AUDITOR MAY AXE INSURANCE TAX CREDIT:

Missouri State Auditor Claire McCaskill has proposed that the state consider eliminating a tax credit that helps insurance companies offset their costs of state reviews.

An audit by McCaskill’s office said Missouri is one of just five states that allow insurance companies to receive tax credits for their state examination costs. For the 2003 and 2004 tax years, insurance companies claimed nearly $6 million of those tax credits, reducing by an equal sum the amount of money that went into the state’s general revenues, according to Associated Press. The audit recommended the Department of Insurance consider seeking legislation to reduce or eliminate the examination tax credit.

DOI spokesman Matt Barton said the tax credits are part of an operational review already under way at the agency.

A spokesman from the Missouri Insurance Coalition said McCaskill’s suggestion was a poor one, and that Missourians would pay for state regulation of the industry one way or another, probably in the form of higher premiums.

The Department of Insurance conducts two types of insurer examinations: one assessing financial stability, the other reviewing compliance with Missouri insurance laws.

Under state law, insurers are billed for the examination expenses, and also pay a 15 percent surcharge to help cover the supervision of examiners. Insurers can deduct their examination costs from their state taxes, which are based on the total amount of premiums they collect in the state. Those tax credits can be carried forward for five years.

According to a spokesman from the American Insurance Association, the DOI is keeping an eye on the 15 percent surcharge issue because it creates a situation in which the fee is becoming a revenue-generating vehicle often when there is no need for such examinations. AIA dismissed McCaskill’s proposal as a “local political debate between two regulating agencies of different political leadership.”