The vital role of non-life insurance
the role of the non-life sector of the insurance industry is not being given the recognition that it deserves! As a matter of fact, without the services provided by nonlife insurance, the world of business and life in general would be greatly affected. to illustrate, loans for the construction of industrial and housing projects would not be granted unless such assets are insured in favor of the banks and other financial institution to protect their mortgage interest.
In addition, contractors who bid for public construction projects are normally required to put up performance bonds as required in the contract. Importation of vital capital equipment and necessary food products such as rice cannot be carried out without marine cargo insurance, which is required by banks in issuing their Letter of Credit. The aviation industry also is mandated to purchase insurance for the protection of passengers. Owners of motor vehicles have to purchase liability insurance in order to obtain a license. Almost every facet of business requires some form of non-life insurance protection. On the personal side, cars purchased under installment plans are insured in favor of car dealers or the banks. Also, personal accident and health insurance are available at reasonable cost.
In the official report of the Insurance Commission, the non-life sector as of the quarter ending September 30, 2021 generated gross premium of P57,479.0 million compared to the P64,830.6 million written in 2019, a decrease of 11.31 percent. For net premiums, 62 out of the 66 non-life insurers earned P38,634.9 million as against the P40,137.7 million earned in the same period of 2019, a modest decline of 4.17 percent.
The total assets of the non-life insurers improved by 9.92 percent to P274,496.9 million compared to P249,714.2 million in 2019. On the other hand, liabilities also rose by 8.44 percent to P172,271.0 million from P158,858.7 million in the same period of last year. Thus, the net worth increased by 12.51 percent. The paid-up capital also increased
by 16.03 percent from P32,001.9 million to P37,131.0 million.
It is not common knowledge that non-life insurers contribute substantially to the nation’s development as their investments total P1,558,125.2 million, a good percentage of which are invested in government bonds and treasury bills. Despite the disruptive problems caused by the Covid-19 pandemic, the non-life sector has performed rather well and its growth prospects remain high according to AM Best Rating Agency that focuses solely on the ratings of insurance companies globally.
However, the buyers of non-life policies are subject to the following taxes: documentary stamp tax of 12.5 percent, VAT of 12 percent plus local government unit tax of 0.5 to 0.75 percent. In addition, policyholders of fire policies are burdened with an extra 2 percent fire service tax. This results in a 24.5/24.75 percent tax on non-fire policies and 26.5/26.75 tax on fire insurance buyers. These taxes are on top of the basic premium. This is perhaps the highest tax in Asean imposed on policyholders who purchase insurance to cover their homes, cars, or other assets.
With the approval of Republic Act 11534 known as the Corporate Recovery and Tax Incentives for Enterprises law, the non-life insurance sector looks forward to a more favorable tax treatment for the buyers of property and liability policies. We thank the Department of Finance for their role in crafting the CREATE bill.