The Malta Insurance Association (MIA) is calling on the government to introduce measures to encourage people to voluntarily protect themselves and encourage lifetime savings. In this way, living standards can be maintained with less dependence on social welfare, David Curmi, president of the association, said.
Speaking on the association's pre-budget proposals, he said that the prosperity of an individual and of the country was partly built on thrift. When thrift grew, the community was strengthened. Measures which encouraged people to save for a worthwhile purpose were important especially when the motive was family welfare and retirement. "The measures which are being proposed by our association do not solely consist of tax incentives. We are also making proposals aimed at ensuring that insurance policies are more affordable and accessible to the public.
"Many governments are becoming increasingly concerned about the ever increasing Protection Gap and Longevity Gap. The Protection Gap is the difference between the resources needed and the resources available to maintain the living standards of dependants after the death of the main income earner, while the Longevity Gap is the difference between the available financial means and the future economic need required as a result of people living longer.
According to a recent study it is estimated that, in Europe, the Protection Gap currently stands at around €3 trillion. Because of this inadequate protection, and as a result of people living longer, more and more families will in future have to rely on public resources for their welfare.
"Governments are therefore seeking to adjust public policy by introducing incentives that encourage greater use of voluntary provision which will, in the long term, lead to the shrinking of both the Protection and the Longevity Gap. This will in turn lead to an improvement in the quality of life for many individuals." Mr Curmi recalled that the MIA had, since 2004, been calling on the government to encourage individual provision for retirement by doing away with measures that hindered personal long-term savings.
"The MIA understands that the introduction of measures aimed at encouraging voluntary retirement provision has to be considered as part of an overall pension reform. We agree with the government that it would be unwise to introduce a piecemeal solution. Our association also appreciates the difficulties that exist in importing the concept of tax breaks in a final settlement tax system. What we are recommending this year is slightly different.
"Statistics recently compiled by our Association reveal that in 2006 life insurance business in Malta amounted to over Lm70 million, an increase of 21 per cent over 2005. A very high proportion of this business emanated from long term savings products. This is a clear sign of the increased confidence by the Maltese in using savings-related life insurance products for long-term savings that may also include retirement provision. As these policies mature the benefits paid can be re-invested in other savings instruments which can include retirement products. In 2006, life insurance companies in Malta paid over Lm14 million in life insurance benefits.
"Our association is therefore proposing the removal of premium tax from all life policies and savings-related life insurance policies, the exclusion of all types of life policies, savings-related life policies, permanent health policies, accident policies, sickness policies and private medical insurance policies from the tax provisions relating to fringe benefits and the introduction of tax incentives in respect of private medical insurance."
He observed that in Malta, only eight per cent of the population benefited from an extensive refund plan and most seemed to be blaming medical service providers for unreasonably high medical expenses which in turn effected the price of insurance premia.
Health insurance was generally seen as being an expensive form of insurance cover in every country. There were very few countries where the penetration rate of health insurance was high. In Malta the penetration rate was low not only because the cover was relatively expensive, but because people were not encouraged by the state to protect themselves.
"The MIA believes that tax incentives are necessary to encourage more people to enter into private insurance arrangements and to make private medical insurance more affordable. Private medical insurance is very sensitive to the cost of private healthcare; the higher the cost of private healthcare the higher will be the cost of private medical insurance. If the stakeholders are unwilling to introduce measures to control the cost of private healthcare then, private healthcare will become affordable only to those who are insured."
Mr Curmi said he would like the association to be consulted on matters that were likely to affect the insurance industry such as any measures aimed at encouraging private medical insurance.
"We feel that open dialogue, communication and consultation with the authorities and stakeholders are the key success factors of our proposals."
Speaking on the association's pre-budget proposals, he said that the prosperity of an individual and of the country was partly built on thrift. When thrift grew, the community was strengthened. Measures which encouraged people to save for a worthwhile purpose were important especially when the motive was family welfare and retirement. "The measures which are being proposed by our association do not solely consist of tax incentives. We are also making proposals aimed at ensuring that insurance policies are more affordable and accessible to the public.
"Many governments are becoming increasingly concerned about the ever increasing Protection Gap and Longevity Gap. The Protection Gap is the difference between the resources needed and the resources available to maintain the living standards of dependants after the death of the main income earner, while the Longevity Gap is the difference between the available financial means and the future economic need required as a result of people living longer.
According to a recent study it is estimated that, in Europe, the Protection Gap currently stands at around €3 trillion. Because of this inadequate protection, and as a result of people living longer, more and more families will in future have to rely on public resources for their welfare.
"Governments are therefore seeking to adjust public policy by introducing incentives that encourage greater use of voluntary provision which will, in the long term, lead to the shrinking of both the Protection and the Longevity Gap. This will in turn lead to an improvement in the quality of life for many individuals." Mr Curmi recalled that the MIA had, since 2004, been calling on the government to encourage individual provision for retirement by doing away with measures that hindered personal long-term savings.
"The MIA understands that the introduction of measures aimed at encouraging voluntary retirement provision has to be considered as part of an overall pension reform. We agree with the government that it would be unwise to introduce a piecemeal solution. Our association also appreciates the difficulties that exist in importing the concept of tax breaks in a final settlement tax system. What we are recommending this year is slightly different.
"Statistics recently compiled by our Association reveal that in 2006 life insurance business in Malta amounted to over Lm70 million, an increase of 21 per cent over 2005. A very high proportion of this business emanated from long term savings products. This is a clear sign of the increased confidence by the Maltese in using savings-related life insurance products for long-term savings that may also include retirement provision. As these policies mature the benefits paid can be re-invested in other savings instruments which can include retirement products. In 2006, life insurance companies in Malta paid over Lm14 million in life insurance benefits.
"Our association is therefore proposing the removal of premium tax from all life policies and savings-related life insurance policies, the exclusion of all types of life policies, savings-related life policies, permanent health policies, accident policies, sickness policies and private medical insurance policies from the tax provisions relating to fringe benefits and the introduction of tax incentives in respect of private medical insurance."
He observed that in Malta, only eight per cent of the population benefited from an extensive refund plan and most seemed to be blaming medical service providers for unreasonably high medical expenses which in turn effected the price of insurance premia.
Health insurance was generally seen as being an expensive form of insurance cover in every country. There were very few countries where the penetration rate of health insurance was high. In Malta the penetration rate was low not only because the cover was relatively expensive, but because people were not encouraged by the state to protect themselves.
"The MIA believes that tax incentives are necessary to encourage more people to enter into private insurance arrangements and to make private medical insurance more affordable. Private medical insurance is very sensitive to the cost of private healthcare; the higher the cost of private healthcare the higher will be the cost of private medical insurance. If the stakeholders are unwilling to introduce measures to control the cost of private healthcare then, private healthcare will become affordable only to those who are insured."
Mr Curmi said he would like the association to be consulted on matters that were likely to affect the insurance industry such as any measures aimed at encouraging private medical insurance.
"We feel that open dialogue, communication and consultation with the authorities and stakeholders are the key success factors of our proposals."