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Published on July 14, 2007

Speaking on behalf of the TLAA from the foreign players' perspective were Wilf Blackburn, president of Ayudhya Allianz CP Life (AACP), the Kingdom's third-largest life insurer, and Donald Carden, president and CEO of Siam Commercial New York Life Assurance, the country's fourth-largest life insurer. They said the 0.5-per-cent ceiling charge would have a negative effect on the overall insurance industry.

Both men pointed out that in other countries, the burden of covering the costs of independent agencies was shared by taxpayers.

Carden said insurance companies already paid 30-per-cent corporate income tax to the government.

He urged the parties involved to focus on building a positive environment, which would result in companies being able to generate higher profits and consequently pay more taxes.

The TLAA has made a rough calculation that if the 0.5-per-cent ceiling charge were implemented, the future Independent Insurance Organisation would receive roughly about Bt2 billion.

The Insurance Department recently proposed lowering the rate to 0.35 per cent, while

the TLAA has suggested 0.05 per cent as appropriate.

Currently, the Insurance Department's expenses total about Bt300 million annually.

Life-insurance companies receive Bt173 billion in premiums annually, non-life insurers about half that.

"If the funding for this future regulatory agency is passed on from the taxpayer to the industry, it's likely that some insurers will pass on the burden to the policyholders by increasing premiums. Although AACP won't pass on the burden to our customers, the regulatory agency is a big risk and a big danger to the industry," said Blackburn.

Carden said the life-insurance industry was a business that generated a profit margin as narrow as 5 per cent, so the extra charge would make it more difficult for the industry.

Blackburn said that as long as a final decision had not been made, the TLAA still had hopes that this regulatory agency would be revised.

"The TLAA will apply every reasonable method to lobby for what it believes is best for the policyholders. However, once the decision is made, everyone has to comply with the law," said Blackburn.

The draft amendments have already been submitted for Cabinet approval, with only one controversial issue: the 0.5-per-cent ceiling charge to fund the future independent agency.

This has provoked serious argument among life insurers recently.

They believe the only way to solve the problem is for the Cabinet to raise questions about the regulatory agency and set up a special commission, which would include industry specialists, to scrutinise the details.

Piyarat  Setthasiriphaiboon

The Nation