Life Insurers Being Reinvigorated By Tax Relief

The removal of 5 percent premium tax and 0.25% documentary stamp tax on life insurance policies means continued survival of country’s life insurance industry. The life insurance premium companies from Malaysia, Thailand, Indonesia are stronger better capitalized than Philippine counterpart. The country’s ratio for direct premiums has increased to 0.71 percent. The penetration rate has reached to 1.86 percent in Thailand, 3.38 percent in Malaysia & 8.85 percent in Japan.

Still we are competing with insurers who have found creative ways to sell policies to high value, which deprive government of tax revenues & premiums to insurers. Most nations do not charge premium taxes, with others charging a slap for one time rate.
The removal of 2 tax forms would result in better sales for private insurers with more tax revenues to the government for improved sales. Only 13% of country’s population has 1 form of life insurance, of which 3-5 percent of insurers hold privately issued policies with majority of policyholders relying on government agencies which includes SSS & Insurance systems.

Half of privately issued policies are group insurance agents which are lower than individual policies making them available in terms of protection. Two congressional bills have been passed in 2 chambers of Congress, which the industry is hopeful to be signed by the end of October.
The premium rates have been increased several times which would reduce the tax burden & poor investment climate. At one time, life insurance industry is a negative rating which is due to weak capitalization & low profitability for tax burdens.