Mich. Insurers Say Consumers Lose in Gov. Granholm’s Tax Plan

A proposal to more than double the tax burden on the state’s insurance industry announced by Governor Jennifer Granholm today will result in higher premiums for the insurance-buying consumer, the Insurance Institute of Michigan has charged.

“The governor’s plan disadvantages one industry—ours,” said Pete Kuhnmuench, executive director of the Insurance Institute of Michigan. “As with all businesses, increased taxes will ultimately have to be passed on to our customers. Unfortunately, this massive tax increase on our industry will increase premiums for all types of insurance, including auto, homeowners, life and health insurance.

As taxpayers, insurance companies operating in Michigan now pay more than most businesses, according to the Department of Treasury. Insurance companies contributed more than $241 million in state taxes as a result of business taxes and regulatory fees. They paid 11 percent of the state’s business tax in fiscal year 2004, an amount that has been increasing in the past few years.

The insurance industry pays another $168 million to fund state-mandated programs. An example of one of these programs is the Michigan Property Casualty Guaranty Association. MPCGA pays claims on behalf of insolvent insurance companies.

“Doubling an industry’s tax burden is not the way to create economic growth in this state,” Kuhnmuench said.

Insurance companies directly employ about 39,000 people, with another 23,000 licensed as agents to sell insurance in this state. The average Michigan insurance industry wage is more than $45,000 annually.

The tax increase will put Michigan companies at a competitive disadvantage through the imposition of retaliatory taxes on Michigan-based insurance products sold in other states.

There are 163 insurance companies headquartered in Michigan, the 17th largest concentration of insurance companies in the United States, according to Kuhnmuench. This number has remained stable over the years. Michigan carriers had direct written premiums totaling approximately $22 billion. An additional $23 billion was written by companies doing business in Michigan but headquartered in other states.

In addition to the impact and contributions to the state’s economy, Michigan’s insurance industry provides residents with financial security. Insurance companies pay about $3 billion each year in auto and homeowners claims and benefits to policyholders in this state. These dollars are used to pay for medical care, rebuild and repair houses, repair automobiles and replace personal property.