Insurers push for payments via salary deductions

Insurers push for payments via salary deductions

INSURERS ARE asking the government to allow its employees to pay for life insurance premiums through monthly salary deductions, saying this will make insurance less burdensome for them.
“When premiums are paid through monthly salary deduction, they come out cheaper for government employees,” Philippine Life Insurance Association (PLIA) member Jose L. Cuisia, Jr. told BusinessWorld in a phone interview last Friday.

“Instead of paying, say, P20,000 at yearend, they can just pay a few thousand pesos every month. This is easier to pay than a big lump-sum.”

Salary deductions will make insurance payments lighter on government employees, added PLIA President Mayo Jose B. Ongsingco, likening the scheme to the Filipino practice of hulugan.

“Since the deduction is already pre-set, it also enforces the savings discipline on government employees,” Mr. Ongsingco said in an e-mail to BusinessWorld last Friday.

The General Appropriations Act, or the national budget, specifies which obligations are covered by automatic salary deductions. These include tax payments to the Bureau of Internal Revenue and contributions to the Philippine Health Insurance Corp. and the Government Service Insurance System (GSIS).

The 2011 national budget includes automatic deductions for payments to accredited insurers.But given the nature of the national budget -- it is scrutinized and approved by Congress each year -- PLIA is pushing for a permanent arrangement.

Mr. Cuisia said the Insurance Code can be amended to say that payments for life insurance availed of by government employees can be automatically deducted from their monthly salaries.

Proposed amendments to the Code are currently being heard by the House banks and financial intermediaries committee.

The committee signified it was amenable to the monthy salary deduction scheme when it met last week.

“Since the General Appropriations Act is changed and updated every year, sometimes salary deductions for private insurance are allowed, sometimes, they aren’t. We don’t want to expose government employees to that volatility since life insurance is a long-term contract,” Mr. Cuisia said.

Among government employees, only public school teachers enjoy the monthly salary deduction scheme for private insurance payments, as this was authorized by the Magna Carta for Public School Teachers.

An estimated 80% of public school teachers availed of the payment scheme, Mr. Cuisia said during the committee hearing last week.

For school year 2010 to 2011, there are about 501,000 public school teachers, according to the Department of Education.

“Philamlife alone had over 200,000 teachers availing of insurance products through the monthly salary deduction scheme,” said Mr. Cuisia, who is also the vice chairman of insurer Philippine American Life and General Insurance Co. (Philamlife).

PLIA wants to extend the same payment flexibility to all government employees, given the success with the teachers, Mr. Ongsingco said.

“There will be no extra cost to the government employee for this salary deduction facility. In fact, the insurer will pay the government, through the agency or government office concerned, a service fee to reimburse the office for the administrative cost of the salary deduction facility,” he added.

However, labor group Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE) is unsure if government employees will avail of private insurance at all, since they are already covered by government insurance through GSIS.

“Most employees will still prefer GSIS,” COURAGE President Ferdinand R. Gaite told BusinessWorld in a phone interview yesterday. “We get loans and pension benefits, over and above what private insurance will provide.”

He added that GSIS has a “social component,” in which lesser-paid government employees are subsidized by the contributions of higher-paid government employees.

“Under private insurance, the burden will fall only on the individual policyholder,” Mr. Gaite said. “I doubt there will be a wide acceptance of these products.”

But Messrs. Cuisia and Ongsingco insisted private insurance is “supplemental” to the protection provided by GSIS.

“This is for government employees who want more than government insurance,” Mr. Cuisia said. “Now, they have another option.”

Mr. Ongsingco added, “Life insurance companies want to extend financial security to more Filipinos, one of the least insured in Asia.” -- Diane Claire J. Jiao

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