Workers question insurance licensing as deadline nears

As the annual deadline nears for local insurance firms to renew their government licenses, foreign workers and labor activists on Saipan are wondering whether the Department of Commerce will let a host of insurers remain in operation despite concerns that apparent financial shortfalls have prevented them from paying worker claims.

“I have two kids… I need these unpaid wages,” said one 38-year-old alien worker Wednesday outside the federal labor ombudsman’s office, which deals with foreign worker and immigration issues. “I have two kids and this is very hard,” she said, adding that she now has to make regular trips to the ombudsman’s office during the only hour she has free from work.

Foreign workers in the Commonwealth often receive insurance, purchased in the form of surety bonds, from their employers as a safeguard should the businesses where they work fold. The bonds can provide unemployment payments, sometimes as much three months’ worth, and often money for an airline ticket to return them to their home country.

Yet according to local insurance industry and labor sources, many firms on the island lack the fiscal solvency to pay such claims, leaving workers to pursue payment through the CNMI Department of Labor, which recently has begun diverting many workers with grievances to the island’s small claims court.

Now, the CNMI Department of Commerce’s annual deadline for insurance companies to renew their business licenses—slated for the end of June—is drawing near and labor observers are curious whether several companies that reported steep financial deficits in a 2005 report will once again win approval.

“The biggest question is: Why is the government allowing these companies to operate when they can’t pay on these bonds?” asked Irene Tantiado, president of the Coalition of United Workers, a local labor group, in an interview Tuesday.

These deficits, often six-figure sums, would be enough for regulators and insurance associations on the U.S. mainland and elsewhere to forego renewing an insurance company’s license until they could obtain more money to back the bonds they sell. But lax regulation by the local government, however, has allowed some companies to get away with selling surety bonds that they cannot pay, “ultimately to the disadvantage of the insured,” the source says.

According to the 2005 Commerce survey, at least four local insurance companies reported financial deficits greater than the capital they had available and three others also reported negative surplus figures. Most of those companies remain in business.

Whether the information in the report is still accurate remains uncertain because Commerce has yet to finalize at least two years’ worth of insurance industry data, which companies submit to it on an annual basis. In an interview Wednesday, Commerce might have figures for the 2006 data available in the coming weeks, pending an approval of their release by the governor’s office, according to Secretary James Santos.

Most of the insurance companies listed in the Commerce report as having deficits did not immediately respond to requests for comment. However, a representative with one company, Oceania Insurance Corp., said the company now has a more than $6 million surplus and is “downsizing” the wage and labor bond segment of its business.

Meanwhile, Santos said it is unclear whether the companies at issue in the 2005 report now meet Commerce’s standards for renewal of their license. Commerce “wouldn’t renew their licenses if they weren’t in compliance with what’s required under our regulations,” Santos said. “We have to look at their financial solvency and their status to decide that.”

Insurers can get an insurance license from the CNMI Department of Finance, but “they cannot by law be selling insurance policies if they don’t have a license out of Commerce,” Santos said.

Explaining the backlog in the department’s analysis of insurance firm data, Santos said it is largely due to a shortage of key technical staff at Commerce, among other issues.

Lillian Pangelinan, a banking administrator with Commerce, added that the staff taken from other segments of the department to deal with insurance firm issues faces a “learning curve,” which is one reason why Commerce has “not been aggressive” in pursuing enforcement action against insurers.

There is “a shortage of staff to go in and do the examinations needed to shut [insurance companies] down,” she explained. The department, however, has begun “slowly moving towards” resolving those issues. “There’s something in the works,” she said. “Normally, what we expect is for Labor to advise us. Part of the reason we continue to issue these licenses is that we have not heard anything” negative about the companies from that department, she added.

But until a solution to these problems surfaces, workers will likely continue pursuing their unpaid wages through the local and federal government.

“I hope that everyone who has these unpaid wages can get them somehow,” said the worker at the ombudsman’s office.