Example In a certain country, taxation of life insurance policies was known to be as follows: premiums are tax deductible up to a certain amount premiums incur a 2½% premium tax investment return is gross the benefit is taxed at 12½% of excess of benefit over premiums paid. Overall, this represented a subsidy on savings effected in the form of a life insurance policy compared with other savings channels such as banks or direct investments. (As a result, many banks established their own life insurance subsidiaries in order to offer their customers these advantages over normal bank deposit account savings I am having difficulty in understanding how is there a subsidy in saving for a life insurer rather than other savings channel in this example. Also could you please explain the paragraph below “As with the regulatory environment, product design will want to make the best use of any opportunities provided by the fiscal environment. On the other hand, the ability to maximise favourable taxation treatment may force constraints on product design. For example, tax authorities may be keen that pure savings business should not be ‘dressed up’ as life insurance in order to secure favourable tax treatment where this exists. If so, they might therefore specify minimum levels of life cover necessary to secure tax concessions. This would then represent both an opportunity and a constraint. The tax concessions might allow a competitive product to be produced, but the design would have to include at least the minimum level of life cover. It should be noted that both the taxation and regulatory environments are very significant drivers of product design in the insurance industry. ” thanks.