The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@ribunemedia.net

HEALTH insurers have revisited and and adjusted their product offerings to aid consumers in a post Value-Added Tax (VAT) environment, the industry association chairman said yesterday, noting that insurers were hoping for ‘minimal’ impact regarding dropped coverage.

Bahamas Insurance Association (BIA) Chairman Emmanuel Komolafe said that while insurers expect that VAT will have an impact on the industry in terms of consumer demand, with some people likely to elect to drop their coverage, they are hopeful that any such impact will be minimal.

“The actual impact of VAT on the demand for insurance is yet to be seen, albeit there remains a valid concern that the imposition of VAT on insurance products will ultimately make insurance less affordable in the Bahamian context,” said Mr Komolafe. “This could very well translate into an increase in uninsured and underinsured (corporate and natural) persons within the country. We will however continue to closely monitor the impact of VAT in the months ahead.”

Effective from July 1, non-life insurance services, including property, health and casualty insurance became subject to the standard 7.5 per cent VAT rate. Life insurance, annuity insurance and savings plans will remain exempt. Underwriting and reinsurance services relating to these services will similarly be exempt, along with any associated broker or agent fees.

“In terms of actual preparation for the July 1 implementation, it should be noted that the BIA had been looking at VAT for about two years prior to implementation,” Mr Komolafe said. “During this period, we engaged in several discussions with the Ministry of Finance and the dialogue is ongoing even after implementation as we are still seeking clarity on some matters.

“Specifically, we are still seeking clarity on the status and treatment of cash settlements under the VAT regime; we have requested an urgent meeting with the Financial Secretary/VAT Comptroller to discuss this further.”

Mr Komolafe said that while assessing the cost of general and health insurance, it seems like a “Tale of Two Cities” in recent times.

“The saving grace in the case of the general insurance market has been the fact that property and casualty insurance premiums have fallen in recent times. While this is expected to help absorb some of the potential impact on the general insurance side in the short term, the future is unpredictable and an adverse event could significantly alter the market overnight without warning. The health insurance market has not been as fortunate as the cost of healthcare continues to rise not just in The Bahamas but globally,” said the BIA chairman.

“The advancements in medicine and technology have led to more effective and efficient (and often less invasive) medical procedures as well as treatments. However, these advancements have come at a price and the new improved medical treatments are expensive, at least in the years following introduction.

“These impact the cost of health insurance as health insurance premiums are determined based on inter alia medical claims experience, the underlying medical costs and medical inflation. It follows, therefore, that as these costs rise, insurance premiums have to be adjusted accordingly. The imposition of VAT on health insurance premiums comes in addition to any adjustments or rebalancing efforts by an insurer.

“To mitigate the impact on consumers in the wake of the introduction of VAT, BIA members in the health insurance sector have been responsive to the needs of the consumers by finding solutions to better serve their needs. Product offerings have been revisited and adjusted to ensure that our customers continue to enjoy health insurance coverage post VAT implementation,” Mr Komolafe added.

He noted that the BIA commenced a VAT public education campaign weeks ago and the general feedback has been encouraging.

“This industry initiative is in addition to the educational programmes carried out by our members during the past months,” he said. “As can be expected with any new system and legislation, it is imperative that we maintain an open line of communication with the policymakers, regulatory agencies and the general public in the days and months ahead.

“Discussions on the structure, format and content of reports required by the VAT Department can be expected until the industry becomes fully accustomed to the VAT framework.”