New taxes stifle growth of insurance sector

Life insurance companies are against the imposition of new taxes as it would hurt the industry and the insuring public.

Already the country’s penetration rate is one of the lowest in the Asia Pacific region, but it plummets to between four to five percent if the mandatory coverage of the Government Service Insurance System (GSIS) and the Social Security System (SSS) is removed.

It is also estimated that a little over 20 percent of the country’s population have one type of life or personal accident insurance coverage.

“New taxes will only hurt the already-burdened insurance industry, and it will have a negative impact on Filipinos without insurance,” Lorenzo O. Chan Jr., president and chief executive officer of Pioneer Life Inc., said during the formal launching of its unique Sparx products.

Chan said that they are not only against Revenue Memorandum Circular 30-2008 (RMC 30-2008), which imposes new taxes on the country’s insurance industry.

Insurers are also for a reduction of the existing taxes including the five-percent premium tax on life insurance policies, and the documentary stamp tax (DST).

Earlier, the Philippine Life Insurance Association (PLIA) and the Philippine Insurance and Reinsurance Association (PIRA) issued joint and separate position papers commenting on the BIR ruling. They also called for its suspension if not revocation.

RMC 30-2008 among others imposes a DST not only on the group insurance certificates but also on the certificates issued to individual covered by the group insurance. “That makes the value of the individual policy even smaller if not worthless,” they said.

The BIR circular limits the cost of service to only claims, losses, maturities and benefits and excludes salaries, employee benefits, cost of facilities and supplies and other expenses incurred in running the business which are accepted under the Tax Code. It violates Section 27E of the Tax Code.

Insurance Commissioner Eduardo T. Malinis meanwhile confided that representatives from both the life and non-life insurance industry will be meeting with officials of the Department of Finance on the position paper earlier submitted by the industry organizations. However, no date had been arranged.

The finance department had informally asked the Bureau of Internal Revenue (BIR) to temporarily suspend RMC 30-2008. However, BIR officials said that the finance department must issue a department order before the circular can be suspended.

Pioneer Life was already forced to re-price its policies upwards last year to be able to cope with the tax environment as well as the poor investment climate in the past three years. Fortunately, it was able to introduce new products.

Chan said that the Sparx products is a micro-insurance product that follows the sachet concept. It is also designed to introduce savings and insurance protection to the youth.

“It is a bite-size insurance product that is affordable and simple to acquire,” the Pioneer Life chief executive said, adding that for a minimum of P100, a child can get insurance protection. It can also be increased by buying additional cards for the same value or as much as P5,000.

It comes in a scratch card much like Internet or mobile phone cards. And registration is just a half page process either through the Internet, through mail or simple traditional forms.