Govt urged to cut agri insurance tax

The government should slash the onerous tax of 26 percent to 27 percent on nonlife and agriculture insurance premium, an agri-finance expert said, stressing that the current policy hinders the entry of cash-rich private sector investors that can significantly accelerate rural farm activity through financing.

In a webinar hosted by the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), Jaime Aristotle Alip said tax on nonlife insurance, including those for crop or agriculture insurance, should be around the rate of life insurance, which is only at a minimal 2 percent. Other nonlife insurance with high tax are disaster insurance and health insurance, he added.

“If you want private sector participation, you must level the playing field. You should lower down nonlife premium tax (including tax for crop or agriculture insurance). I think there will be many private sector players (given this),” said Alip.

Alip is chairman emeritus and pioneering founder of the country’s largest microfinance firm CARD MRI (Center for Agriculture and Rural Development Inc.-Mutually Reinforcing Institutions).

SEARCA held the virtual forum “Agricultural Investment Risks: Empowering Smallholder Farmers through Micro-Insurance” as part of its thrust toward Accelerating Transformation Through Agricultural Innovation (Attain).

Alip pointed out the government needs to subsidize agri insurance because the regime will be market-driven. “It will be the law of numbers and the law of efficiency (that will work).

The gap must be addressed. Lawmakers should make nonlife insurance affordable,” he said.

The agri-financing expert, who is also a 2008 a Ramon Magsaysay awardee, stressed that microinsurance plays a significant role in boosting private sector investment in micro-financing or in extending loans to small farmers.

Once there is insurance or a guarantee program for farmers’ loans, banks are automatically willing to lend even to small farmers, Alip said.

The misery of Filipino farmers is often blamed on the dearth of facilities on microfinancing and its constant aid microinsurance.

In a country like the Philippines, insurance or a loan guarantee is critically important in financing the marginalized farmers, in enabling them to get out of poverty, according to Alip. If farmers are paid right away, they will be able to reinvest in agriculture again after a misfortune, he further said.

“Insurance is an important safety net so that the poor will not slide back to poverty. If we’re able to pay farmers right away, their loyalty and affinity to insurance will be there,” said Alip.

He explained how CARD allows its members to make payments, deposit and withdraw online amid the coronavirus disease 2019 (Covid-19) pandemic — precisely because there has already been a predeposited insurance premium for the disaster, calamity or typhoon.

“Within [eight] hours we’ll pay. If there’s an issue (problems) involved, in 48 hours we will pay. The speed of payment shows how serious you are. Microinsurance should be believable. It should just be like a deposit when there’s a claim. You pay it right away,” Alip elaborated.

Established in December 1986, CARD has grown into a group of 23 mutually reinforcing institutions.

“My vision was for a bank owned and managed by the poor. I believe the reason why poor people are poor is not because of lack of access to resources. It is the lack of control over resources,” he said.

“After 10 years, we put up the first microfinance institution in the country, the CARD Bank, owned by its members. We completely turned banking system upside down,” Alip added.

To date, CARD has 3,482 offices in 85 provinces covering 1,577 municipalities and cities and 40,440 barangays (villages). It has 17,157 full-time staff. It has offices for overseas Filipino workers in Hong Kong, Myanmar, Laos, Thailand, Cambodia, Indonesia and Vietnam.

“This is how we are exporting the technology of CARD in micro-financing and microinsurance,” Alip said.

CARD accounts now for 20 percent of the entire microfinance industry in the country.