KUALA LUMPUR: The Life Insurance Association of Malaysia (LIAM) has proposed the government include medical insurance premium in the tax relief of RM8,000 which is for medical expenses for self, spouse and children as one of its four items on the wish list in the Budget 2023.

       LIAM president Loh Guat Lan said on Monday alternatively, the government could raise the tax relief for education, medical and health insurance from RM3,000 to RM6,000.

       Its second proposal is the government increase personal tax relief for life insurance premiums from RM3,000 to RM5,000.

       Thirdly, LIAM also proposed the 6% service tax on group employee insurance scheme be abolished.

       As for the fourth plan, it proposed the government extend the RM50 Perlindungan Tenang Voucher Programme for B40 for another year i.e from 2022-2023.

       Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz will table the 2022 Budget proposals on Oct 29.

       LIAM said it wanted to promote financial inclusion and increasing awareness on the importance of financial protection among the rakyat. In the spirit of “Keluarga Malaysia”, for the Budget, LIAM put forward four proposals that would assist the rakyat in enhancing their well-being by encouraging Malaysians to plan for their protection needs and enhancing coverage among the B40 and the Malaysian Employees

       As for its first proposal to include medical insurance premium in the tax relief of RM8,000 which is for medical expenses for self, spouse and children; or raise the tax relief for education, medical and health insurance from RM3,000 to RM6,000; Loh said:

       “We would like to propose that tax relief for medical and health insurance premiums be increased by one of the following options:

       “a. To allow the current tax relief of RM8,000 for medical expenses on self, spouse and children

       for serious diseases be extended to include medical insurance premiums; or

       “b. To increase the current combined tax relief of RM3,000 (for medical and health insurance premiums and premiums for education insurance) to RM6,000.”

       Loh said the rationale behind this proposal is firstly, it will lift the burden of potentially large medical expenses from the taxpayer due to the pooling of risk.

       Secondly, the cost of medical expenses typically increases with age and taxpayers are utilising their current income to fund for their future long term medical needs.

       “The cost of medical insurance for an average family of two adults and three children is about RM2,500 per annum at the lower end. Hence, there is only RM500 savings for premium per annum for this family to support the education policy of the three children, which is not enough.

       “Given the importance of having health insurance for Malaysians, the tax relief for this type of insurance plan should be increased,” she said.

       Loh pointed out in 2020, the life insurance industry paid out a total of RM11.6bil in benefit payouts, where a significant amount from the payouts were for medical insurance, which amounted to RM4.5bil.

       Hence, medical insurance is very important in the management of healthcare cost among policyholders.

       By increasing the tax relief for medical and health insurance premiums, families do not have to compromise the purchase of education insurance for their children.

       As for the second proposal, Loh said personal tax relief for life insurance premiums should be increased from RM3,000 to RM5,000.

       She explained that the COVID-19 pandemic in the country has made everyone realise how uncertain life can be and the needs to protect oneself and their loved ones financially as a safety net in the event of any unforeseen circumstances or the passing of a breadwinner in a family.

       “A life insurance policy can help provide a family with a lump sum of money to pay off mortgage debt, loans and bills, hence eliminating financial stress.

       “For a breadwinner, it is always a necessity for them to protect themselves if one day they are unable to provide for the family,” she said, and urged the government to increase the current limit of personal tax relief for life insurance premium from RM3,000 to RM5,000.

       Elaborating on the LIAM’s third proposal, Loh said the 6% Service Tax on Group Employee Insurance Scheme should be abolished.

       She pointed out this will encourage employers to insure their staff under a Group Employee Insurance Scheme and thereby increasing the penetration rate of workers.

       Based on published statistics, less than half of employees is being covered by any form of group insurance. This leaves a significant insurance gap that needs to be closed, to extend the insurance safety net to as many Malaysians as possible.

       “Depending on the future cost of healthcare, which we have assumed the average hospitalisation claim cost to range between RM4,000 and RM6,000, this can potentially help the government to save between RM598mil and RM1.8bil per annum, in the form of reduced public healthcare spending,” she added.

       The insurance industry is well-positioned and in full alignment to support the government in providing insurance safety net for all Malaysians, especially the B40 group. This is in line with the national agenda of increasing insurance penetration rate.

       On the fourth proposal, she said in Budget 2021, the government introduced the Perlindungan Tenang Voucher (PTV) programme to provide better social protection for the BPR recipients.

       Eligible BPR recipients will be given a RM50 voucher as financial aid to purchase Perlindungan Tenang products.

       "We would also like to thank the Government for the successful launch of the Perlindungan Tenang RM50 Voucher (PTV) Programme on 30 September 2021, involving the first batch of 3.6 million BPR recipients from the household category. Subsequently, the PTV programme will be made available to other categories of BPR recipients at a later date.

       "This noble initiative aims to expand the social protection among the B40 community in the country to enable them to purchase a Perlindungan Tenang product as a financial protection against key risks in life such as death, accidents, fire or other unfortunate events.

       This incentive is extremely encouraging for the BPR recipients as Perlindungan Tenang products have been specially developed to incentivize the youth, young families and B40 household segment to purchase life insurance. It is indeed timely for the BPR recipients to receive the RM50 voucher of Perlindungan Tenang as a form of protection during these uncertain times.

       As the BPR recipients need time to learn and accept insurance/takaful protection as part of their family’s financial planning, Loh proposed the government extend the RM50 Perlindungan Tenang Voucher Programme for another year i.e. from 2022 to 2023

       “To instill the habit of securing insurance or takaful coverage as part of their social protection, having the second premium subsidised will be necessary especially as the recovery from Covid-19 remains uncertain.

       “Otherwise, many of the BPR recipients are likely to discontinue their coverage and the long-term benefits of the programme will be lost,” she said.

       The availability of Perlindungan Tenang products is important in providing immediate temporary relief in the event of misfortune, able to access financial resources and having peace of mind knowing that financial relief is available in an easy and timely manner.

       LIAM, she said, hopes that by extending the incentive for another year, it would benefit majority of B40 households in the country. Ultimately, as part of the insurance and takaful industry’s aspiration, the PTV Programme hopes to fulfil the nation’s financial inclusion agenda of achieving higher insurance penetration and household resilience among the population.