HEALTH CARE

Insurance industry adapts

Charoen Kittikanya

Accident coverage for students has been launched with a premium of 0.25 baht a day.

THE COUNTRY'S insurance landscape has experienced a substantial change over the last three years, especially after the introduction of Ua-arthorn low-cost insurance policies, one of the Thaksin administration's populist policy programmes implemented in conjunction with the universal low-cost health-care scheme.

The government, through the Commerce Ministry, has initiated a number of low-cost policies including the one-baht-a-day Ua-arthorn personal accident coverage policies, launched in mid-September last year, and accident coverage for schoolchildren, with a premium of 0.25 baht a day, introduced in May this year.

Under the Ua-arthorn personal accident insurance scheme, should the policyholder lose his or her life, the payout is 300,000 baht. If one member of a couple takes out a policy and both die, the payout is 400,000 baht. The payout in the schoolchildren's insurance plan is 100,000 baht in the case of permanent disability.

Despite the low payouts and losses totalling 20 million baht as of the end of last year, the low-cost packages have played a part in the growth of the industry, particularly in increasing awareness, and led to positive results, according to Sutti Rajitrangson, the president of the Thai Life Assurance Association.

Though the above-mentioned programmes are the most visible contributions to the insurance industry from the Thaksin administration, the most praised move by the industry experts was the hiking of the personal tax deduction for life insurance premiums to 50,000 baht from 10,000 a year.

This deduction was unprecedented in that earlier increases had taken place in increments of approximately 1,300 baht and their approval from the authorities would usually take years.

The higher deduction not only encourages people to buy insurance, it also boosts personal savings, Mr Sutti said.

Under the Thaksin government, a lot of regulations relating to life insurance deemed to be a detriment to the development of the industry have also been addressed, particularly regulatory red tape involved in the approval of new types of life insurance policies.

Government authorities have passed on the responsibility of administering examinations for the granting of insurance licences to new agents in Greater Bangkok to the insurance industry.

Most importantly, particularly for those with large investment assets, was the approval for insurance companies to invest abroad as a way to seek higher investment returns that are limited locally due to the current low interest rate environment.

However, of note, the Thaksin government has baulked at certain requests from the life insurance industry, such as the request to eliminate the 7% value-added tax charged on revenues earned by the insurance sales agents. It is viewed as a double tax as the agents are assessed personal income tax as well.

A dispute is also outstanding over health insurance premiums paid by employers. The Revenue Department sees these premiums as benefits derived from employment, and thus part of an employee's taxable income.

By implication, the employer is obliged to deduct withholding taxes on payrolls by including the group insurance premium at the normal progressive personal income tax rates, which range from 5% to 37%.

Another point of contention is that health insurance policies issued by general insurers are subject to a value-added tax of 7% and cannot be claimed against income tax while those issued by life insurers as riders to life coverage are exempt from VAT.

Another perceived anomaly is that although the benefits of health insurance offered by both types of insurers are similar, life insurers can only sell health insurance to their policyholders.