The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Proposals to part-finance National Health Insurance (NHI) via a 10 per cent tax on auto insurance premiums were yesterday branded “inappropriate” by a leading underwriter, who warned it would undermine a key Government policy objective.

Patrick Ward, Bahamas First’s president and chief executive, warned that raising auto insurance costs would further exacerbate “the significant problem” this nation already has with uninsured motorists.

With 7.5 per cent Value-Added Tax (VAT) set to be levied on Bahamian property and casualty premiums come July 1, Mr Ward said adding a further tax on top of that and the existing 3 per cent premium tax would only increase the number of uninsured drivers.

This, he explained, would worsen the potential for financial loss among victims of accidents caused by uninsured drivers, increasing the cost to both the economy and Bahamian society.

The Bahamas First chief said the 10 per cent ‘auto insurance’ tax proposed by Sanigest Internacional, the Government’s NHI consultants, was effectively a ‘wealth transfer’ from motor insurance to medical insurance - as the proposed NHI scheme would likely have to foot rising medical bills for accidents caused by the increasing number of uninsured drivers.

Conceding that he had not yet been able to assess the context in which Sanigest had made its proposal, Mr Ward told Tribune Business: “On the face of it, I don’t think that would be appropriate for this market.

“First of all, we have a 3 per cent tax levied on all premiums, including auto. We already have a significant problem in this country with uninsured motorists on these streets, and one factor is the cost of auto insurance relative to what people can afford.”

This is set to be further exacerbated by VAT’s July imposition, with insurance industry concerns also centred on whether the 7.5 per cent charge will be levied upon the existing premium tax - thus becoming a tax upon a tax.

Mr Ward yesterday confirmed Bahamian insurance industry estimates were that one in five, or 20 per cent, of this nation’s drivers are either uninsured or not properly insured.

This concisely illustrates the scale of a problem he believes Sanigest’s proposal will only make worse.

The Bahamas First chief said the ‘10 per cent auto insurance tax’ would “go against a public policy objective”, and added: “Anything that you do which is going to disincentivise the number of insured motorists on the road is going to impact what the Government wants to achieve.”

Mr Ward described this goal as the protection of “innocent third parties” from bodily and life threatening injuries sustained in road accident, and the recovery of liability for all damages sustained.

The Bahamas First chief executive said the Government should instead seek to “incentivise” motorists to purchase adequate coverage, thereby achieving “a higher compliance rate”.

And, in doing so, he argued that it would “alleviate some of the health insurance issues by another mechanism”.

“There’s a significant amount of money spent each year for medical case procedures or pain suffering issues resulting from bodily injuries that arise in the case of motor vehicle accidents,” Mr Ward told Tribune Business. “We’re talking about millions of dollars a year.”

Summing up the unintended consequences if Sanigest’s auto insurance tax proposal was adopted, Mr Ward said: “Ironically, what seems on the face of it to generate the revenue to provide a broader level of care could undermine the very aspect of the recovery process that actually works.”

Sanigest, in its October 2014 report to the Government, said that with auto accidents the seventh leading cause of male deaths in the Bahamas, healthcare bills associated with these events were likely relatively high.

There were 10,000 motor vehicle accidents reported in the Bahamas in 2013, implying that more than one person was involved in a crash every hour.

Taking the World Health Organisation’s (WHO) estimate that car accidents cost countries between 1-3 per cent of their gross national product (GNP) as a benchmark, Sanigest suggested these cost the Bahamas $90 million in health costs and lost economic productivity.

Levying a 10 per cent premium tax on the estimated $69.404 million in auto insurance premiums forecast for 2016 would provide $6.94 million for the NHI catastrophic insurance fund, the report forecasts.