Imagine a country where one tenth of the population works and lives abroad. Where I am from, which is the Philippines, this is the reality: that 9 million of a population estimated at 90 million are situated in a foreign country. Officially, these expatriate Filipinos have been dubbed as Overseas Filipino Workers or OFWs, a segment whose majority of income, obviously earned abroad, is channelled back into the country, behaviour driven predominantly by the family comes first mentality of Filipinos, which has given rise to the occasional comment that the Philippines might just be a Latin American country that so happens to be located in the hustle and bustle of Asia.
The remittances are no laughing, piddling matter either. In 2010, OFW remittances are estimated to amount to over 18 billion US dollars and a significant chunk of this influx has driven up domestic consumption and bolstered the peso-dollar exchange rate. An acquaintance of mine recently purchased a high-end condominium in one of Manila’s more up-and-coming business districts, the skyscraper-filled Bonifacio Global City, more commonly known as The Fort, and she commented that the neighbouring units were mostly owned by OFWs, demonstrating the extent of their purchasing power.
The government has also paid heed. With at least 12% of the country’s GDP attributable to OFW remittances, local politics has always leaned toward the protection, welfare, and interest of OFWs and, most government policies, if not all, are favourable toward a segment that has also been characterized as the country’s unsung “modern-day heroes”. This support has shifted into higher gear with the passing of Republic Act (R.A.) 10022 by the government of President Benigno S. Aquino III, which lays the foundations for expanded support of OFWs. “The implementation of R. A. 10022 is a challenge that puts the DOLE [Department of Labor and Employment] at an even bigger forefront of OFW social protection,” said DOLE Secretary Rosalinda Baldoz in a separate news article.
R.A. 10022, which amends R.A. 8042, the initial act promulgated into law to look after the welfare of Filipinos abroad, is officially and breathlessly titled “The Migrant Workers and Overseas Filipinos Act of 1995, As Amended, Further Improving the Standard of Protection and Promotion of the Welfare of Migrant Workers, Their Families, and Overseas Filipinos in Distress, and For Other Purposes.” And while the name may be a mouthful, the contents of the act itself have generated a ripple in the insurance industry due to one of the act’s key components, which requires recruitment agencies—defined as recruitment or manning agencies licensed by the Philippines Overseas Employment Agency (POEA)—that deploy OFWs to provide them with a specific, unique type of insurance. The nuance of the law is that rates are prescribed and contingent on the length of the cover required and they should come at no cost to the worker, meaning the premium is borne by either the principal or the agency. Perhaps in a bid to hammer home the message that the government is deadly serious, the act is stringent on those who fail to comply. Under the law, any licensed recruitment or manning agency which passes on the cost of insurance coverage to the worker, or uses such insurance coverage as basis to claim any additional fee “shall lose its license and all its directors, partners, proprietors, officers, and employees shall be perpetually disqualified from engaging in the overseas recruitment business.”
This new hybrid insurance product meanwhile blends non-life and life benefits together with emergency assistance services and the coverage appears to be as extensive as the title of the act itself: it includes contingencies for accidental death, natural death, permanent total disability, repatriation costs, a subsistence allowance, settlement claims, compassionate visit, medical evacuation, and medical repatriation. At the onset of implementation last October, the Insurance Commission had already approved three of the local market’s largest carriers to distribute and provide the cover: Pioneer Insurance, Paramount Life and General Insurance Corporation, and the Passenger and Accident Management Management and Insurance Company (PAMI), which is acting on behalf of Philippine Charter Insurance Corporation and United Coconut Life Planters Assurance Corporation. But there are rumours and rumblings of more carriers vying for accreditation and hoping to get on board, including Malayan Insurance, which leads the nation’s local carriers in terms of premiums written.
Brokers have also gotten on board and where we have tried to create a niche for ourselves is in our approach to servicing. Most other brokers will only go so far as setting you up with a provider but our attitude at Lacson & Lacson is to go the extra step and relieve you of the operational burden associated with the procurement of cover. In other words, aside from selecting for agencies and principals the best security, we take care of the procedural aspects, such as enrolment of OFWs in the compulsory insurance scheme, provision of proof of cover on a timely basis so that OFWs can be deployed on schedule, and finally, our pride, the active negotiation of claims. We always say that, as brokers, we work for the insured in order to make their insurance work for them. I am also proud to say that so far this sort of approach has garnered us two of the country’s top ten recruitment agencies and we have partnered up with these agencies such that they are able to comply minus the hassle but with the guarantee of good security and a broker looking after their back.
Whether it’s been a boon or a bane, though, is another question altogether. The primary criticism has been the overlap with existing insurance or coverage already provided for by the principals and agencies and, not unexpectedly, the added cost of the insurance. The biggest voice creating a stir is none other than the country’s Vice President, Jejomar Binay, also the presidential adviser on OFW-related concerns. “Considering the complaints, I believe it is necessary to re-evaluate RA 10022. That is why I’m calling on the labor committee of the Senate and the House of Representatives Overseas Workers Affairs Committees to defer the implementation of the law pending its review,” Binay urged lawmakers.
Agencies that primarily deploy sea-based OFWs who are based in vessels and tasked to carry out work as crew or skilled technical labourers have also voiced out their concern during these initial months of implementation. When I met with some prospect agencies in the months leading up to the implementation date of the act, their feedback was that the regulation was more beneficial for land-based OFWs and they sighed in exasperation that the maritime agencies, which are already governed by the highly-regulated world of maritime law, had not been consulted from the beginning. Some argued that the coverage was already being provided for through the P&I clubs and there have been a few rogue agencies that have dared to dissent by not complying—and have actually gotten away with not providing the mandatory coverage. The buzz is that the Philippines Overseas Employment Agency or the POEA, the regulating body in charge of implementation and enforcement of the act, has opted to treat these initial months as a grace period, with strict compliance to be mandated beginning February of this year.
On top of that, there is also the issue of the cost. The premiums denominated in US dollars, start at $56.70 per head for a sea-based worker deployed for six months, and the numbers can add up when you are deploying in the thousands, leading to a large, unplanned, out-of-budget increase in your recruiting costs.
For now, though, implementation appears to be on course and come February it should be full speed ahead. “There is no suspension because the law has been implemented. This will continue,” DOLE Secretary Baldoz said in an interview, though she did state that the congressional oversight committees on the law would still listen and hear proposals that would help mitigate any negative impact of the law on OFWs.
And so perhaps the only sure thing for all parties involved is this: the coming months will definitely be interesting.*
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Nicolas Lacson is the Chief Operating Officer of Lacson & Lacson Insurance Brokers, Inc. (LLIBI), a leading non-life insurance broker in the Philippines committed to providing professional advice for your insurance needs. LLIBI takes pride in assisting its clients by negotiating for claims on their behalf. The Philippine member of the Worldwide Broker Network (WBN), LLIBI is also the third largest broker in the Philippines in terms of paid up capital. To view LLIBI’s extensive range of insurance solutions visit www.llibi.com.
