Published 18 October 2021, The Daily Tribune

In this jurisdiction, motor vehicles owners and land transportation operators are fully cognizant that one of the essential requirements in registering a vehicle with the Land Transportation Office (LTO) is securing a compulsory motor vehicle liability insurance.

The basis for this requirement can be found in Article 387 of the Insurance Code, which provides that “(i)t shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued to indemnify the death, bodily injury, and/or damage to property of a third-party or passenger, as the case may be arising from the use thereof.”

In complying with the requirement of securing a compulsory motor vehicle liability insurance, a motor vehicle owner or land transportation operation may secure a stand-alone Compulsory Third Party Liability (CTPL) policy or a comprehensive motor vehicle insurance policy with or without a CTPL cover.

A stand-alone CTPL policy is the most basic type of motor vehicle insurance. Such policy covers the expenses incurred as a result of a motor vehicle owner’s fault in causing bodily injury or death to any third party in an accident arising from the use of the insured motor vehicle. This is the minimum coverage required to register a motor vehicle.

While a CTPL insurance is the most common type of motor vehicle insurance, operators and owners who prefer to be protected from a wider range of risks of owning or using a vehicle may opt to secure a more comprehensive motor vehicle insurance. These comprehensive insurance policies usually include the minimum coverage mandated by the LTO. A comprehensive motor car insurance policy may be with or without a CTPL cover.

In this area of motor vehicle insurance, there has been a concern, specifically raised by the Anti-Red Tape Authority, with respect to the perceived redundancy of the requirement of securing a CTPL insurance when a comprehensive motor vehicle insurance policy with a CTPL provision has already been issued covering the same motor vehicle.

According to the Insurance Commission (IC), this redundancy occurs when a CTPL cover which is included in a comprehensive motor policy does not coincide with the date of motor vehicle registration. In such an instance, the CTPL cover is refused to be honored by the LTO, compelling the owner of a motor vehicle or land transportation operator to secure another stand-alone CTPL cover.

In response to this problem, the IC, in cooperation with the LTO, issued Circular Letter 2021-54 last 16 September 2021, which provides the guidelines to synchronize the period covered by comprehensive motor vehicle insurance policies with the registration dates of motor vehicles. The Circular applies to stand-alone CTPL policies or comprehensive motor car insurance policies with CTPL provisions.

The IC specifically requires all insurance companies offering motor car insurance to allow the extension of the period of coverage of CTPL insurance to synchronize the period of coverage with the month of the motor vehicle registration, as indicated by the last digit of the motor vehicle plate number.

In effecting this synchronization, the Circular holds insurers and their agents responsible to inform the insured that the respective period of coverage of their comprehensive motor car policies may be extended at the option of the insured, and to apprise the latter as to the terms of such extension.

Furthermore, the Circular mandates insurers issuing motor-vehicle insurance policies — whether a stand-alone CTPL policy or comprehensive motor car insurance policy with CTPL cover — to issue a Confirmation of Cover (CoC) for motor-vehicle registration with the LTO. It also requires insurers to ensure real time-authentication of the issued CoC.

In sum, the Circular was issued to ensure efficiency in the registration or renewal of registration of motor vehicles, to avoid redundancy in the coverage of motor car insurance policy, and to instill convenience of the insuring public — all in compliance with Republic Act 11032, otherwise known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018.

For orderly and proper transition, insurers are given until 31 December 2021 to review their records for comprehensive motor car insurance policies issued without a corresponding CTPL cover.

The same deadline is also given for insurers to issue the necessary notices to policyholders with respect to the extension of the period of coverage of the comprehensive motor car insurance policies.

Violators of the provisions of the Circular shall be penalized with a fine amounting to P5,000 for each violation.

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