Life insurance sector hit hard by tax costs

The Philippine life insurance industry has been hit hard by the different forms of taxes imposed by the government on the sector, which led to high premiums that eventually resulted to a declining market.

According to Nenette N. Aseniero president of Life Underwriters Association of the Philippines (LUAP), the life insurance players have difficulties in reaching out to the supposedly "fertile" market in the Philippines, because they can not bargain their product to stimulate the interest of individual consumers because of the skyrocketing cost of premiums.

"Too many taxes, that's why hindi na affordable ang product namin to most Filipinos," Aseniero said in an interview during her visit in Cebu recently to grace the general assembly and election of LUAP-Cebu chapter.

The 36 life insurance companies in the Philippines only cover about 12 percent of the total Philippine market.

Before the entry of year 2000, the insurance industry, including life insurance projected to expand its market penetration to cover at least 20 percent of the over 80 million Filipinos.

However, Aseniero said the growth movement of the industry has frozen for the last few years. There was even a year that it plunged because of the unattractive premium cost.

 On the other hand, she said the industry players are now aggressive to tap the huge corporate or group insurance market, convincing employers to get insurance premium for their employees.

Because of this problem, Aseniero said LUAP is supporting a move spearheaded by the Philippine Life Insurance Association (PLIA) to ask the government to reduce the taxes imposed by the industry.

"We are the most heavily taxed industry in the country," Aseniero said adding that another jack up of tax rates would further cripple the industry.

Aside from other documentary fees, and smaller taxes, the life industry is burdened with premium, documentation, and corporate income taxes.

PhilAm Life president and chief executive officer (CEO) Jose L. Cuisia Jr is now leading the advocacy asking the government to reduce the tax requirement to the life insurers.

What sustains the industry players now, is the good young Chinese market, that are now recognizing the importance of getting insurance products, such as life, she said.

Unless, duplication of tax obligations is lifted up, Aseniero said it is harder for the life insurance industry to climb to 20 percent market penetration in the Philippines in the next few years.

In 1999, there were a total of 40 companies engaged in providing life insurance products to the Philippine market. In 2003 up to now, there are only 36 companies left.

Big top five players include; PhilAm Life, Sun Life of Canada, Insular Life, Philippine AXA Life, and Ayala Life.

She added that the LUAP is also working on to further professionalize the players to protect the image of the industry, wiping out the agents that are only "moonlighting".