Year 2019 - A NEW ERA FOR INSURANCE TAX DEDUCTION 保險扣稅展新里

"Why tax deduction for insurance is benefit to both society and government?" This article is to discuss why tax deduction for insurance is benefit to both society and government with focus on the incentive for citizens to purchase Insurance. The Value of Insurance Functions of insurance are to spread the loss caused by a particular risk over a number of persons and assets. Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. Insurance benefits to society in several ways but the general awareness and professional recognition of its contributions to the overall economy and society are comparatively low. Policymakers, policyholders and the general public only start valuing insurance once a loss has been incurred and compensation is expected from insurance. The most significant contribution of insurance to society is the provision of risk sharing, risk pooling and risk transfer abilities and loss prevention measures, which are inherent in the insurance business model and fundamental for a well-functioning economy. If no insurance cover, we can imagine that huge financial assistance is required from the government for any typhoon losses, catastrophe losses or retirement expenses. From the policymakers perspective, where risks are uninsurable the government has to intervene, but it does not have to worry about risks that are insurable and insured. Insurance thus works hand-in-hand with the government in loss prevention and loss compensation. The government policies that are relevant to the management of risk for the natural disasters, accidents and aging problem include, but are not limited to disaster assistance, government funding insurance programs, taxation, social welfare, compulsory insurance requirements, and insurance regulations. Insurers insure individuals as well as commercial entities. Private individuals choose an insurance product to avoid being confronted with a financial burden when incurring damage resulting from a certain event (non-life insurance) or when they want to build up a financial reserve for a certain project and/or seek to mitigate mortality, disability and longevity risks (life and pension insurance). Insurance is an effective tool of risk transfer for helping consumers, companies and society to recover from the financial losses. "Peace of mind for individuals" The most common compulsory non-life insurance product in Hong Kong is Motor Third Party Liability (MTPL) insurance. If an individual causes an accident, he/she is obliged to compensate the damages which the non-liable third party has incurred. Depending on circumstances of the accident, the individual would need to pay a high amount of money (ranging from hospitals bills to loss of future income, in addition to the material damage). By taking out MTPL insurance, the individual ensures that the third party’s damages are paid, while his/her financial situation is not heavily impacted. 專題探討 FEATURE 34 2018 年刊與 2019 展望 YEARBOOK 2018 & PROSPECT 2019