Country Panel Presentation: Poland€¦ · • The social security in Poland consists of: old–age...

© International Group Program

Country Panel Presentation: Poland

2016 IGP Regional EMEA Seminar Windsor, May 24-26, 2016

Joanna Grudnik, Group Business Operation Director

This presentation was exclusively prepared for the attendees of the 2016 IGP Regional EMEA Seminar. None of the contents of this presentation may be copied or disclosed to any other party or used for any other purpose than the one mentioned above without IGP's prior written permission.


Key Topics

Background Information

Country and Company Info &

Background

Social Security

Private Practice

Taxation Administration Legislation

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• Area: 312,7k Km2 Pop: 38,5 M

• GDP: USD 553 bln (3,6% growth )

• 6th largest economy in Europe and 21st in the world.

• GDP per capita (ppp) 26.455

• 1 USD = 3,87 PLN

• Inflation Rate (Consumer Prices): 0%

• Unemployment Rate: 10%

• Corporate Income Tax: 19%

• Personal Income Tax: 18%, 32%

• Export: Germany = 26%, Great Britain = 7%,

Czech Rep.= 7%, France = 7%

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Poland Info (data as of March, 2016)



• Established: 1875

• Head Office: Newark, New Jersey

• Employment: above 48 000

• Geographical coverage: 40 countries 4 continents

• Products and services: life insurance, annuities, retirement-related services, mutual funds and investment management

• Assets: approx. 1 187 billion USD

Pramerica Życie TUiR SA is a subsidiary of Prudential Financial, Inc. (PFI)*

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Company Info

* Prudential Financial, Inc., a company incorporated in the United States, is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom. For more information, see www.pramerica.pl or www.prudential.com.


Background Information Company Info

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Established: 1999 Products: individual and group life insurance

99.5 million PLN Gross written premium

Recognized as The Best Employer of the Year in 2005, 2006, 2009, 2010 and

2012.

Three times recognized with the “Fair Play” award. This

prestigious title is awarded as a result of a survey conducted amongst insurance brokers.

Recognized as “Ethical Company“ in 2015 (for activities with respect to the highest ethical standards on the Polish market in

2013 and 2014)


Key Topics


Social Security

Summary of Social Security

Benefits

Private Practice


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Social Security Benefits

• The social security in Poland consists of: old–age pension, invalidity pension, sickness and maternity insurance, insurance against accidents at work and occupational diseases, health insurance family benefits, uneployment benefits.

• The following benefits are payable in various situations: In respect of old age

‐ Old-age pension. In respect of the long-term incapacity for work

‐ Disability pension, training pension. In respect of sickness and maternity

‐ Sickness allowance, maternity or paternity benefit, rehabilitation allowance. In respect of accident at work and occupational disease

‐ Lump-sum compensation, benefits in respect of sickness, disability pension Other

‐ Funeral grant, social pension, pre-retirement benefit, Childsupport Benefit “Family500+”

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Summary



• The tasks in the sphere of social security are exercised by many institutions, including: The Social Insurance Institution (Zakład Ubezpieczeń Społecznych –

ZUS) – is the main enforcement authority with regard to social security regulations. It collects social insurance contributions and distributes benefits.

The Ministry of Labour and Social Policy (Ministerstwo Pracy i Polityki Społecznej – MPiPS) – organizes benefits in respect of unemployment, family benefits and social benefits (from social assistance).

The National Health Fund (Narodowy Fundusz Zdrowia – NFZ) – organizes benefits in kind from the health insurance, gives access to general practitioners and other doctors and public hospitals.

The Open Pension Funds (Otwarte Fundusze Emerytalne – OFEs) – collect and invest funds to finance a part of an old-age pension under the new rules within the second pillar.

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Summary



• The rate of contribution (% of monthly salary)

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Summary

Specification % of total contribution

Of which % of the contribution financed by:

the payer (the employer) the insured (the employee)

Social Insurance

Retirement insurance 19.52 9.76 9.76

Disability insurance 8.00 6.50 1.50

Sickness insurance 2.45 2.45

Accident insurance from 0.67 to 3.86 from 0.67 to 3.86

Fund of Guaranteed Employee Benefits 0.10 0.10

Labour Fund 2.45 2.45

Health Insurance 9.00 9.00

Total from 19.48 to 22.67 22.71



• Old-age pension scheme is composed of three pillars.

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Summary

• Contribiutions

Criteria for classification First pillar Second pillar Third pillar

Status of the scheme universal universal supplementary

Participation in the scheme compulsory compulsory voluntary

Social objective basic level of benefits basic level of benefits higher level of benefits The management of the scheme public public/private private

Total contribution - 19,52 % of gross salary (half-half by employee and employer) Before 1st of February 2014

ZUS ‐ 12,22 % Pension Funds ‐ 7,3 % After 1st of February - decision to stay with Pension Funds

ZUS ‐ 12,22 % ZUS ‐ subaccount ‐ 4,38 % Pension Funds ‐ 2,92 % After 1st of February - decision to stay with ZUS

ZUS ‐ 12,22 % ZUS ‐ subaccount ‐ 7,30 % Pension Funds ‐ 0,00 %


Key Topics


Social Security

Private Practice

Customary Private Employee Benefits:

Type & Level of Benefits / Survey

Data / Plan Design / Benchmarking /

Trends


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Customary Private Employee Benefits

• Group life benefits

• Group disability benefits

• Group medical benefits

• Family risks

• Pension funds

• Health insurance

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Type of Benefits

Benefits for Employee but also for family members (right to enroll to the same scope of coverage as Employee).



• Premium sponsored by Employee – Voluntary programs premium is deducted from monthly salary Around 70% of the market.

• Premium sponsored by Employer – Employee Benefit programs Around 25% of the market.

• Premium co - sponsored by Employer – e.g. 50%/50% Around 5% of the market.

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Models of financing group life insurance:



Employer Sponsored programs:

Risks covering employee (death, permanent disability, critical illness).

Sum assured is often defined as multiple of annual salary, not a fixed

amount – each employee has a different sum assured.

Average sum assured is typically 2 or 3 times annual salary.

Employee has to pay social tax and personal income tax on the

premium paid by the Employer (around 40% of the value of the

premium paid by the Employer).

Market dominated by the international brokers.

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Level of Benefits



Employee paid Voluntary programs:

• Cover family risks e.g.: child birth, parent death, spouse critical ilness, child hospital.

• Average sum assured for spouse’s death is USD 5.000, child birth benefit is USD 500.

• Average monthly premium is USD 15.

• The market is dominated by one insurer – 50% market share.

• Package especially popular among employees with lower salaries (e.g. production plants), several of these benefits were covered in the past by the Social Security

• Only approx.10% of such programs are sponsored by Employer

• Sums assured are fixed amounts.

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Level of Benefits


Customary Private Employee Benefits Typical Plan Design

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Quotation no: 107657041401 Group name: all employees Number of employees: 548 Average age: 41,98 Monthly premium: 34,83 PLN

Monthly premium Scope of coverage Sum Assured Benefit Premium per

Insured Premium per

Group Insured's Death 100 000,00 PLN 100 000,00 PLN 15,76 PLN 8 636,48 PLN Death due to an Accident 100 000,00 PLN 200 000,00 PLN 2,88 PLN 1 578,24 PLN Inability to Work caused by an Accident or Illness 100 000,00 PLN 100 000,00 PLN 4,95 PLN 2 712,60 PLN Total 34,83 PLN 19 086,84 PLN

Example of Employer sponsored group life insurance Very basic program



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Example of Employer sponsored group life insurance Standard program

Quotation no: 107657041401 Group name: all employees Number of employees: 548 Average age: 41,98 Monthly premium: 47,02 PLN


Insured Premium per

Group Insured's Death 100 000,00 PLN 100 000,00 PLN 15,76 PLN 8 636,48 PLN Death due to an Accident 100 000,00 PLN 200 000,00 PLN 2,88 PLN 1 578,24 PLN Detriment to the Health due to an Accident 100 000,00 PLN 100 000,00 PLN 11,24 PLN 6 159,52 PLN

for 1% of detriment 1 000,00 PLN Inability to Work caused by an Accident or Illness 100 000,00 PLN 100 000,00 PLN 4,95 PLN 2 712,60 PLN Insured's Hospital Care (180 days maximum)

due to an Illness (up to 14th day / after 14 days) 100,00 PLN 100,00 PLN / 100,00 PLN 3,61 PLN 1 978,28 PLN due to an Accident (up to 14th day / after 14

days) 200,00 PLN 200,00 PLN / 100,00 PLN 3,54 PLN 1 939,92 PLN Surgeries 5 000,00 PLN 5 000,00 PLN 5,04 PLN 2 761,92 PLN Total 47,02 PLN 25 766,96 PLN



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Example of Employer sponsored group life insurance Standard program

Group size 498 Group's average age 42,28 Average monthly gross salary (MGS) 7 860,17 PLN

Premium sponsored by the Employer Monthly

Scope of coverage Sum assured Benefit Rate in per mil

Percentage of average salary*

Insured's Death 24 MGS 24 MGS 0,153417 0,371 % Death due to an Accident 24 MGS 48 MGS 1) 0,028583 0,069 %

Detriment to the Health due to an Accident 24 MGS 24 MGS 2) 0,111583 0,264 % for 1% of detriment 1% of 24 MGS

Inability to Work 24 MGS 24 MGS 3) 0,047917 0,116 % Insured's Critical Illness (45 illness units) 12 MGS 12 MGS 4) 0,364833 0,441 % total 1,261 %



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Example of Employer sponsored group life insurance Top-end program


Insured Premium per

Group Insured's Death 200 000,00 PLN 200 000,00 PLN 31,51 PLN 17 267,48 PLN

Death due to an Accident 200 000,00 PLN 400 000,00 PLN 5,75 PLN 3 151,00 PLN Death due to a Transportation Accident 200 000,00 PLN 600 000,00 PLN 2,88 PLN 1 578,24 PLN

Death due to an Accident at Work 200 000,00 PLN 600 000,00 PLN 2,15 PLN 1 178,20 PLN Death due to a Transportation Accident at

Work 800 000,00 PLN Detriment to the Health due to an Accident 100 000,00 PLN 100 000,00 PLN 11,24 PLN 6 159,52 PLN

for 1% of detriment 1 000,00 PLN Inability to Work caused by an Accident or Illness 100 000,00 PLN 100 000,00 PLN 4,95 PLN 2 712,60 PLN Insured's Critical Illness (37 illness units) 20 000,00 PLN 20 000,00 PLN 7,30 PLN 4 000,40 PLN Insured's Hospital Care (180 days maximum)

due to an Illness (up to 14th day / after 14 days) 100,00 PLN

100,00 PLN / 100,00 PLN 3,61 PLN 1 978,28 PLN

due to an Accident (up to 14th day / after 14 days) 200,00 PLN

200,00 PLN / 100,00 PLN 3,54 PLN 1 939,92 PLN

Surgeries 5 000,00 PLN 5 000,00 PLN 5,04 PLN 2 761,92 PLN Total 77,97 PLN 42 727,56 PLN


Example of Voluntary Employee paid group life insurance Standard program

Monthly premium

Scope of coverage Sum Assured Benefit Premium

per Insured

Premium per Group

Spouse's or Partner's Death 20 000,00 PLN 20 000,00 PLN 4,37 PLN 2 394,76 PLN Spouse's or Partner's Death due to an Accident 20 000,00 PLN 40 000,00 PLN 0,58 PLN 317,84 PLN Child's Death 5 000,00 PLN 5 000,00 PLN 0,35 PLN 191,80 PLN Child's Death due to an Accident 4 000,00 PLN 9 000,00 PLN 0,08 PLN 43,84 PLN Childbirth 1 500,00 PLN 1 500,00 PLN 5,81 PLN 3 183,88 PLN Stillbirth 1 500,00 PLN 3 000,00 PLN 0,06 PLN 32,88 PLN Child Orphaning 5 000,00 PLN 5 000,00 PLN 1,01 PLN 553,48 PLN Parent's or Parent-in-law's Death 1 500,00 PLN 1 500,00 PLN 6,89 PLN 3 775,72 PLN Spouse's Critical Illness 5 000,00 PLN 5 000,00 PLN 2,74 PLN 1 501,52 PLN Child's Critical Illness 5 000,00 PLN 5 000,00 PLN 2,01 PLN 1 101,48 PLN Total 23,90 PLN 13 097,20 PLN




• Due to the historical background circa 100% of the mid and large companies have a group life insurance policy in force and circa 70% of them are purely on voluntary basis – the premium is just deducted from Employee’s monthly net salary and the conditions are negotiated by the employees’ representatives.

• The trend that we observe is the growing engagement of the Employers in the group life contracts. Being a party of the insurance contract and having a legal responsibility for these plans, Employers want to be engaged in the plan design, its conditions and the premium payment.

• The basic value of financing the group life insurance from the Employer perspective is: The premium may be treated as a tax deductible cost for the

company (Corporate Income Tax Law). Employer may be exempt from the obligation to pay out

severance pay for the deceased (Labour Code). Motivation tool to attract new employees and keep existing

employees.

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Trends



• The sum assured is constantly increasing Now approx. USD 30.000 under the risk “death of any reason”.

• The sum assured as a multiple of annual salary 2 or 3 annual salaries, not a fixed amount.

• Employees of one company divided into subgroups according to grades/levels with different scope of coverage: e.g., staff, management

• Focus on the critical, limited scope of risks in Eemployer Paid Plans: Death, disability, critical ilness

• Product simplicity Limited scope of exclusions of responsibilites, clear definitions.

• The same insurance programs for family members (spouse, adult child) as for the employee

• On-line services

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Trends


Key Topics


Social Security

Private Practice

Taxation

Taxation of benefits (e.g. lump

sum versus pensions) /

Tax treatment of ER and EE

contributions

Administration Legislation

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Taxation

Life Insurance

The premium financed by the Employee is free of tax. The premium is just deducted form the

employee’s monthly net salary.

The premium financed by the Employer is added to the employee’s gross salary and the

employee pays the Personal Income Tax (18% or 32%) and Social Security Taxes.

Group life insurance benefits are not taxed.

Pension Fund

The investment premium paid into the plan by the Employee is free of tax. When the

Employee closes the account, he/she is obliged to pay Capital Tax (19%) on the gained profit.

The investment premium financed by the Employer is added to the Employee’s salary and

Employee pays the Personal Income Tax (18% or 32%) and all Social Security Taxes.

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Key Topics


Social Security

Private Practice

Taxation Administration

Legal requirements re. administration of

benefit plans: actuarial valuations / communications / involvement of

unions/employees

Legislation

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Administration of Plans

• Life Insurance - Enrollment process Even if the benefit is sponsored by the Employer, Insurer/Employer is

obliged to enroll each of the Employees seperately into the scheme. Each Employee has to agree and sign the Enrollment Form. Before

enrolling each Employee has to receive General Terms and Conditions in paper form or in electronic form provided his approval of such form.

• Pension Fund Mandatory consumer needs and knowledge analysis. Paper survay is

required to enroll.

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Key Topics


Social Security

Private Practice


Current legislative issues with

significant impact on the funding of the benefit plans / How are employer

and employees affected?

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Legislation

New Act on Insurance and Reinsurance Activity, January/April 2016 (implements Solvency II reqiurements and introduces additional law changes)

• Group insurance Extensive informative obligation to insured persons (including the

obligation to serve the GTC to every insured person)

• Pension Fund Mandatory consumer needs and knowledge analysis in accordance with

the questionnaire specified in the Regulation Limitation of the rate of liquidation fees up to 4% of the paid-in

premiums Extension of the time for the withdrawal from the contract for

policyholder or insured person

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Update


Thank you for your attention! Key Topics We Discussed:


Country and Company Info &

Background

Social Security

Summary of Social Security

Benefits

Private Practice

Customary Private Employee Benefits:

Type & Level of Benefits / Survey

Data / Plan Design / Benchmarking /

Trends

Taxation

Taxation of benefits (e.g. lump

sum versus pensions) /

Tax treatment of ER and EE

contributions

Administration

Legal requirements re. administration of

benefit plans: actuarial valuations / communications / involvement of

unions/employees

Legislation

Current legislative issues with

significant impact on the funding of the benefit plans / How are employer

and employees affected?

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www.pramerica.pl

Contact Info

Joanna Grudnik

Pramerica Życie TUiR SA

+48 22 329 31 21 | M +48 781 818 214 [email protected]

Group Business Operation Director

Country Panel Presentation: Poland€¦ · • The social security in Poland consists of: old–age...

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