Press Release
June 15, 2008

Loren bats for lower life insurance premium tax

Sen. Loren Legarda, Senate economic affairs committee chairperson, is batting for a 60-percent reduction in the premium tax on life insurance policies to make them more affordable to a greater number of Filipinos.

Legarda has introduced Senate Bill 2117, seeking to lessen from five percent to just two percent the tax on life insurance premiums.

"We definitely want more Filipinos to enjoy adequate voluntary life insurance protection. One sure way to achieve this is by reducing the cost of premiums through lower taxes," Legarda said.

She lamented that only three million Filipinos, or less than four percent of the population, have voluntary life insurance coverage.

"We want to encourage more Filipinos to invest in life insurance policies," Legarda said, adding that premiums paid by individual Filipinos should be treated as part of their long-term savings.

She added: "We have to strike a balance between the need to spur long-tem savings on one hand, and the need for government revenue on the other hand."

The Philippine Life Insurance Association (PLIA) has expressed support for Legarda's bill, which the group said would boost long-term savings and help local life insurers compete globally. The PLIA noted that the Philippines is the only country in Southeast Asia that imposes a five-percent tax on life insurance premiums.

Legarda said the government need not worry too much about the foregone revenue from the proposed lower tax rate.

"Cheaper premiums owing to less taxes would drive down the cost of life insurance and eventually expand coverage, thus enlarging the base of taxable premiums and enhancing government revenue over time," she pointed out.

Legarda also stressed that lower taxes would reinforce the role of life insurers in savings mobilization. She cited their role in building up the local capital and securities markets via massive investments in listed firms, commercial papers and bonds.

"If we look at the top 100 shareholders of every major corporation listed on the Philippine Stock Exchange, life insurers are among their biggest long-term investors," Legarda said.

The senator cited the case of Great Pacific Life Assurance Corp., the 8th largest Filipino shareholder of Philippine Long Distance Telephone Co. She also cited the case of The Insular Life Assurance Co. Ltd., the 36th largest Filipino shareholder of the Bank of the Philippine Islands.

Legarda said she definitely sees the life insurance industry's premium income growing even faster once taxes are lowered.

Life insurers generated a total of P56.4 billion in premium income in 2006. This is 20.3 percent higher than the P46.9 billion that they collected in 2006, and more than double the P26.9 billion that they gathered in 2000.

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