KARACHI: Insurance Association of Pakistan (IAP) has observed ‘Insurance Week’ to raise awareness of insurance at national level.
Addressing a news conference at Karachi Press Club (KPC), the members of IAP said by celebrating ‘Insurance Week’, the industry aims to spread the message of insurance among general public highlighting the important role this industry plays in mitigating risks, supporting individuals and businesses in their hour of need and the overall economic development of the country.
This year, Syed Kazim Hasan said IAP celebrates its eighth “Insurance & Takaful Week” from 7th to 11th February 2022 with 9th February 2022 marked as the “Insurance & Takaful Day”.
Others members of IAP Faisal Khan, Muhammad Rashid, Altaf Gokal, Dr Bakht Jamal and others were also present.
He also presented set demands before the federal government.
He demanded withdrawal of federal Insurance Fee on Insurance Premium/Takaful Contribution & Insurance/Takaful Awareness Programs.
He said with low insurance penetration in Pakistan where vast majority of the public is not aware of insurance as a risk mitigating tool, the insurance industry itself can only reach out to major 20 cities whereas a large portion of people living in small towns and villages remain unprotected.
In 1989 a levy was imposed as Federal Insurance Fee (FIF) @ 1% on all non-life premium in order to generate a fund which could be used for education and for creation of awareness in the masses.
Unfortunately, the levy so collected has not been used for any awareness efforts. Conservative estimates indicate that an amount of Rs10.9 billion has been collected and retained by the Government.
As a first step, the government should release these funds to Insurance Association of Pakistan who can then develop plans for education and creating awareness among the public about benefits of insurance as a system.
He also demanded withdrawal of Sales Tax on Health Insurance.
Kazim said Health insurance provides a modicum of social security to citizens and its penetration as a percentage of GDP should be encouraged by all possible means so that this relief may be availed by a broad spectrum of our population.
Currently, health services are not taxed when availed directly whereas Health insurance has been brought in the ambit of sales tax as the provinces have inserted health insurance in the schedule for taxable services in the provincial tax laws.
It has temporarily been exempted from application of sales tax for a fixed period via notifications and zero rate mechanism (exempted until 30th June 2022 in Sindh). However, this temporary exemption may be withdrawn at any time posing a challenge for policyholders and the insurance sector making health insurance unviable.
Kazim said Life Insurance should be permanently exempted from the levy of sales tax.
He said Life insurance is a vital savings tool for people across the globe however the provincial sales tax levy on life insurance is discouraging life insurance policies in Pakistan, making it expensive for policyholders.
He said the government of Sindh has levied Sindh Sales Tax on reinsurance, though reinsurance is neither a service nor a separate activity from the original insurance contract. Further, levy of Sindh Sales Tax on reinsurance activity is also against the fundamental principle of value addition tax regime across the globe.
He said reinsurance is part of the main insurance contract as certain portion of the risk assured in the insurance contract is hedged. Accordingly, premium is passed to the reinsurer on which tax has already been paid.
The reinsurance and insurance companies (being retrocessionaires) are effectively partners in sharing risk of the policy holders as per requirements of section 42 of the Insurance Ordinance, 2000. Therefore, sales tax on reinsurance must be withdrawn.
He said sales tax on agent commission should also be withdrawn
Kazim pointed out that Motor third party insurance is compulsory in every country of the world including Pakistan via
Motor Vehicle Act 1939 however its effective implementation is lacking for the past several years. Enforcement of this one type of insurance can alone protect people from on road risks and create an interface between 15-20 million people with the insurance industry. Currently due to lack of implementation there are thousands of uninsured vehicles and in the event of major accidents there is no effective recourse of financial support for the victims and the Government has to finance the compensations.
In addition to providing adequate financial support it will create substantial tax income for the Government in the form of taxes on insurance premiums.
On Compulsory Corporate Health Insurance, he said, the SECP can make it mandatory for companies/employers to purchase health insurance for all their employees reducing the burden on government provided free health services.
In order to encourage corporate health insurance, the government should also provide attractive incentives such as tax breaks to employers who choose to purchase health insurance for their staff.
It would take away the load from state health institutions which can cater to those who cannot afford to purchase health insurance or who do not fall within the social health initiatives of the Government.
He said Insurance Institute should be developed as the industry needs capacity building initiatives to improve skills of the existing workforce and ensure a steady supply of insurance qualified staff for industry expansion.
Secretary IAP NA Usmani was also present on the occasion.
Copyright Business Recorder, 2022
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