NHMFC, eight insurers flagged over MRI deals
Credit to Author: Jordeene B. Lagare| Date: Tue, 04 Feb 2020 15:00:29 +0000
THE Philippine Competition Commission (PCC) on Tuesday raised anticompetition concerns over the imposition of exclusive life insurance by the National Home Mortgage Finance Corp. (NHMFC) and several insurance companies on their account holders.
In a statement, the antitrust agency said its Enforcement Office charged the NHMFC and eight insurers for signing agreements on providing mortgage redemption insurance (MRI) to account holders when other firms offer better terms and conditions.
The eight were the Beneficial Life Insurance Co. Inc.; Country Bankers Life Insurance Corp.; First Life Financial Co. Inc.; Fortune Life Insurance Co. Inc.; Manila Bankers Life Insurance Corp.; Philippines International Life Insurance Co. Inc.; The Manufacturers Life Insurance Co. (Philippines) Inc.; and United Life Assurance Corp.
The PCC’s investigative and prosecutorial arm also charged members of the executive committee who administered the agreements, namely President Ignacio Macrohon Jr.; Vice President Daniel Mercado Jr.; Jaime Santiago, chairman of the technical committee; and Evelyn Carada, secretary and treasurer.
Based on a statement of objections filed on Dec. 27, 2019, the Enforcement Office said the NHMFC and the eight companies violated Section 14(c) of Republic Act 10667, or “the Philippine Competition Act.”
Under RA 10667, entities found to have entered into anticompetitive agreements could face an administrative fine of up to P100 million.
The respondents, the PCC said, signed agreements allowing the insurance firms to exclusively and indefinitely provide MRI to borrowers whose loans have been assumed by NHMFC as secondary mortgagor.
One of the anticompetitive agreements has been in effect since 1980.
“This exclusive arrangement effectively deprived NHMFC and the housing loan borrowers of choosing MRI coverage from other providers, which may offer better terms and conditions at lower premium rates,” the PCC explained.
“Any insurance company wishing to offer MRI to NHMFC is effectively required to go through the pool, thereby foreclosing competition in the relevant market. Additionally, the agreements cannot be terminated by mere notice, aggravating their foreclosure effect,” it said.
With these deals, the insurance group enjoyed the lack of any competitive constraints. This resulted in poor service, unfavorable premium rates and lack of options to the detriment of thousands of account-holders, including low-cost and socialized housing borrowers.
The investigation was initiated when the NHMFC approached the PCC during the two-year transitory period of the PCA, seeking review of its agreements with the pool.
Prior to RA 10667’s passage, the NHFMC had attempted to end the said agreements, but faced legal obstacles brought about by the pool.
As secondary mortgagor, the NHMFC manages different mortgage loan portfolios that are originated by banks, housing developers and other primary lending institutions that offer loans for socialized and low-cost housing.