Various
insurers, with the support of the
Insurance Commission, has urged Congress to lighten the
tax burden on the
nonlife insurance industry in preparation for the “Big One,” or the big earthquake seen along the Marikina Valley fault line cited by government scientists.
Philippine Insurers and Reinsurers Association (Pira) Chairman Michael F. Rellosa said the proposed lowering of tax rates on the
nonlife insurance industry will help the country prepare for the (potential) devastation when it finally comes.
Nonlife insurance companies are slapped with a 12-percent value added tax (VAT) on top of a 12.5-percent documentary stamp tax (DST), while
fire-insurance policies are levied an additional 2-percent fire service tax. On top of these, local governments also impose 0.15 percent to 0.17 percent in municipal tax for
property insurance covers.
At present, the premium tax imposed on
nonlife insurance policies is the highest in the world, ranging from 24.5 percent to 26.5 percent. Singapore only imposes a tax of 7 percent on nonlife
insurance policies, while Thailand imposes only 11.3 percent.
Insurance Commissioner Emmanuel F. Dooc supported the call for lower taxes and has pushed for the passage of the bill in Congress to help prepare the nonlife
insurance industry for more stringent competition when the economic integration within the Asean starts in 2016.
For instance, PIRA said that in the aftermath of Supertyphoon Yolanda (international code name Haiyan) in 2013 when the estimated economic losses aggregated Php571 billion,
local insurers reported losses amounting to Php66 billion because many of the victims were not insured. The cost of the reconstruction required in the aftermath of the disaster effectively became the responsibility of the government.
Were the tax on nonlife insurance policies reduced, such become more affordable for everybody as a shield against post-disaster losses.
In 2010 Congress already reduced the tax imposed on life insurance policies from 5 percent to only 2 percent. The Pira now lobbies for a similar law that will lower the
tax for nonlife insurance companies to more or less, 5 percent.
