Insurance system needs more study

IT’S a fair move by Parliament to postpone the second reading of the Employment Insurance System (EIS) Bill 2017 to the next parliamentary session for further deliberation with stakeholders. I wrote several articles on the EIS early this year, raising concerns over the motive and cost benefit analysis of the scheme.

It surprised me that it was tabled in Parliament, which implies that the Human Resources Ministry had not adequately engaged other ministries on the matter. The Deputy Finance Minister’s statement that Socso would stand to collect RM1.4bil annually from 6.5 million employees while only a small number of people would benefit has merit.

The implied conclusion is that Socso decided to address its existing financial deficit by creating new benefits rather than addressing the weakness in the current scheme and its operational efficiency.

As a medical doctor and professional reinsurer with a combined experience of 28 years, I am convinced that the EIS, though noble, has motives beyond nobility. Comparing the contributions made to the cost of a cigarette does not reflect the true value of the scheme.

Insurance is about helping each other. When insurance companies issue new products, it is done with profit in mind as it takes into account the probability of a benefit being triggered at the background of voluntary take-up of the product.

In the case of the Socso EIS, it has the law behind it to make it compulsory. All that’s needed is proper and robust actuarial analysis to justify the cost.

My view is that the proposed scheme is oppressive with benefits that do not commensurate with the mandatory cost.

Socso must understand that it is a secretariat that takes care of the benefits of various stakeholders whose opinions matter.

The EIS would impact on employers and Malaysia’s competitiveness for foreign and domestic investment in the business sector. A more thorough evaluation with consensus of all the stakeholders must be obtained. It is best that the relevant parties appoint a credible third party to do a proper cost benefit analysis and challenge Socso’s findings professionally.