Pru Life UK is pushing for the lifting of the premium tax on insurance, saying such a move will address the problem of low insurance penetration rate in the Philippines.
Antonio Manuel De Rosas, president and chief executive officer of Pru Life UK, said eliminating the premium tax would make insurance products affordable for most Filipinos.
He echoed the stand of several other industry players that many Filipinos could not afford to buy insurance products because they had to focus spending on basic needs. The industry believes lowering the cost of insurance, particularly through the lifting of the 3 percent premium tax, will encourage more Filipinos to buy insurance.
“To improve the penetration rate [of insurance products in the country], the government can remove premium taxes altogether, encourage distribution through banks, not only universal banks, and other channels,” De Rosas told the Inquirer.
In the Philippines, only about 4.5 percent of Filipinos have insurance policies. The rate is one of the lowest in the region.
In neighboring countries, including Singapore, the insurance penetration rate exceeds 100 percent as some individuals hold two or more insurance policies.
The push for the total lifting of the premium tax comes following the move of the government last year to reduce the premium tax from 5 to 3 percent.
Industry players said that despite the reduced tax rate, the insurance industry in the Philippines remained heavily taxed.
Besides high cost, the lack of financial education is another reason cited for the low insurance penetration rate in the country.
De Rosas said there should be more programs to improve the financial literacy of average Filipinos. Education is believed to make more consumers in the country appreciate the importance of insurance products.
“Financial literacy is learnt bottom up. It starts at home. The government can engage via public schools, communities, households, among others, on the concept of budgeting, saving and investing,” De Rosas said.
In the meantime, the Bangko Sentral ng Pilipinas said the need to enhance financial literacy among Filipinos was already being addressed. It recently entered into a partnership with the Department of Education for the implementation of a program on financial literacy among elementary students.
Under the agreement, the BSP will assist in the formation of the curriculum for elementary school students.