play games of chance, you
may win money, lose money or just break even the risk you run is speculative in nature. This
type of risk cannot be insured.
2) Pure Risk - is a risk that involves no possibility of gain; there is either a loss or no loss. The
possibility of economic loss without possibility of gain is the only kind of risk that can be insured.
The primary purpose of insurance is to compensate for financial loss, not to provide opportunity
for financial gain.

LAW OF PROBABILITY
• A likelihood that a given event will occur in the future.
• This is used in determining the number of people dying & living at a particular age w/in a
given period.

In determining the level of risk to a person's life expectancy, life insurance companies use 2 laws:
First, is the law of probability that shows the likelihood that a given event will occur in the
future. This is used in determining the number of people dying and living at a particular age
within the given period.

LAW OF LARGE NUMBERS

• The more frequent a particular event is observed, the more likely that the observed
results will approximate the true probability of the event happening.

Second, insurance companies also use the law of large numbers, which states that the more
frequent a particular event is observed the more likely that the observed results will
approximate the true probability of the event happening.
An example of this is a coin toss. We know that there is a 50% probability of yielding heads and
another 50% probability yielding tails. If you toss the coin just 3 times it is
likely that you may yield 2 heads and 1 tail or the other way around. But if you continue to toss
the coin 10, 100, 1000 times, you will notice that the more figures there are to study the more
the figures approach the true probability of the event.
This relates to life insurance as a risk sharing business, since life insurance companies need to
effectively determine mortality or the probability of the incidence of death among a given group
of people.