24% tax for nothing?

Twenty-four percent of everything that is paid for insurance in the Philippines goes to value added tax, documentary tax and local tax. But what in relation to insurance do we get out of it? We have the Insurance Commission but nothing else.

That’s almost a quarter of our payments that goes to government, but what does government give back to us in exchange? At the moment because of an act of nature most of the flood victims who paid billions in total payments for automotive and home insurance get nothing. Not from Insurance companies and certainly not from government.

After all that has been said and not done about the system, it may give a lot of Filipinos some sense of satisfaction if our Senators and Congressmen conducted a joint investigation to study and correct certain practices and policies in the many areas of insurance coverage.

We now hear of endless tragic tales of people losing everything in the flood and not getting any sort of help from their insurers because of little known clauses and additional costs that they were never advised to pay by their agents.

One of our readers, Mr. Ramon Abena, called in to cite that in many cases, flood victims were never fully apprised or advised about an additional cost for “calamity” or “acts of nature”. This is quite true because in most cases, the agent has not been trained or required “BY LAW” to fully explain, all provisions and options to buyers. In fact a number of so-called agents are not even licensed.

Most people don’t know that in order to get “act of nature” coverage for your car, you need to pay .625 percent additional to the insured value of the vehicle, then you add 24 percent of the sum to pay for VAT, documentary and local tax.

Many homeowners don’t know that just like cars, if you insure your house for “acts of nature” such as typhoon, floods or earthquake, the insurance company will automatically remove a certain value for “depreciation”. So even though you paid for P5 million coverage you won’t get P5 million in return.

The same applies to stolen vehicles where you have to wait between three to six months because the law allows the insurance companies this “reasonable period” to make sure that your car will never be recovered before they pay the insurance you paid for promptly and hassle-free.

So just because you got comprehensive coverage on your car or your house, in the Philippines it does not mean you can expect to move on with your life tomorrow.  

The good news according to the office manager of an insurance company I checked with is if your house burns down in a fire, there won’t be any deductions. Probably because you will be going through hell, trying to reconstruct your papers as well as your insurance policy.

So Senators and Congressmen should also put into law, that in the unfortunate event of fires and acts of nature, the “agent” and the insurance company must be required by law to provide a certified true copy of the policy within so many days, not weeks and not months. 

Buyers buy into the contract largely on “trust” and believing that their agent, who often is also their friend or relative knows what they’re doing and has their interest in mind. Friend or no friend, many of us now know that the “agent” was nothing more than a vendor whose interest was to make a living by getting the commission.

In many cases they are in the bottom of the corporate pecking order or pyramid where they work to please and fatten the cows upstairs. The agents assure their clients or friends that the company is the best in the universe, even though in most cases they have never even seen the door of the company’s CEO.

When the day of calamity strikes, we discover that the “agent” can’t move heaven or earth and suddenly asks us in puzzlement, “Didn’t you read the contract?”  

I even know of a case where a family bought travel insurance and were provided a policy for coverage. When one family member fell ill and needed hospitalization in Europe, their claims were rejected because the insured person was over 65 years of age.

So why did they issue a policy in the first place? Because the woman behind the counter was just a “clerk” pretending to be a qualified “agent” never asked or interviewed the clients!

At the very least, Congress should move in to simplify the provisions and the process as well as implementing a “reasonable” timetable to complete the process. If the agent makes money from the policy, it should also be mandatory that they directly assist in the documentation and filing for claims.   

We need a law that requires those people selling insurance to be licensed trained professionals who are required “BY LAW” to go through the policy with the insured. Failure to explain and enumerate should be cause for automatic payment of claims.

If a Judge can toss out an arrest for failure to read a suspect his “Miranda rights”, If President Arroyo can force pharmaceutical companies to cut prices by 50 percent for products that make people well, why shouldn’t we punish insurance firms for failing to read us our “rights” and have our best interest in mind?

The reason Congress should conduct a FULL investigation of all types of insurance coverage is BECAUSE CONGRESS OWES IT TO THE PEOPLE. After imposing so many taxes, Congress must now conduct a performance evaluation of the industry.

What are Filipinos getting for the 24 percent tax that government collects from their insurance payments?